Maximize your product-market fit
The key to creating a high-value company is to solve maximum customer pain to create as much value as possible
Intro
There are many posts on product-market fit. In my experience, this is not a binary answer, it is a continuum. On one end you have enough product-market fit that you can create a viable company. On the high end, you create billion dollar, market-changing enterprises. These are the companies we all use daily. All of these life-changing products have a clear “why”. It is during this period of time that companies are setting the ceiling on the value their product can create.
Where to start
My preferred methodology to get to product-market fit is to start with the customer “Jobs to be Done” and customer needs. A product that has perfect product-market fit would have strong forces promoting the new action and limited forces blocking the change (see the image below).
Many of the largest tech companies were early in a market and thus the blocking forces were weak. New entrants to the market now must provide a solution that is better than the incumbent. For these reasons, it is hard to see companies like Google not being a market leader. Once the behavior is a habit it requires countering forces that are very strong. Chalk one more reason why being early to market gets so much hype, though early doesn’t necessarily mean first. Case in point is Apple with the iPod and iPhone.
Teardown of the Hype Cycle
Technology is a critical factor in creating products to solve customer needs. Many technologists/pundits place too much emphasis on the technology that enables experiences. It is not to say that technology doesn’t enable great experiences, but generally technology on its own does not create the product-market fit. The best products maximize the value created from technology, along with a number of benefits (see this post for a list of benefits).
Gartner publishes a graphic called the “Hype Cycle” for many industries (as seen below). Lots of money has been spent on technologies looking for a market. Here is my teardown of the hype cycle stages and why only a few businesses emerge.
- The “innovation trigger” that starts the cycle is often a publication on a new technology coming out of a lab
- The rise to the “peak of inflated expectations” represents the level of activity to prove out product-market fit.
- The downslope from the “peak” then represents the failed attempts to apply the technology to a customer need
- The “slope of enlightenment” represents the growth rates of successful businesses. The slope of this curve represents the amount of value created through product-market fit.
Product Market Fit Evaluation
There is a spectrum of product market fit. At the lower limit is having a product that has enough traction to justify sales and marketing spend. The upper limit is often limited by technology or financial reasons. I learn best by evaluating various scenarios. The below are a few different product areas to show how product-market fit can vary over time and different solutions.
Bike Rental
Over the past few years, the bike rental has been completely upended with dockless bikes. Dockless bikes product-market fit comes from there presence across the market. They take advantage of consumers having smartphones and GPS tracking. Some of the bikes are e-bikes, which provide electronic assist to make your commute or sightseeing adventure even easier.
Travel
Over the past 20 years, the travel booking product has undergone a radical transformation. At this point, the job to be done of booking travel is well optimized, but we are starting to see the emergence of solutions that go all the way through the experience. Airbnb took travel beyond the booking through to completion and likely is just the start of a new wave of travel changes. I expect solutions like NetJets and Uber to lay a framework for full-service travel.
Music
Much has been written on the business model disruption of music, but the major changes over the past 100 years have been due to product changes. Digital music created a ton of value to the consumer by making it easy to access and play an almost unlimited catalog of content. It is not surprising that the introduction of digital formats has also spawned significant business model innovation that had not existed for decades previously despite the product changes.
Personal Experience
There are two different product launches that we had over the past couple of years.
- Direct Call. This product was built from customer feedback that contractors prefer to be called vs. make an outbound call to a customer. The four forces that drove the development were very strong. We had to build out technology that would make it possible for us to deliver the customer need. Overall good product-technology overlap.
- Rev Share. This product was built from customer feedback that they have a set budget they are willing to pay for marketing services. They wanted a performance-based product. This was done with operations only. The core product didn’t change, just the monetization mechanism. This has been successful, but redesigning the technology could unlock even more value.
In both cases, we listened to the customer needs. The major difference is that #1 required a change in the product we developed and #2 was essentially just a business model change. It is common that people refer to #2 as a product and assess product-market fit. While this change has been helpful, to achieve the full value will require us to change the underlying product.
#1 on the other hand, has required constant iteration on the product design to get to a point where the value creation aligns with the expectations. We have not altered the business model for this product yet, as we are first working to get the value creation equation correct. We know the business model will require some tweaks, but if we can’t generate enough value for end customers it doesn’t warrant the business model changes.
Why Product-Market Fit is Not Easy to Measure
Product-market fit is the overlap between technical feasibility and customer desirability. The below graphic shows that the overlap between the two represents the extent of product-market fit. As discussed above it is not just about technical feasibility, but it is also about whether it is desirable to a customer that determines the fit.
In my next post, I will introduce a business-model fit, which will introduce business viability as a third component (as shown below). While business viability is less important to determine product-market fit at the early stage, over time it is a critical component to the success of a business.
Closing
Product-Market fit is a valuable step in creating a sustainable company. It sets the ceiling on the value created for customers which when coupled with the business model defines the value capture potential. I will follow this post in the next week with a post on business model fit.
If a new product does not create enough value it is time to go back to the 4-forces model to design improvements. Once the product has captured maximum value is it time to start to modify the business model to capture maximum value.
Before you release your next product, make sure to consider how you can address your customer’s four forces to switch and use your solution. Good luck with your product development and one final quote:
It is easier to make things people want than to make people want things. — Rocketship.fm
