Achieving Product-Market Fit with Three Questions
An approach for how your team can determine if you have captured the ever-elusive product-market fit.
I’m in the throes of finding product-market fit for a new product. It’s both exhilarating and scary. What if we don’t achieve it?
Well, I’d rather declare that we don’t actually have product-market fit (PMF) and tweak our plans in some way. I’ve been on a lot of teams that have skipped this step altogether and raced head first into development. The end result has never been good. Often, it wasn’t the market or product that was wrong, but the problem wasn;t sized correctly. (By the way, the rationale or skipping research is always “Steve Jobs never did research.” Even if true, I’m not Steve Jobs and you probably aren’t either.)
PMF is critical because, if validated, can provide insurance around three key areas:
The problem
The market
The product
So, how do teams determine PMF? How do we know when we’ve found it? Admittedly, it’s difficult and requires work. Like many business pursuits, there has to be an openness to being wrong and scrapping your plans for changing direction.
A quick commercial break: I’m hosting a workshop on the topic of product-market fit on June 27 at 12pm noon. Space is limited so sign up now. www.pmlevelup.com
In thinking about PMF, I think a lot of teams leave out the problem they are solving in their analysis. I add the problem to solve as a third factor that plays into the analysis. When we do this, it opens up three questions that can be answered to help achieve product-market fit.
Let’s hit all three questions along with how your team might validate each one.
Problem-market: For whom does the problem significantly exist?
As you might tell, the word “significantly” was added intentionally. My faucet tends to drip two or three times after I turn off the water. Will I call a plumber? Nah. I can live with this pain. If a pipe underneath my sink was consistently leaking, would I call someone? You bet. The key here is ensuring that there is a population of the world that feels this problem is big enough to invest (money, time, thought) into.
Validation: Of course, if a market already exists for solution to this problem, that is some validation. As noted, competition is good because it means that not only does a market exist, but you don’t have to create it. In the event that you’re creating a market around a problem that hasn’t been previously solved, seek intention in the real world. Are people searching for solutions? Complaining online? Have you met with real people who’ve identified the problem? From my experience, surveys or paid market research aren’t bad ways to do this, but they’re often incentivized with financial compensation, and as such, you may not get true demand signals.
Deliverable: Ideal customer profile. The market segment by organization (industry, size, org type, location) and/or persona (demographic, job title, responsibilities) in which this problem is most significant. If evaluating a few different problems, I like to grade the strength of each relationship between the market and the problem.
Product-market: Does you product satisfactorily meet customer expectations?
You’ve identified a problem worth solving, but does your product meet the needs of this market? Are customers satisfied that your solution solves their problem in a way that would encourage them to invest in your product (through money and/or time)?
Validation: The ideal scenario is a working prototype. Start a beta program and pre-sell the tool. You may even want to play with demand and mention that the early pilot program will only include x customers. If clients are jumping in line to be part of the first cohort, you are likely onto something. Typically, the beta program will likely include multiple rounds of product tweaks to land on the right product. In extreme cases, you may even want to tweak the market you are delivering to. Find the right beta participants and be clear around expectations for feedback gathering.
Deliverable: Positive pre-sales and/or usage patterns. Are people coming back to use the tool? Have they made it part of their workflow? Have they paid for a future contract when you’ve fully productized the offering?
Problem-product: How does your product uniquely solve the problem?
The exercise of product-market fit is important but all for naught if someone can come in and copy your market solution after you’ve done the validation. (Truthfully, this is why the first question alone doesn’t work on its own.) For your business to work effectively, it’s critical to build the “moat” that protects your business from competitors. So, what makes your product unique to other participants in your space? Do you have the best expertise? Intellectual property that protects copycats? Partnerships that allow you to offer something special? The best marketing team? A distribution advantage?
Validation: There is likely a reason you entered this business in the first place. But attack your value proposition from all angles. This is likely a team exercise and you may want to bring in outside experts/advisors to poke holes in your thinking.
Deliverable: A business plan with details around the unique value proposition as well as a plan for how that advantage can be protected, evolved or expanded over time.
In conclusion, product-market fit is difficult to gauge and even more difficult to achieve. But many have done it, and once secured, will lead to a much clearer path to success.
A quick commercial break: I’m hosting a workshop on the topic of product-market fit on June 27 at 12pm noon. Space is limited so sign up now. www.pmlevelup.com