Product-market fit is the first great hurdle to clear in realizing the product vision.
If we’re honest with ourselves as innovators, we’d probably have to admit there was a time or two in our past experiences in which we headed to market curious, wondering if there really was an audience for the product we were shipping.
We disquieted ourselves with monikers like launch and learn - relying on generic data points that filled out a daily/weekly/monthly report - or abused the notion of what a beta really is just so that we wouldn’t find ourselves lying awake at night, staring at the ceiling instead of counting sheep.
So, how can today’s innovator get a better night’s rest?
Surely it would it help if you knew that your target audience would be crushed if your product wasn’t available to them, no?
How about if you knew the threshold hundreds of other companies needed to cross with their target users to know that their product had a foothold in the marketplace?
It’s an idea that’s been around a good while now, popularized by the rise of the Lean framework, but it’s really starting to come into its own, as various product professions sharpen their understanding of what it takes to ship successfully to market.
Product-market fit is the first great hurdle to clear in realizing the product vision. Without fit, a product has very little sustainable hope of being around for the long haul, unless you’re delivering to a captive audience – and even there, you’re likely just blazing a trail of disengagement without fit.
That doesn’t sound good, does it?
In this article, I’d like to share some interesting thinking on how on to conceptualize this critical toolkit item, and more importantly, how to know that your product is indeed fitting into a desired market.
“If you address a market that really wants your product — if the dogs are eating the dog food —then you can screw up almost everything in the company and you will succeed.Conversely, if you’re really good at execution but the dogs don’t want to eat the dog food, you have no chance of winning.” -Andy Rachleff
Mr. Rachleff coined the term product-market-fit to describe his investment style at a venture capital firm. Many others in the industry have adopted, adapted, and run with the notion of the two vital steps in starting up, and please note – the order of these two steps does matter:
One of my favorite adaptations of Product-Market Fit came from Dan Olsen, who published and spoke on The Lean Product Playbook.
Olsen (2015) laid out five basic building blocks that comprised his Product-Market FitPyramid:
When you look at the blocks above, you’re supposed to address them in a stacked order, meaning you’d build the foundation first by properly identifying the target customer for your business model or company.
Here’s the challenge I see in that – at the beginning of the product life cycle, the most important thing is addressing a need.
Often what I see in practice is that companies need to discover who they are solving for as much as what they are solving for them.
Previously a target audience would be identified with some combination of demographics or transactional analysis. There’s still value to be had there, but I’m more and more in the camp of motivations and benefit recognition.
What I mean by this is that a customer can be just about anybody, but a target customer, at the beginning of the product life cycle, is less about who they are and more about what they need in that moment they are giving your product a try.
So, you’re zeroing in on a custom segment while concurrently figuring out what benefits of your idea really resonate with them. It’s tricky, but when it clicks, it’s an incredibly exciting moment!
We’ve often heard these folks described as early adopters, but they’re so much more than that.
When a segment of users can connect the dots between your product and a chronic problem and/or repeatable task, then they are far more likely not only to adopt, but more importantly to influence additional customers/users to see the light and adapt to the benefits of your product.
The framework Mr. Olsen laid out was/is a fantastic way to get into the mindset of product-market fit as you set out on the journey. But how do you objectively know if you’ve addressed these elements to the extent that the product is in the sweet spot as displayed in Olsen’s diagram above?
We are more and more a business world driven by data points. What gets measured, gets managed, or so the saying goes.
There are qualitative and quantitative ways to think about anything software related these days and finding a meaningful north star to hitch your wagon to.
“I felt this incredible intense pressure to launch – both from the team and also from within myself.” -Rahul Vohra
Rahul Vohra recently shined a practical light on a metric to help innovators understand the readiness of the company’s product in the marketplace.
Mr. Vohra has been speaking throughout the year on this metric, and the engine he developed to drive it. I got my chance to listen in when he presented at Industry Global last month.
He detailed his first-person account of how Superhuman, a disruptive product billed as the fastest e-mail experience ever made, took more than two years to establish a fit between product and market.
Mr.Vohra described to an audience of 1,200+ product professionals the anguish he was going through as he took Superhuman to market. As he put it, “I felt this incredible intense pressure to launch – both from the team and also from within myself.”
So many of us in the pre-launch space go through this.
Doing so leaves our product, and possibly our company, vulnerable to the great unknown and an avalanche of lagging indicators like sales and satisfaction ratings.
In crowded spaces with competitive dollars to be had, relying on lag indicators can ironically lead to a very finite lifecycle for the product. How can we find a lead indicator that informs us about product-market fit?
Mr. Vohra searched for this data point and posited that he found it in the teachings of author, investor, CEO Sean Ellis. Mr. Ellis has a single question that is both a sturdy baseline and an indicator far enough upstream to be a lead metric.
How would you feel if you could no longer use the product?
In studying more than 100 companies, Mr. Ellis determined that the companies who struggled were the ones in which less than 40% of users would be “very disappointed” without their product.
To get a sense of this threshold, and how hard it is to achieve, on a product most of us know, 51% of Slack users would be “very disappointed” without it.
Vohra’s company devised a survey that went out to their audience after they had experienced Superhuman for about three weeks.
This survey would ultimately serve as the backbone of a product-market fit engine. It is elegant in its simplicity. Here are the questions they asked survey participants:
1. How would you feel if you could no longer use [product name]?
a. Very disappointed
b. Somewhat disappointed
c. Not disappointed
2. What type of people do you think would most benefit from [product]?
3. What is the main benefit you receive from [product]?
4. How can we improve [product] for you?
I like a couple of things Superhuman did here. For starters, it’s only four questions, and each one of them is critical to learning - no survey bloat, no conflicting directions, no learning what the survey is trying to get at.
It’s also good form that they used open-ended questions after they got their north star metric addressed in question 1. They know their key metric and dedicate the precious few questions left to ensuring descriptive input to help them make why? sense of their lead indicator.
At Skiplist, we like to say that this survey design is quite Thoughtful indeed.
Once the product fits, there is still so much to do. Establishing fit identifies the easy part about features – the mission critical ones. What lies ahead for the innovator is the tricky part.
In Part 2 of the Innovator’s Toolkit series, I will share thoughts on product-market fit as a discovery engine and its overall fit as a critical starting point.
Until next time, cheers!
Bill is the Director of Product at Skiplist. He has twenty years of experience in UX and Product Management, building a portfolio of successful software experiences that are value-centered for the client, their business, and their customers. His experience with user research, information architecture, design thinking, and project management gives him a unique point of view for solving problems and fitting thoughtful software in the marketplace. He has a B.A. in Economics from Indiana University and has guest lectured at Kent State's IAKM program.