As a child, what did you want to be when you grew up? Your life-goals have probably changed over the years (Then: Rockstar, Footballer, Astronaut, Fire-engine. Now: Startup guru, Nobel-prizewinner, Fortune 500 CEO, Brain-surgeon), but we’d bet certain criteria have stayed the same: stimulating work, wealth and respect from your peers. Fortunately for you, there is a roadmap to this kind of success, it’s called product market fit.
Every startup founder has heard this mythical term; experts like Andrew Chen, Ben Horowitz and Eric Ries have discussed it at length. There’s more to it than meets the eye, so we’ve broken it down for you:
What is product market fit?
With an important topic like this, the simpler the definition, the better. Marc Andreessen’s definition works well:
Product market fit means being in a good market with a product that can satisfy that market.
– Marc Andreessen
So we can see that having market penetration isn’t enough on it’s own. Selecting a good market isn’t enough either. Having a “great product” isn’t even enough. Success is contingent on the whole equation.
What’s a “good market”?
There are a lot of different things to look for in a market. Monetisation is important, and profit formula is a big consideration. The competition is also important, and “blue ocean” thinking is worth taking into account. According to Andrew Chen, however, three main factors define the attractiveness of a market for tech products: “a large number of potential users, high growth in numbers of potential users, ease of user acquisition”.
These three criteria should be to the forefront of your decision making when evaluating a market. You’re looking for a big, growing market that you can feasibly sink your teeth into. In order to judge a market, however, you need to know what a market is…
So, what’s a market then?
The roadmap to product market fit becomes clearer when we look at the concept of what a market really is. Our buddy Andrew Chen again has the answer:
A market consists of all the consumers who can search for and compare products for a use case they already have in mind.
– Andrew Chen
Your market is not based on the segments you have conceptualised, or where suppliers are clustered. The crucial point about markets is that they are collections of people looking for a solution to a problem they have. Get rid of any preconceived assumptions you have made about where demand for your product lies. No one cares about your product. You should be solving customer’s problems for them, not pushing your solution. Here Brant Cooper explains how important it is to make everything your startup does “problem-focussed”, as opposed to “solution-focussed”. Entrepreneurs have analytical minds, which leads them to focus on the solutions they have come up with for problems the customer has. This is the wrong approach because the customer doesn’t care about how great you are. “Solution focus” also leads entrepreneurs to underestimate and misunderstand the customer’s problems. This is the antithesis of product market fit. If the market is defined as users with a problem then focus your product on the problem, anything else offered by your product not desired by the market. This is another reason why a big, growing market is of value: it’s easier to figure out what the customer wants because the market will “suck” the product out of the company by providing you with more opportunity for feedback and testing.
At this stage it should be clear what a good product should look like: less is more. This is a paradoxical concept for an entrepreneur to wrap their head around. “How could offering the customer less make my product more attractive?”. Put simply, adding features always costs something. This is the fundamental lesson from the Lean Startup Methodology, anything not needed is waste:
- Adding features is a time-consuming and distracting exercise. Bloated feature sets cost resources, and one-off additions usually incur costly design debt. Des Traynor has excellent advice on how to prioritise features to avoid becoming the swiss-army knife of software.
- Your product should focus on a core problem, and solutions you offer to other problems distract from your message. A jack-of-all-trades image will hurt your marketing efforts.
- Adding features makes you lose sight of your ideal market, which should consist of a specific customer problem. The bigger your feature set, the closer you creep towards trying to solve universal problems.
- The more one-off features you add, the more you drift from your strategic strengths. Michael Karnjanaprakorn has some useful advice here on the importance of strategic competitive advantage for product market fit.
The moral of the story
Customers only care about their problems, and customers who share a common problem make up a market. Enough of these customers together (ie a large market) represents a great business opportunity. In order for your startup to fit with this business opportunity, you need unwavering focus on the problem they share, with no distractions. When a startup solves this problem well for a lot of customers they are said to have achieved “product market fit”.
And that, boys and girls, is how to become rich and famous.