Developing a new product is a journey dedicated to solving problems. But some problems are more important than others. We can easily say that the most critical goal for a new product to succeed is to achieve product-market fit since that’s what makes a sustainable business.
PMF (Product Market Fit) means that you have a product that meets the needs of a defined market. It’s when you’ve found enough people who are willing to pay for your product or service to make it viable. Reaching product-market fit is key to sustaining growth and profitability because, without a steady stream of new customers and revenue, your business will eventually stagnate and die.
A new digital business needs three things to be successful: a great team, a great product, and a ready market. Many business leaders believe that the market is the most essential element of a successful startup and the number one reason startups fail is that there is no market for their product. This is why product market fit is crucial.
Achieving product-market fit can be a difficult and long journey but it is possible to accomplish it in a lean way. So this article will show you how to achieve product market fit in a lean way, with a step-by-step guide.
What is Product Market Fit?
Product market fit is key to the success of any product. In order to have PMF, the product needs to be able to fill a specific market’s needs and should have enough demand. Although it’s not enough to have a well-developed solution, an initiative achieves product market fit only after it develops a valuable solution for a specific customer or market segment. To reach PMF, there should also be proven demand, i.e. enough sales.
Despite its importance, product-market fit is a notoriously difficult thing to explain. This is mostly because everyone defines it differently. While some people interpret product market fit in a very broad sense, some of them decrease it into having a proven customer acquisition model. Underestimating the concept and perceiving it as equal to profitability may harm the growth and sustainability of your product.If you’re looking to achieve product-market fit for your product, it’s important to first establish your own definition of success. You need to gather data, experiment, try, and pivot until you reach it.
Focusing on achieving product market fit means focusing on the market since it’s the only thing you cannot change after you start. As we mentioned above, according to CB Insights, the lack of market need is one of the first reasons why startups fail:
Luckily there are frameworks to help you develop a product that people will really demand.
Marc Andreessen on Product Market Fit
In 2007, the term “product-market fit” was coined by Marc Andreessen, an entrepreneur and investor based in Silicon Valley. Andreessen is also known for being a co-creator of Mosaic, the first widely used web browser, and co-founder of Netscape.
In his blog post The Only Thing That Matters, Andreessen tries to explain what he sees as product market fit: being in a good market with a product that can satisfy the market. He refers to a good market as one that is sufficiently large and in need of new solutions.
Suggestion for further reading: The Only Thing That Matters by Marc Andreessen.
In the post, Andressen explains that PMF depends on three key factors. The three things that have the biggest impact on PMF are the team’s quality, the product’s caliber, and the market size.
If you have product-market fit, you should have revenue and customer traction to back it up. Product market fit is not just understanding that your product needs to address a real problem, but also knowing that the market is ready for you to turn latent demand into paying consumers. Andreessen finds the concept so important, he even makes a distinction in the startup life cycle as before product-market fit (BPMF) and after product-market fit (APMF).
Although Andreessen didn’t create the concept, his blog post helped to make it popular. After he published the post, product market fit became popular among Silicon Valley startups, then it spread all over the globe. Today, the idea of product market fit is still accepted, especially by product people.
Product User Fit
There are also several other contributions to the concept. One of the remarkable ones is Product-User Fit Comes Before Product-Market Fit written by Peter Lauten and David Ulevitch (both are now partners of Andreessen Horowitz a.k.a a16z). In the article, Lauten and Ulevitch came up with the term product user fit which is having the right product for the right niche user group. At this point, although everything seems flawless, there is a lack of market opportunity that needs to be found to turn the situation into a product market fit.
Suggestion for further reading: Product-User Fit Comes Before Product Market Fit by Peter Lauten and David Ulevitch.
They explain product user fit as a step before product market fit. According to them, when you move forward, the correct new features will convert non-users into users, and new users into power users. As you add more and more new customers, the product will finally satisfy enough market demand to provide a potential market opportunity.
Product Market Fit Pyramid
Dan Olsen made another important contribution to the concept of product market fit with his book The Lean Product Playbook: How to Innovate with Minimum Viable Product and Rapid Customer Feedback. In the book, Olsen simply seeks answers to the question: Why do most products fail to achieve product-market fit?
Suggestion for further reading: The Lean Product Playbook: How to Innovate with Minimum Viable Product and Rapid Customer Feedback by Dan Olsen.
Olsen provides the ultimate roadmap for any new product: a lean product development process that splits the product into iterations and a step-by-step, validation-first approach. He also developed a framework to achieve product market fit in this way, which is called the product market fit pyramid.
Here is what the pyramid model looks like:
All of the tiers of the pyramid are hierarchical and stacked on top of one another, implying an organized approach to achieve product-market fit. According to the pyramid model, every other aspect of a successful product is built upon the target customer, which means when your customers change, everything needs to be built again.
The layers of the pyramid from top to bottom are UX, feature set, value proposition, unserved needs, and finally, target customers. You have more authority over the top layers than the bottom layers. The top layers are heavily influenced by the bottom layers, so it’s important to consider your target customers when making decisions about the UX, feature set, and value proposition. According to the book, you should always start testing your hypothesis by beginning with the bottom layer of the pyramid i.e. you need to validate these hypotheses in that order:
- Who is your ideal customer? The one you envision when you think about the people who will be using your product or service?
- What needs do they have that are not being met? What problems do they have for which they would be willing to pay for a solution?
- What is your product’s value proposition? what can it give that is distinctive and hard to replicate?
- What is the MVP feature(s) that you need to build? Which ones are more important than others and which ones could be delayed?
- How the user experience should be according to all other decisions? What is the optimum UX for the product?
The 5 hypotheses above are also could be seen as your roadmap to achieving the product market in a lean way.
Lean Product Development for Product Market Fit
As Steve Blank, author of The Four Steps to the Epiphany: Successful Strategies for Startups That Win, explains; modern entrepreneurship began with the realization that Startups are not small versions of larger enterprises. After the realization that new methods and approaches are needed for new product development processes.
Customer development, what Steve Blank suggests to prioritize when building a new product was an attempt to provide that. Later, his student Eric Ries merges the idea of customer development and the importance of market demand with the lean production method’s proven rules and builds the lean startup methodology.
Suggestion for further reading: The Four Steps to the Epiphany: Successful Strategies for Startups That Win by Steve Blank
According to Blank, lean product development provides three tools to achieving product market fit as fast as possible:
- The Business Model Canvas
- Customer Development
- Agile Engineering
Later, the methodology was developed by Eric Ries, the Silicon Valley-based entrepreneur who developed the lean startup model. His book The Lean startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses advocates creating a minimum viable product (MVP) rather than attempting to create the perfect solution on the first try. The lean startup approach is a hypothesis-based approach to building new products iteratively.
Suggestion for further reading: The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses by Eric Ries.
The book explains testing early and frequently to see how effectively the solution satisfies the target customer’s problems. Another way to continuous innovation for the product market fit is to use split testing to see what various groups of consumers think. The Lean Start-up methodology proposes relying on understanding the benefits of real feedback loops, referred to as ‘validated learnings,’ to develop the best product-market fit. This book is primarily a guide to assisting start-ups in succeeding by reducing the waste of time, money, and effort in developing a perfect product that may not find a real user when launched.
As we mentioned over and over again, the product market fit can be achieved by optimizing processes while building value with constant feedback and user data.
Conclusion: How to Achieve Product Market Fit in a Lean Way?
The fundamental challenge is the usage of resources to reach maximum output when building a new product. From a lean product development perspective, we not only mean users or revenue with “output” but also validated learnings that light your road to product market fit. So, what you should do is simply falsify all other ideas to make the right decisions in every single step and ultimately reach the fit.
Shortly, your only need is building an MVP to validate your hypotheses iteratively to achieve product market fit.
Since you have limited resources -especially limited time- to gather data and insight to see if the product achieves the product market fit, you need to follow the lean product development processes.
Putting everything together, we can create a basic overview of the process:
1) Develop a full grasp of your target customer.
2) Discover their unmet needs that are not being supplied by competitors.
3) Outline how you intend to solve those pains better.
4) Create a simple prototype to evaluate your value proposition with real customers before starting on a big development project.