Complete Your Puzzle With Product-Market Fit
Did you know that no market need is the top reason for the failure of startups?
You can have it all – the perfect team, great technology, solid expertise, and fail simply because you built something that the customers never wanted. Indeed, there has got to be a solution to this.
Enter: Product-Market Fit.
Marc Andreessen sums up this process perfectly by stating, “Product-Market fit means being in a good market with a product that can satisfy that market.”
His emphasis is on two key aspects. Firstly, you need to go after a market that is big enough and will continue to grow. Secondly, the product that you develop must meet the needs of that market. You miss any of these, and there is a good chance you will add to that statistic given in the beginning.
Slack, Uber, and Spotify, companies whose products we use day in and day out, all started by first determining their product-market fit and then scaling with a product that was as close to perfect as possible.
Here’s how the product-market fit completes the puzzle for young startups.
Helps understand the product’s potential
The first and most apparent benefit of undertaking the process of product-market fit is that you will be able to judge if your product has the potential to sell a lot in the market. While there are no straightforward metrics to know when you’ve reached product-market fit, by taking it one step at a time, you will get clues about your progress.
If your users are growing fast, demand is hitting the roof, people are coming from references, and the word-of-mouth sales are picking up, it means you are getting something right. However, if you are finding it hard to close deals and people seem disinterested from the get-go, you need to head back to the drawing board.
Look out for signs of excitement in your customers when you talk to them about your product. They should relate to your mission and be curious about how it solves their problems. Product-market fit is not a one day job. It will take many meetings, many experiments and many failures. The best way is to know from the start that bit by bit, you will get closer to achieving the same.
Helps to determine the market size
A great product in a stagnant market will end up failing. Entrepreneurs make the mistake of building a solution for a problem that is not as prevalent in the hope that a good solution will drive demand on its own. Sadly, that’s not quite how it works.
No matter the problem you are going after, product-market fit helps you assess whether you are targeting a market that is big enough to help the company sustain itself. Look at underserved markets and specific needs of the people but check if a large enough group struggles with them.
For example, in 2001, the music-sharing platform Napster collapsed due to copyright issues. Daniel Ek, Spotify’s CEO, was quick to realise that some kind of product-market fit already existed. All he had to do was see if a large enough group of people would pay extra to access music legally.
Spotify’s massive success lies in identifying the market-fit along with sensing a sizable and growing market for the same.
Helps in getting the priorities right
In the product development phase, despite some market research, assumptions are made regarding features, consumer behaviour, needs, wants, and other things. After going through the process of ascertaining the product-market fit, there is a good chance that your assumptions will be proven wrong, forcing you to focus your energy on aspects you did not initially consider.
Some entrepreneurs come to realise that crucial features are missing from their product that the customers actually wanted. Other times, they may see that their packaging lacks appeal or that they require specialists in a domain to take things ahead.
There are too many variables involved in the early stages of a startup, and almost all are put to the test while determining the product-market fit. Your priorities regarding your product will most definitely change and will bring you on the right track.
Helps in mitigating risk
While all founders wish to see their companies as unicorns and beyond, it is nearly impossible to reach those heights without getting the small things right. Product testing, research work and analysis can take you away from your goal, rather than towards it, if not done properly.
Finding your product-market fit helps reduce many risks, including financial and operational. You can prepare for a successful commercial launch because you are aware that you have the right product for the right market at the right time. It will give you the confidence and direction to start scaling your startup.
No matter how well your product looks or how strong your sales team is, you will not have customers unless you give them the product best suited for them. It is better to invest resources and pump in vast amounts of hard-earned money only when the market itself gives you the indication that you have created something good for them.
The final word
Assuming that you have achieved product-market fit by thinking that you have created something new or that you do not have any competitors is a big red flag. Unless plenty of customers tell you it’s right for them, you are far from achieving anything.
It is hard to replicate the success of the big startups if you are not willing to get your hands dirty. The processes are slow and even painful at times, but that is the only way to get slightly closer to success. Stay relevant and keep up with trends because you can lose your product-market fit by refusing to change with the market.
