Do I have product market fit?
If, like me, you have ever found yourself searching for the term "do I have product market fit?" - you probably haven't got product market fit! By the time I had that epiphany I had a shelf full of awards, big name paying customers, a growing team, a board of directors and lots of investors cash under my belt.
Because it took me so long to realise there was a problem, my options to tackle it were limited and my chances of emerging with the job title of CEO intact felt pretty remote.
From day one, our company values said we were there to solve real world problems and deliver clients compelling bottom line results. I never subscribed to "build-it and they will come" - I'm too much of an analyst, too keen on testing and data for that. Nor was I going to waste years building a solution in search of a problem, or a technology in search of a business application. I'd read my Lean Startup, identified a big problem in a big market and iterated/executed on a solution to that.
So why now, 5 years in, did it seem every scrap of evidence on the planet was suddenly screaming at me that we didn't have product market fit, when I had previously been so sure we had?
According to Marc Andreessen, “product/market fit means being in a good market with a product that can satisfy that market.” Very importantly Andreessen stresses that market comes first and a good market matters most: “You can obviously screw up a great market — and that has been done, and not infrequently — but assuming the team is baseline competent and the product is fundamentally acceptable, a great market will tend to equal success and a poor market will tend to equal failure.”
You can't then satisfy that market til you have delivered a product into the market and the customer has accepted that product into their life. Post product launch, it still takes several cycles of buying and using before you learn if the market is indeed satisfied with the product to the point they want to buy more of it - and are willing to do so at a purchase price and cost of customer acquisition that means you have a viable business.
In enterprise technology, for example, the buying and using cycle can be long and slow. Staff turnover can be faster than the company's buying cycle, meaning you're frequently back to square one. More significantly, if the market isn't as good as you thought - maybe there's not enough customers, or they can't/won't buy despite you extensive sales efforts - the chances are you've expended a lot of time, money and energy by the time you learn that.
Frustratingly, in hindsight, it makes complete sense that my personal moment of epiphany came so late. It wasn't that I'd never heard of product market fit, lean, iterating etc - I'd been putting that into practice (I thought) since before day one. What had happened was that I assumed we had product market fit, and so I had focused on getting more sales and scaling the business accordingly. Now I was having to accept I could be wrong. (For the record, I should state this is product market fit interpretation is my personal view - not everyone agrees with my assessment of the situation).
Here is the phrase - again Marc Andreessen - that made me feel most nauseous:
“You can always feel when product/market fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of ‘blah’, the sales cycle takes too long, and lots of deals never close.
And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can."
Ring any bells?
How did this happen?
What had I done wrong? What had I missed along the way that meant we were here? These are the factors that I believe have the most useful, general relevance:
1. Not being in such a great market after all. This above anything else, I think. In terms of size, willingness to act, ability to buy, willingness to pay, complexity of the buying unit, constraints to the sector and staff churn cycles. A number of tech founders I have spoken to recently have said the one thing they'd do differently next time is pick a different market! Next time I will test this better at the outset, before the outset even - it shouldn't take 5 years to learn this lesson.
2. Not delivering the customer a solution they could easily buy. Note I say solution, not product. It is easy to forget that getting the commitment to a sale is just the start of the process, the customer has to use and gain satisfaction from your product, and see a solution to their pain. It is so much easier and low risk for your customer to do nothing at all - even with something they have bought. Next time, the level of convenience, ease of adoption and magnitude of pain relief needs to be far higher than I had originally understood.
3. Not solving a truly serious, urgent pain for enough people. The feedback from early adopters and seriously supportive evangelists can easily blind you to the indifference of the mainstream market. Classic Crossing The Chasm stuff - the chasm is the huge gap that lies between the early adopters and the early majority when a product is disruptive and requires behavioural changes. If your mainstream doesn't share the urgent pain in the same way as the early adopters, your niche segmentation is potentially off, and/or you are not in a big enough market.
4. Trying to scale too soon. It is so tempting to scale sales at the first signs of revenue traction, rather than based on the core aspects of what you are doing that have actually delivered significant, repeatable value to the customer and to the business. Your first wave of sales and their aftermath is really where you need to watch, measure like a fiend and wait for your usage data and feedback to come in. Otherwise, you risk feature creep, misfocus and overextending in too many directions. It means saying no to sales that are not the right sales and zooming in on what is really working. You Tube (originally a dating site), Flickr (gaming), and Twitter (podcasting) all eventually zoomed-in on a single compelling aspect of what they did. That micro-focus was the key to them achieving product market fit, and then scaling.
5. Mistaking product/market fit issues for sales and marketing issues. It is incredibly common, maybe almost inevitable, that when your sales are taking too long, or are slow, the first place you or your board look is to your sales staff and processes. Then to your marketing communications. Then to your leadership. Especially when you don't think of yourselves as a startup anymore. But iteration isn't a one-off, or 'get it right and it is done' process. If you neglect that startup culture in your haste to grow up, you are increasing, not reducing risk - at least you are if you don't yet have product market fit.
So what the heck do you do next?
If you are in a good market, with customers who can and do buy from you, and you are delivering a solution to a serious enough pain that those customers will protest if your product is suddenly taken away them - then you have product market fit. Congratulations. Go scale...
But what about if you don't?
What do you do next when you realise you do not have product market fit? Once you stop being sick and park the idea about fleeing to Antarctica for a long winter break, you do have options. But those options are very much constrained by your investor/board relations, the amount of cash you have left in the bank and the extent to which being in a poor market is part of the problem. Obviously, the earlier you learn you have a problem the better. But if you are several years in, these are your options as I see them:
1. Iterate on your vision and zoom in on an element that works and do whatever it takes to cut costs and survive long enough to get product market fit. There has been such a backlash against the word pivot, I don't recommend you even go there. Get the whole team thinking of ways round the obstacle. Test and learn as cheaply as possible, and if there is a solution to be found - somewhere, anywhere - then find it and test it. Do whatever it takes. (I know, that sounds a lot like pivoting, but trust me on avoiding the P Word!)
2. Withdraw and change vision/markets. Ouch. This is hard. Who knows if you'll have any success in the next market either, as the grass always seems greener. But if you have the funds, the network, any possible inroads then this would still be preferable to option 3. And there are a few examples - FanDuel and NextDoor - who have emerged as successfully reinvented businesses by this method.
3. Stop. Walk away. I do not subscribe to the 'never give up' cliché. Never give up too soon, but if you have tried 1 and 2, or if you are completely out of money, you may have little choice. You cannot keep on running headlong into the same wall and expect different results.
Unfortunately, you may come up against those who prefer another option:
4. Complete denial/Shoot the messenger. This is probably self-explanatory. Replace the Sales Director and the one after that. Replace the Marketing Agency and the one after that. Replace the CEO and the one after that. This is extreme denial - usually, it is more subtle. But it's a common response. You'll also likely have to face people who want to shoot the messenger, just don't be guilty of it yourself. Listen to your team and listen to your customers - the messengers are far more likely to tell you what you need to hear, sooner rather than later, if they can do so in a safe and supportive culture.