Is the idea of “Product/Market Fit” backwards?
In a recent research report, CBInsights found that 42% of startups fail because there is no market need for their products. The implication that almost half of startup failures can be attributed to a lack of understanding the market is scary, but probably not wrong. I would argue, however, that this number could be significantly reduced, simply by changing the startup product development model. Given todays ability to rapidly get customer feedback on products and prototypes, and iterate, are startups too often trying to develop products and then find a market, or are they trying to understand a market well enough to develop a product it wants?
Assuming that most startups are founded to solve a previously unsolved problem, does it not make sense to start by understanding who they are solving the problem for, before beginning product development? Think about it, if you start with a problem, but do not understand who is actually going to benefit by having it solved, you risk developing a product with no market. There are numerous examples of companies that have spent loads of money developing products that should never have been created. Conducting some initial, basic research to see if the problem is one a sufficient number of people were struggling with, probably could have saved a lot of people a lot of money. Think Juicero.
So how do we rearrange the startup model to be more efficient?
The common model looks like this:
Identify a Problem > Idea for Solving Problem > Develop Product > Market/Customer Input > Iterate > Repeat
Versus a model that moves market input to earlier in the process:
Problem > Idea for Solving > Market/Customer input > Product > Iterate >Repeat
The former requires a lot of guessing and initial development based on assumptions and technical research, followed by in-market iteration and feedback. The latter starts with the understanding of who will benefit from the problem being solved and how that solution will affect their daily lives. This helps inform the most effective technology with which to build the product. There will still be iteration and feedback, but the cycles will be shorter and the market will be more immediately accessible.
You could even change the development model further:
Problem > Market/Customer input > Idea for Solving > Product > Iterate > Repeat
This model avoids the risk of spending time and energy on a problem that has insufficient addressable market to build a sustainable company around. Taking this approach also helps identify solution options that you may not have considered otherwise. Where this model suffers, is that it requires a longer up-front period before starting product development, and many investors want to see rapid action and progress on the product. After all, that’s what ultimately will generate revenue.
How does brand play into this model?
Simple. If you understand that brand is about how your business is built and functions, you can use your brand foundation to help inform your process for approaching the market and guiding your product development. Using the Vision to identify the problem you are solving, the market feedback you receive will either reinforce or redirect your mission statement. This sets how you are going to solve the problem for the initial addressable market. The Values and Operating Principles support these efforts as they guide the culture that drives product development, and customer experience when you go-to-market.
This is what we mean by your brand being your business. It allows you to adjust and address your market in the most effective and efficient manner possible without losing your company’s unique characteristics.
Ask yourself, is it better to spend a lot of money developing a product and then changing it to fit a market? Or is more effective to identify a problem, understand the market that has this problem and then build a product that meets their needs? The answer should be obvious.
I’d be interested to hear your opinions on the best model for startups to use when developing their initial product. Respond in the comments below, or contact me directly and let’s talk. You can reach me via email at email@example.com or through my website andrewhayden.com.