6 Steps to Establish Product-Market Fit

6 Steps to Establish Product-Market Fit

The CEO of Quirky—a platform that allows users to vote on inventions to crowdsource—stepped down last year because his company burned through its venture capital and couldn’t persuade investors to re-up. While the idea of a crowdsourced inventors’ marketplace sounded great, and initial returns were promising, after the smoke cleared, the company couldn’t maintain its momentum. While any company can convince a few people to buy something, to achieve sustainable success you need a larger portion of the market to get excited about what you offer. If your product is truly a market fit, you’ll be pulling all-nighters to keep up with manic consumer demand.

Most companies spend the majority of their time prioritizing features, developing build schedules and visualizing big-picture ideas. But coming up with ideas is often easier than executing them. And, many people get caught up in ideation and are unprepared when it’s time to go to market.

Other companies get so excited about their ideas that they hit the height of their social interest too early and are forgotten when launch time arrives. Remember Clinkle, a mobile payments startup offering user rewards? The initial idea got potential users excited; the startup even managed to raise $20 million during development. However, the hype died down as people realized that an actual product was a long way off. The eventual product launch more closely resembled a single lit sparkler, not a full fireworks display. Employees left in droves.

Of course, the other direction is just as dangerous. Calxeda, a company that built ARM-based servers, tried to market tomorrow’s solution to today’s consumers. It fell flat because people weren’t yet ready to go in that direction. Both Clinkle and Calxeda were unable to achieve a product-market fit because they failed to time their product to consumer readiness.

Then there are businesses like OnLive, a streaming game service purchased last year by Sony and shut down a month later. OnLive failed previously in 2012 before retooling its subscription gaming approach. It attempted a comeback in 2014 on the popular Steam platform and as an enterprise workflow software. But that ultimately failed too. Even with Sony’s more aggressive pricing model, the market simply didn’t demand what the product offered at a price required to remain viable.

Creating a product is just the first step in a long, complex equation. The world must be ready for your product, and people must understand how your product solves their problem. These businesses failed because they couldn’t create the proper product-market fit. To avoid their fate, test the value of an idea before fully developing it, and only decide how to proceed based on those results. Fleshing out an idea just to see whether it will work results in sunk costs, wasted time and lost business intelligence opportunities.

Luckily, it doesn’t have to be particularly difficult to identify the market fit and execute a product strategy to match; you just have to follow the proper procedure. An important tactic here is to set the bar high and hold your organization accountable. A small trickle of customers at a low conversion
rate doesn’t indicate product-market fit. Instead, look to achieve product-market fit by reaching or surpassing the conversion rates of competing products. The following steps will help you find the best fit for
your product.

1. Document your plan.

First, take a step back and reevaluate your original plan. Create a simple one-page documented plan. This won’t be a business plan for your investors where you make optimistic guesses about your financial success. Rather, it will show a simple business model that outlines your solution, how it solves customers’ problems and the associated risks. Lean Canvas offers a free version online.

2. Tackle the riskiest part first.

Start with the most uncertain part of your plan and tackle that. The risk might be in marketing, sales or development. Wherever it is, focus your attention there before moving on. It may seem obvious in hindsight, but the easiest way to lower your uncertainty is to eliminate the biggest risks first.

3. Put product function above operationalization.

Identify your business model and product fit before you tackle how to operationalize them. Does your solution truly meet the consumer need? Have people demonstrated that they want this need fulfilled and are willing to pay for it?

Focus heavily on learning what works, then start operationalizing once you know you have product-market fit. Remember, Clinkle failed because leadership spent $20 million operationalizing the company instead of using its resources to establish product-market fit.

4. Define and measure key product metrics.

Company leaders must talk to everyone—from stakeholders to end users to prospects—if they want a clear understanding of what their user base expects. Use that information to create specific metrics that determine whether your business is succeeding.

Define and track your metrics around AARRR: acquisition, activation, retention, referral and revenue. These high-level metrics will help you understand the big picture of your business model and solve ground-level problems using top-level logic.

5. Make your claims testable.

When you make claims about the outlook of your product and business initiatives, you need a way to test those claims. Product pros and entrepreneurs love to make vague claims that sound good but can’t be used to evaluate success.

For example, instead of saying, “We will become famous through content marketing,” say, “Writing 10 guest posts for credible publications will net 1,000 new visitors in this time frame.” Can you duplicate the results? If so, you have a repeatable testing model. Now you can home in on what makes your product the right market fit and focus on those areas.

6. Shorten the cycle time.

Use manual processes first to understand the ins and outs of what you need to accomplish. Next, design your processes using that knowledge to shorten your cycle times. For example, rather than building a report-generating feature over the course of a month, create the report by hand for your first 10 customers. It will take more time in the beginning, but once you understand the value of that feature, you can decide how—or whether—to flesh it out more fully.

Before anything else, product-market fit—or its absence—is what will make or break your company. Many great ideas have died because they arrived at the wrong place, at the wrong time, in front of the wrong people. Make identifying your product-market fit as important as the development of your product, and you will dramatically increase your chances of success.

Author

  • Pragmatic Editorial Team

    The Pragmatic Editorial Team comprises a diverse team of writers, researchers, and subject matter experts. We are trained to share Pragmatic Institute’s insights and useful information to guide product, data, and design professionals on their career development journeys. Pragmatic Institute is the global leader in Product, Data, and Design training and certification programs for working professionals. Since 1993, we’ve issued over 250,000 product management and product marketing certifications to professionals at companies around the globe. For questions or inquiries, please contact [email protected].

Author:

Tags: Agile

Other Resources in this Series

Most Recent

Article

Top Reasons to Pursue a Product Management Certification 

Earning a product management certification is a strategic move for professionals immersed in product development, whether they're officially holding the title or managing related tasks. It’s also a smart step if you’re aspiring to move...
Article

How to Choose a Product Management Certification

Learn how to choose the best product management certification for your career development and what makes a certification worth it.
Article

How to Recognize and Overcome Imposter Syndrome at Work

Imposter syndrome is the internalized belief that your success is due to luck or other external factors rather than your skills, intelligence or qualifications. This false idea leaves you with a perpetual feeling of being...
Category: Career
Article

What Does a Product Manager Do? 

Meet the unsung heroes of product development – product managers. They're the architects behind the scenes, shaping a product's journey from idea to triumph. In this guide, we'll cut through the jargon and look at...
Article

How to Become a Product Manager: The Ultimate Guide

Want to become a product manager? This step-by-step guide has everything you need to know to start a successful product management career.

OTHER ArticleS

Article

Top Reasons to Pursue a Product Management Certification 

Earning a product management certification is a strategic move for professionals immersed in product development, whether they're officially holding the title or managing related tasks. It’s also a smart step if you’re aspiring to move...
Article

How to Choose a Product Management Certification

Learn how to choose the best product management certification for your career development and what makes a certification worth it.

Sign up to stay up to date on the latest industry best practices.

Sign up to received invites to upcoming webinars, updates on our recent podcast episodes and the latest on industry best practices.

Subscribe

Subscribe