The Leaping Startup
I’ve been trying to understand why some startups leap through success once product/market fit is achieved, while others don’t.
I don’t have a full answer yet, but some signals are emerging. A common pattern seems to boil down around the founder’s mistake of staying too close to the product and users, instead of starting to get closer to the business model. That’s the “product/market fit’s dilemma“, when it is not accompanied by a business model realization.
Product success & market acceptance give you tremendous insights into your customers and markets, but with this multitude of signals, comes the challenge of sorting through it. Although you want to listen to all of this data, it will drown you if you act on all of it. For example, prioritizing feedback by acting on the most popular requests is a sure act of shortsightedness that doesn’t propel you ahead. What the crowd is telling you to do is typically obvious, and should be used to validate, not dictate what you need to do next.
Reality is that most customers will give you incremental feedback, and that will limit your potential if you only listen to that. Their vantage point is selfish, often centered on making the product work better for them, but not always helping you solidify your business model foundation. Only few users will give you insightful or strategic feedback. And these may first appear as outlier types of feedback. But that is where you might find some silver linings.
Your product adoption success was just a license to figure out your business/revenue model. The benefits of having market acceptance is that it gave you an added level of clarity and insight into the strategy required to get to your business model goal. So, use that post-period to get closer to the business model, instead of responding to incremental feature requests that don’t add-up to propelling you forward.
Two scenarios at play here. Either the founder has a deep product vision, and they continue pouring resources on product development, or the product vision is lead by user feedback and excessive listening to it. Either way, at some point, you must stop iterating on the product, and start figuring out the business model.
If you’d like to ask users for feedback, don’t ask them what new features they’d like to see. Rather, ask them which ones they will pay for, or which ones they can’t live without, or what will it take for them to tell 100 others about your product, or what you should do next as a company in order to be in business forever.
Let’s review these 5 startups as case studies to validate my data points. These are real examples, but with a hidden identity:
- A startup has over 10 million users, and a pipeline of product requests, but the paid version features are not unique enough. Why? They listened too closely to their user feedback, instead of leapfrogging with something unique that no else has. Therefore, they are still vulnerable.
- This company has over 30 million users, yet the founder gets more excited talking about and focusing on adding additional features to a product that has already achieved product/market fit many times over. Why? The founder is too focused on realizing the last chapters of his product vision, while he has late at focusing on monetizing the model to solidify his ground before going further.
- This startup is approaching 20 million users and boasts an enviable user community that loves them, but the founder thinks every user on the planet is theirs to capture, and he’s not worried about realizing the business model yet. Why? The founder thinks they are safe because they are following user demand.
- This B2B startup is servicing more activity than the perceived leader in their market, yet they are relatively unknown in that space. Why? They are following the needs of their customers who want more of what they have, instead of stepping back and thinking strategically about how they can leapfrog their positioning in the market.
- This company has a loyal base of over 3 million users, is installed in several million websites, yet the company’s market message is more confusing than ever, and they aren’t able to act like the leader they are. Why? They are following the Lean startup method of iterations and product extensions way beyond its useful lifecycle, and the founder is late on optimizing their revenue model potential.
On the surface, all these (mature) startups appear very successful from the outside, but they are struggling with a ticking bomb on the inside, because they aren’t making the bold moves to solidify their business model. But these companies are salvageable, only if the founders acknowledged the gaps and started acting to remedy what is ailing them.
To counter the above risky examples, here are 5 Cases of successful leapfrogging:
Focusing on the business model with the same exactitude and obsession as managing the product is a trait of a successful Founder-to-CEO transitions (more on that topic, soon). Managing the product to fit the market vs. running the company towards the business model are not the same thing and require different skills.
When you have millions of users or transactions, they become a drug you’re addicted to. While you can’t ignore the feedback, you shouldn’t be totally focused on where it wants to lead you. Feedback prior to product/market fit and feedback after the product/market fit should be treated differently.
Users are a means to an end, not the end itself. The end goal is to make the business model a successful one, and often it’s a lot harder than developing the product.
A friend of mine who is a very successful restaurant owner once told me “a restaurant is a business … that happens to serve food” (and his restaurant is consistently ranked as a top choice for his food category). When you start to think of your startup “as a business, that happens to …fill-in-the-blanks”, then you’ll know that you can be in business forever, and all the other good stuff about valuations and acquisition potential will be maximized.
- Don’t let user feedback lead you. Users will give you a year’s worth of product revisions that will anchor you down, and won’t let you leapfrog.
- If you’ve got a ton of feedback, find the gems in that feedback that are springboards to a leap. Most others will weigh you down.
- Don’t keep iterating ad infinitum, past the product/market fit. Rather, start iterating on the business model, before it becomes urgent.
If you want to take user feedback, take it as a whole, not feature by feature, and imagine something better and bigger to deliver on, and make a difference.
Make that leapfrogged difference. No one will remember your iterations, but they will remember your shots.
This is a very insightful article. I succumbed to
the transitional failure that you describe and it proved to fatal. I
achieved early product success and in the excitement that followed
became overly focused on continuous product innovation to the neglect of
business/revenue model refinement. The result was a failure to develop
an appropriate recurring revenue dimension for the product success that
was occurring. The result was almost like a ponzi effect, when the
economy tightened and new sales slowed the money ran out.
Hi Bob, Sorry to hear about that, but thanks for validating my assumptions. Hopefully, this will raise the visibility on this issue, and help others.
Thanks for the great article, William. Recently at a company I advise I was helping the product manager to write his job description, and told him that for now his job is to achieve product-market fit — and that once that’s accomplished we’ll need to throw that job description away and write a very different one.
Hi Rohan, Exactly. That’s a great way of framing it. I like that approach.
The corollary is – how do you know when you have achieved product/market fit? — I’ll have an upcoming post on that 😉