Product/Market Fit is a Continuum
Yesterday, all my troubles seemed so far away.
Now it looks as though they’re here to stay.
Oh, I believe in yesterday. – The Beatles
It’s easy to think that Product/Market Fit is a tipping point in time when all your troubles go away, because you reached that magical moment. But that’s in theory, not reality.
In practical reality, Product/Market Fit is a continuum*, and it is rarely the result of a single defining event or variable. Reaching Product/Market Fit is always obvious in hindsight, but not so clear in foresight.
In a post I wrote last month, Don’t Let Lean Startup Become a Crutch, Ben Horowitz says “achieving product/market fit is a good tactic, but not an operational theory”, because you never know when you’ve exactly hit it. That’s very true.
In that same post’s comment space, Jim Hirshfield wondered, “How do you measure product-market fit and know that you’re there?”
So, I asked Union Square Ventures partner Albert Wenger to answer that same question in 30 seconds on Ziggeo. Here’s the Ziggeo clip and narrative below:
“Product/Market Fit is best measured by observing how customers react to your product, better yet, observe them interact with your product. You know you’ve achieved Product/Market Fit when the customers intuitively understand what need the product fills for them, and they have no trouble using it, in fact they enjoy using it…in fact they start telling their friends about it, maybe even telling the world about it on Twitter. That’s how you know if you’ve got Product/Market Fit.”
Albert hit on the behavioral side of user adoption, and that’s key because you can’t fake your way into growth if users are challenged or puzzled each time they interact with your product.
But I became obsessed with answering Jim’s question thoroughly, so I went on a research hunt, and after reviewing a lot of what’s been written on Product/Market Fit on the SUM Library, I saw 4 camp themes:
1) Marc Andreessen was the first to come-up with the term Product/Market Fit, and in his seminal post from 2007, The Only Thing That Matters, he emphasized that PMF really includes 3 variables: the product, the market and the team that is executing on it.
=> Take-away: if there is no market, even a great product and a great team will not get you there.
2) In his book The Startup Owner’s Manual, Steve Blank, argues that Business Model realization is part of the Product/Market Fit, and that includes the Value Proposition, Customer Segments, Channels, Customer Relationships, Cost Structure and Revenue Stream.
=> Take-away: if you can’t realize the business model, there is no Product/Market Fit.
3) The Lean Startup cheer leading trio of Eric Ries, Ash Maurya and Dave McClure look at Product/Market Fit based on user engagement, by focusing on conversion velocity, from user acquisition to deep engagement.
=> Take-away: If there is no retention and referrals, there is no Product/Market Fit.
4) Ben Yoskovitz and Alistair Croll, in their book Lean Analytics astutely remind us that maybe we should think in reverse, i.e. Market/Product Fit, not Product/Market Fit.
=> Take-away: “Instead of building new features, or rebuilding from scratch, try pointing your product at a new market.”
Marc, Steve, the trio and the duo are right. We need to look at Product/Market Fit as a holistic continuum that takes into account the team, the business model, user traction metrics and the market.
So, I put together this table to capture all these elements at the Before and After stage.
|Sales||- Crafting each pitch, and re-writing it|
- Inconsistent selling techniques
- Selling done by founder or 1 other sales person
|- Well defined sales playbook & roadmap for selling
- Sales materials and collateral exist
- Repeatable approach to selling from targeting to pitching to closing
- Easy onboarding of new sales reps
- Sales funnel is becoming predictable
|Marketing||- Lots of growth hacking and online marketing|
- You correlate marketing time to results
|- Holistic marketing with perfect positioning
- You correlate marketing spend to results
|Product||- Non-intuitive usage|
- Key features still being developed, others being dropped
- Re-writes/re-designs are occurring
|- Users see immediate value
- New features are stabilizing
- Customer identifies the pain point immediately and relates to it
- Customer/user can’t live without the product
|People||- Team changes are still occurring to fill gaps or add needed capabilities||- You have a stable team that is able to iterate quickly and as needed|
|Channels||- Still not sure about how you will distribute your product||- Distribution or partners identified and contributing to your growth|
|Revenues||- Sporadic or non-existent revenue||- Sales orders are validating the fit
- Growth is finally linear or starting to become that way
|Market||- Market size not well defined |
- Target market segment still shifting or not well identified
- You are pushing the product on the market
|- Signs that a large market potential exists are validated
- Market segmentation is known and can be described accurately
- Market starts to pull the product
|Cost||- Focused on burn, not costs||- You have a financial model for your growth|
|Business Model||- Still iterating |
- Strategy not clear yet
- Have a list of options and choices
|- Clear path between product, strategy and business model
- Business model is scaling
- The causality of metrics is clearer
|Customer Relations||- 1:1’s focused on translating feedback||- 1:1’s are to empower customer advocacies|
|User Engagement||- Engagement drops off after activation|
- Takes a long time to onboard a user
- Referrals aren’t consistent and not growing
- User personas are vague
- You are saying No to user/customer requests
|- Engagement is steady and predictable
- User onboarding is well lubricated
- Referrals are increasing
- User Personas are well defined
- Your product is part of daily user or business workflows
This Conundrum was a Continuum
The Product/Market Fit is a continuum because it’s a series of steps and doors that open progressively, each allowing you to do things that you couldn’t do well before. I love this picture to depict the evolution towards Product/Market Fit.
- The Product/Market Fit is a multi-variable equation, not an event.
- Getting to Product/Market Fit is like a dance where the product and the market are trying to align and synchronize.
- Product/Market Fit is also like an orchestra or a chorus, because the team and the business model have to sing in harmony.
(* Thanks to Brad Feld for inspiring the title of this post, after he wrote A Startup is a Continuum of Ideas.)
Nice summary of the various thoughts on product-market fit. Thanks for giving me a cameo.
Stop asking questions that take me 3 days to research 🙂
Thanks for the interesting post. But given your table of Before/After, I feel like using the word “continuum” doesn’t capture the Product/Market Fit dynamic, because with the “Before/After” there is strong notion of having “arrived”. That’s why there such a focus on how do I know when I’ve arrived? Getting there is the point – not the “continuum” of the journey.
I think a better visual might be an uneven plateau, with multiple false summits, but ultimately diminishing marginal returns. The point is to achieve a level of altitude where you begin to escape gravity and be carried by own momentum.
Or am mixing too many metaphors?
Fair point, and I may have dramatized the continuum part a bit. Maybe Journey would have been a better metaphor?
The thing is that between the BEFORE and the AFTER, there’s a whole lot that happens. And even when your PM Fit is pretty good, you keep evolving, because new doors open, i.e. you can do more, the stronger the fit is at each level. There’s a follow-up post I was thinking about, re: what happens after PM Fit.
really like is “=> Take-away: If there is no retention and referrals, there is no Product/Market Fit” ..and the “customer relations” row in the table above.
heres a minor epiphany about my own use of my pebble watch…
a) when i first bought it i was an early adopter / curious user
2) after using it – and really liking it ( notifications on the wrist are pure sweetness ), i noticed that i was telling all sorts of people about it – even strangers!
i love showing merchants that take payments via square the sms reciept when it appers on the pebble on my wrist! the look of amazement on their faces 🙂 🙂 🙂
…now if i could just get onx working with the pebble intents api
Hahaha! Consider yourself lucky to have inspirations for new posts. Not so easy.
Yup…some products grow on you, and become you, almost. Good 2 examples. Thanks.
I agree that product market fit is a measure of relative advantage in a particular market at a particular time. But it’s not a rachet or a trapdoor: it can also degrade due to competitive response by incumbents or new players and changes in consumer taste. I blogged about this in “Product Market is a Fraction not a Bit” in http://www.skmurphy.com/blog/2010/08/10/product-market-fit-is-a-fraction-not-a-bit/
Hi Sean! Great to see you here.
Yes, and Ben Horowitz made that point in the first post I referenced above-
But then what happens depends if the company takes action or not, to mitigate the potential effects of the competitive aspect.
Maybe using healthy/unhealthy is a better metaphor. There’s certainly an ongoing journey, but there’s also a before/after aspect. Unhealthy “fit” and healthy “fit”. You want to have a healthy busniess
But most authors portray it as a rachet; once you see it as a competitive factor that has to be managed not only by startups but by mature companies it changes the way that you manage the problem.
A “degree of fit”,,, that’s interesting too.
Most startups fail because they never find product market fit. Most mature companies fail because they lose it. In between are growth companies and they tend to fail because of poor execution.
That’s a good way to segment it. Thanks Albert.
Hi William, Having seen some people question before/after vs continuum – I would like to throw a third model in from personal experience, – it seems it is not one OR the other. It can be both simultaneously…
1) We have not reached PMF because I can look down your tables and criticise our operation in many respects, also because of our feel of “searching”. (eg Markettng collateral is in a continual state of evolution as core propositions change – AaaaRGH)
2) We have nailed PMF for some key benefits / use cases, where clients are calling up colleagues and saying “you must see this – its brilliant”. and enterprises are trying serious changes to their propositions to accommodate the value we can add.
From broad functionality -There is a refinement process – even after you have found those scrappy elements that people love , see as brilliant and even evangelise , you still need to package a holistic solution and get the those basic black Model T Fords s rolling off the end of a production line, in their most uniform configuration as a MVP.
PMF is thus as far as I can make out the result of an iterative refinement, not a step change, but also as it involves steps or insights – it is not really a continuum.
In hindsight, I should have said it’s a “journey”, perhaps to more accurately depict what you’ve just described. Do you like Journey?
That said, I think there is a continuum around reaching stepping stones and milestones that reveal themselves over time. I think each progressive step allows you to do more in terms of reaching market success.
Great post William. I find that, especially in the early days, even if you reach PMF, each subsequent decision can pull away from PMF, which makes it a bit of a tug-of-war until you reach scale. You may feel you’ve hit PMF on a Monday, but not on Friday, due to lots of potential internal and external influences.
Funnily enough I was putting a presentation together on the subject of differentiation and looked at this photo.
The concept was that there are automated solutions all around us but when you tread back you see that we “bridge” the missing step. So If i said I did not see steps as part of a journey I would look silly.
But is the journey it a continuum ? In low resolution or from 100,000ft it appears so but near to the ground each thing you learn is merely the sum of quanta Learning takes place and is stepwise although it can appear continual to the observer.
Yup. You’re never happy, being an entrepreneur. There’s always another goal around the corner, right after you achieved the previous one.
Thanks. I’ve been there exactly as you described. True, but then suddenly you’ll know when the signals are better.