Focus on Product-Market Fit

by Robert Freedman, VP of Products and Services and cofounder of Accomplio

You’ve got a great idea for an app and a buddy who codes. Go get some funding and get that app out there now! It’s easier to do that today than it’s ever been. But not so fast. Building a sustainable business requires focus and some process to be effective, and a key milestone you need to achieve is product-market fit. This is an overview of how to get there based on practical experience bringing products to market and the writings of authors like Eric Ries in “The Lean Startup,” Steve Blank, and others.

What is product-market fit? If you were to graph it, it’s the point where a line representing a product’s attributes crosses a line representing a customer’s willingness to pay for those attributes, which we can simplify to: when customers pay for your product (or download and use it, in the case of free apps). When you achieve product-market fit, it feels like magic, because all of your dreams meet your customer’s reality and you have a marketable product!

But, while it feels like magic, there’s process you can apply to getting there. We see that process falling into three phases, which we’ll label as Design, Validation and Acceleration.

Let’s use a familiar example – food! – to illustrate. You like to cook for your friends, who love your creations, and so you decide to open a restaurant. You could start by opening an actual restaurant with the accompanying spectacularly high failure rate and ability to consume capital faster than a party of eight can finish a crème brûlée, or you could take a more incremental approach.

Streat Food and Off the Grid in San Francisco enable budding food entrepreneurs to showcase their offerings through a relatively low cost channel – the food truck. Some food entrepreneurs stay with the food truck, while others graduate to (or start with) hosting a “pop-up” restaurant in an existing restaurant space. Let’s say your vision is to combine Korean and Mexican into a bulgogi burrito – the “bulgito” – and offer it via food truck. Let’s take a quick walk through the three phases:

  1. Design: First of all, does anyone want a bulgito? This is relatively easy to sort out. You can survey patrons at the food truck parks to get their feedback on what you envision, what their tastes are and how you might meet those with ingredients that are interesting to them. So let’s say you get positive feedback on offering Mexican-Korean fusion.
  2. Validation: Now you need to put some real effort into this. Let’s invite a sampling of these food truck patrons to try out a variety of your bulgito concoctions. Maybe you try a rice paper wrapper rather than a tortilla. Are there some Korean snacks that can go on the side in place of tortilla chips? For the carb-free folks, can you do a tostada salad using Korean ingredients? How about the non-meat eaters who like a bean burrito – a tofugito? Out of this phase, you realize you can only afford to offer one main item and a side dish initially. So you now have your menu (products and prices) and your target customer: a meat eater who is not watching his or her carbs.
  3. Acceleration: And now it’s time to put some real money into this. You need to rent time in a food truck or pop-up space, get certified to prepare food in an industrial kitchen, figure out where to source ingredients, and hire help to take orders and make change while you’re on the grill. Then come the rave reviews, the bulgito is declared the next cronut, and Chipotle buys you for $10 million as the next big thing in wraps!

We all love food and happy endings, but there is a structured process for achieving product-market fit. Your app, site or hardware product (and any product really) might seem very different from the bulgito, but it’s not. How can you apply this to what you’re doing? Two important foundational points:

  • The bulgito example relies on a robust food-entrepreneur ecosystem. Tech products benefit from a robust, entrepreneur-friendly ecosystem as well.
  • There are two elements to product-market fit: product and market, where market=customers. Many entrepreneurs focus on product and forget about customers. Big mistake. During validation for our bulgito, we simplified product by stripping out salad and tofu options, which also refined our target customer.

Design

For the bulgito, we verbally surveyed potential customers, but for an app, you need to show something – a picture is worth a thousand words. There are great options for initial prototyping that keep costs low:

  • Apps and sites can be mocked-up using Balsamiq and shown on a computer, phone or tablet at life-size.
  • Paper-prototypes can be printed, passed around and marked up with a pen.
  • Tools like iBuildApp are limited in the “palate” they offer, but are easy for non-coders to use to “build” an app.
  • Physical hardware prototypes can be printed on a 3d printer.
  • Small computers like the Raspberry Pi offer low cost machines running Linux and other emulators.

Ultimately, the point of Design is to get something with reasonable fidelity into the hands of potential customers to figure out if your idea has legs without spending a lot of money. You also need to spend time thinking about your target customer so that you can get relevant feedback. Don’t assume that you are your target customer. You’re going to miss the opportunity by talking to the mirror or to your friends. You need real customers sooner than later, so start finding them now. Call, email, Facebook, LinkedIn, Instagram, or Pinterest potentials and get prototypes in front of them.

Listen to the feedback. Don’t take negative feedback and think, “Well, Steve Jobs never paid attention to users.” That’s a myth – he did. Also, you’re not Steve Jobs – not yet anyway. And Steve failed a lot, too. Also, listen to figure out whether these folks are your target customers or just good (or bad) leads on who your eventual target customer should be.

Validation

From Design, you’ve gotten feedback on the product proposal and potential target customer. Now it’s time to put some money and a lot of time into figuring out what you want to take to market and to whom to market it.

To build it, a co-founder who can code is great. Odesk/Elance can also be cost-effective, but allocate appropriate (read: a lot of) time to managing virtual resources. Consultants can also be a good option, but it depends on expertise versus cost.

What you’re looking for in Validation is direction on your Minimum Viable Product, or MVP. MVP does not mean minimum product, it means minimum viable product for your target customer. For the bulgito, we eliminated gluten-free and veggie versions. The tofugito can follow once we’re selling enough bulgitos. Looked at operationally, offering a tofugito would introduce too much complexity for the additional customers that such an option might attract. Making a decision to cut features like this is really difficult. Many entrepreneurs struggle with reducing functionality and therefore perceived flexibility, but it’s a critical decision point. If you want to emulate Steve Jobs, do it here: cut options ruthlessly and focus on key features.

And to focus effectively, you must have clarity on your target customer: who is he, what does she do, what does he like, how does she behave, what will motivate him to acquire your product, how many of her are out there? Become this person in your head. Then go find him or her with all tools at your disposal, and put a controlled testing program in place to gather feedback. Resist the temptation to include five friends of a buddy who heard about what you’re up to and think it’s really cool. Will these friends of a friend actually acquire your product on their own? If not, pass and find potentials who might.

Acceleration

You now have some clarity on minimum viable product and target customer. Now you’re going to spend real money and all of your time to put a product out there and you’re going to see who will actually acquire it. Depending on what your product is, there are various ways to do this: Kickstarter, the app stores, Google or Facebook advertising, Amazon e-commerce, industry shows and meetups, blogs and press, etc.

As for funding, you should always be thinking about it, but coming out of Validation and going into Acceleration is really the right time to be building a business plan to go along with your product and market plans, and working your network to get to funders. The Validation phase buys you exactly that – validation. With a prototype and real-world feedback, you should be able to tell a plausible story about your product and market opportunity. And you’re at the perfect point to make the case for an initial valuation based on the promise of your product. As well, you need real money now. Acceleration requires a more than full-time commitment from you and your partners, and the money to make it happen. This is not to say that during Design and Validation you shouldn’t raise money, but if you did so, it should have been true seed-stage capital with a valuation based on your first real funding round coming sometime about now in the process.

In short, there are many funding, marketing and fulfillment channels at your disposal once you hit this stage. It’s still hard work to put all of these channels into operating mode, of course, but with the clarity that validation of product-market fit brings, you should be in a great place to accelerate into doing real business at this point.

One other point: don’t stop at the sale – you also need to offer absolutely killer customer service. Monitor tweets, social media posts, and feedback, and respond. Be fast, positive, and proactive. Make a name for your product and company as customer-friendly. And get the wheelbarrow ready for the cash to roll in.  Actually … get ready to rinse and repeat. Welcome to the next act – Version 2!

 

Robert Freedman has been part of the founding and management teams of several successful startups, and is the VP of Products and Services and cofounder of Accomplio, a product development firm.  Accomplio helps entrepreneurs and businesses build great products by integrating product management and product strategy with world-class software and hardware development.  Contact: rfreedman@accomplio.com