Importance of Product-Market Fit

In this section, from time to time, I will share my thoughts on what I see are important observations, trends, caution zones and other tit bits. These are personal thoughts that I notice from my travels world-wide or from my other investments and so on. Some of which are important lessons I learned in my journey on the path as an entrepreneur. Some of them may hold for you and some may not. In any case, here you go.   Importance of Product-Market Fit On a flight from Hong Kong, mid-Sep 2019  
  1. Every product business will face this question at some point or the other – and this is an important thing to answer.
Timing
  1. a) depending on stage of the market (infancy, growth, maturity and decline) a product- market fit may have different manifestations.
  1. b) Typically, when you hit product – market fit, you will notice the following –
  • Sales process becomes easier and faster
  • You will almost not need to go to engineering or research team – as the product is now standing on its own legs, with no new changes required
  • Very quickly in the discussion with the customer, the pricing and installation, delivery schedule become points to discuss
  • Feature capabilities are either already known to customer or is a part of expected check list – any new features client is asking is either already on your development roadmap or already built and is now GA stage
  • Installation environment or nature of deployment (SAAS / premise based / private cloud) etc type of discussions are no brainer as any option the client is asking is already ready and available with you
  1. c) Your next big indicator that you have hit product-market fit may be
  • The possibility of repeat sales of the same configuration or with minor changes now becomes a reality, which means
  • Your next several customers are all asking similar stuff and the sales process now becomes hugely predictable
  • For the given genre of clients, your sales process now approaches a templatization model
  • Sales decision time frames also become predictable
  1. d) If you have hit this situation, then what?
If you have hit this situation, then you are doing something right This means you have now hit the Product – Market fit for the given genre of prospects, so what next?
  • Now is the time for you to quickly define / update a Sales plan for this segment, fine tune it and invest in sales resources. Do not wait anymore
  • Product Market-Fit is a difficult situation to reach and all the signs for monetization are now visible
  • Quickly assess Competition offerings
    • Stabilize your pricing model – discount structure etc
    • Pick a unique positioning and brand out like crazy for the proven genre
    • Multiply sales efforts and cover the genre at earliest
    • Accelerate and close sales urgently
  1. f) If done well you could become a segment leader for the product category. But don’t rest on your laurels.
  • A new version of Agile could suddenly give your competitor an edge. Product businesses are exciting because they are also fast-moving dart boards. But more on that for another day.
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What about the other PMF: People- Market Fit?

From my desk at home, US – Sep 30

There is indeed such a thing called ‘People- Market’ fit. Either it has not already been spoken enough in start-ups (mostly because they have more urgent issues to solve) or has been felt but not sounded out loud enough.

The situation in start-ups is usually the cliched ‘everyone wears six hats here’ which is proudly declared as the only way to go. In many cases, the convenient excuse of course is ‘we will need to live with this till funding happens’ but then when the funding does happen, there are so many other higher priority budget items that the finer hiring invariably stays.

The ‘people market fit’ issue is usually more of sales and marketing function attribute and not so much of an engineering issue. In case of sales and marketing, there is a far more stringent client profile – salesperson profile fitment that while not necessarily etched in stone, can many times be the difference between successful sale or lost opportunity.

For example, if you have a low ASP (average selling price) beauty salon equipment (lets say, in the low $30s) typically to be sold over the counter or in one walk-in visit by the sales person, you would need savvy, non-technical, street-smart type salesperson to quickly make the sales on hi-street. Unlikely you will have success with someone who is used to 10-month sales cycles in selling large infrastructure type solution in enterprises (worth several thousand dollars).

‘People-market’ fit comes up in all product markets, especially in brand new categories of products – what are called ‘category-makers’. High energy, young team members in such start-ups are highly agile, fast learners and carry no baggage – such are quick to learn and unlearn and learn again. There are really no problems of ‘people market fit’ in such situations.

‘People-market’ fit issues show up mostly, in start-ups that have crossed critical market validation and now looking to scale. Especially in new product segments, where an existing business model is being disrupted, or current players are being crushed by a new technology, and the emerging leader needs to scale, it faces ‘people-market fit’ type issues.

As a new product category creator, you are an order of magnitude different from current legacy solution providers. To scale the sales team, you need to now bring experienced sales folks (let’s say, targeting enterprises), but you do not want to hire from legacy competition (as it is technically, business-model-wise, and perhaps even culturally a misfit to the new organization you are building).

This is classic ‘people-market fit’ issue because, you have now started seeing scale in demand, thanks to early product market validation, but the next 24 months is critical to establish coverage. Market awareness can come from marketing efforts but you really need ‘feet-on-street’ to close sales. How can this be achieved without an appropriate sales organization? And if there is no comparable product, you will not have suitable people readily deployable for field sales.

The solution is to bring in ‘near-fit’ sales folks, train them on the fly and ensure they are successful and stay with the organization. This can be very exhaustive phase of growth but there are simply no alternatives.

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