Failure to achieve the right product-market fit is a major reason why startups fail. Why is achieving this so hard?
Having been part of 4 startups over the last 22 years, and having experienced successes and failures first hand, I thought I’d consolidate my thoughts into the following key points:
- Is there a step-by-step process to follow?
- How much time does it / should it take?
- Who owns it?
- What should one do differently daily?
- What should one do in the meantime?
#1: Is there a step-by-step process to follow?
Yes and no. I’ve read umpteen articles and posts on step-by-step processes. I think they make a good conceptual read but lack a practical approach. I’d like to share the process that I now like to follow:
a. Research: There is way too much tendency to look inwards. It's natural, but you need to break that habit. Get great at looking into the external world — direct competition, analysts, research firms, companies in adjacent spaces, and finding out what your customers are up to. I do this EVERY DAY. And it’s so simple, takes no more than 10 min — setup a google alert on top keywords and topics, and have results delivered in an email every morning. Over a period of time, you will understand the external world better, start identifying trends and patterns, and developing mental models for your market.
b. Strategize: Now make a 180-degree turn. To quote Hercule Poirot:
“It is the brain, the little gray cells on which one must rely. One must seek the truth within — not without”
Product-Market fit is a mental exercise that has to be solved both consciously and subconsciously. Please do not relegate strategy to a scheduled weekly meeting — that's a recipe for disaster. This process of unraveling the mystery has to be running all the time!
c. Hypothesize: once you have given this sufficient time and effort, you will find a single path or multiple ones. Pick one as the primary hypothesis, and maybe 1–2 more as secondary hypotheses. Define and document these, how they are to be tested, and what would constitute failure or success.
d. Experiment: it’s my favourite word, and I like to run experiments across the business — pricing, messaging, product, design, etc. So, take your newly formed hypothesis, test these in a controlled manner (with a set of customers, or a segment), and record the results. Then change something and experiment again. Agility and creativity are skills that you will need in your team to make this come alive.
e. Validate: here’s where you compare the output with the hypotheses you had created. Will you land on a bullseye? You’ll be really really lucky if you do. Finding the product-market fit is an iterative exercise, which takes me to point 2 below.
#2: How much time does it / should it take?
The process is iterative as illustrative below:
- I recommend 3 cycles, no more, to get this right. If you are unable to reach a good position, then it’s clear that something is amiss. While that could be many reasons, I’d bet that you don't have the right skills.
- Each cycle should not last more than 3–4 months
- Cycle 2 should start at some point while Cycle 1 is already on. Same for Cycle 3
- If all the above holds, you should have arrived at the product-market fit in around 9 months
- This should last you for the next 2-3 years at the very least. Be prepared for the next cycle — it will be forced upon you if you don't drive it yourself!
#3: Who owns it?
I would recommend the following order: CEO > Head of Product > Head of Marketing > Head of Sales.
Ideally, the CEO. If not, Head of Products. And so on.
The CEO is the obvious choice, but not always someone with the best skills to scale the business. Here’s where I would recommend a commercially-minded head of products to play this role.
I don't recommend the head of sales to be doing this, for the simple reason that I view sales as an execution and growth engine — don't bog down the sales team with all this — instead, solve the problem and then hand it over to them to execute.
Sometimes, and especially in early-stage companies, you may also have someone (like me) playing a combo role (Chief Business Officer or Chief Commercial Officer). In my current role, as head of sales, marketing, and strategy, it is my responsibility to come up with the right answer.
#4: What should one do differently daily?
Simple — carve out time and discuss with 1–2 key stakeholders on a daily basis — everything that you learned the previous day.
We are all bogged down by day to day tasks — deadlines, meetings, and escalations. Break the pattern and dedicate time to reviewing progress on a daily basis. It could be a 5-minute catch up — “Hey, we learned nothing” or “Hey this customer suggested this use case that we never thought about”. Or it could take longer — “Did you read up on what that giant corporation did — let’s look at this together now” or “I had a great idea while doing a demo yesterday — can we talk about it now”.
You will be amazed at where you will be within a month.
#5: What to do in the meantime?
While all this is getting figured out, sales cannot and should not stop. In such situations, I recommend that we learn to divide our time and attention into 2 buckets:
In my current role, we were in exactly the same situation a few quarters ago. By drawing sales and marketing attention to the top use cases, we were able to keep the revenue engine chugging. And by carving out time for strategic inputs and discussions, we were able to stay focused on the bigger picture to land on the product-market fit.
As with many other things, finding the product-market fit boils down to the basics, which I define here as:
- Willingness to experiment
- Hard work (physical and mental)