When your product is being ripped out of your hands by eager customers and you cannot keep up with their demand for more, you have achieved the nirvana known as “product-market fit.”
Most startups fail because they burn through cash without first carefully considering or planning for the moment when customers actually want what they are selling. Achieving a product-market fit is one of the most important goals for a startup, yet it is also one of the least understood concepts.
Marc Andreessen, a co-founder of influential Silicon Valley venture capital firm Andreessen Horowitz, coined the term in a 2007 blog post, defining it as “being in a good market with a product that can satisfy that market.”
Dan Olsen, product management expert and author of The Lean Product Playbook, further defines product-market fit as the end-game where a startup has built a product that creates significant customer value. “This means that your product meets real customer needs and does so in a way that is better than the alternatives,” Olsen explains.
Olsen has created a process to help articulate, test and revise your business plan so you can achieve this goal. He proposes a six-step framework called the Lean Product Process.
Determine your target customer
Start with a hair-on-fire problem that an identifiable group of people have. Target customers ultimately decide how well a product meets their needs. Use market segmentation to clearly define your target customer.
Segmentation is the partitioning of the full market into market segments consisting of potential customers with similar needs and behavior.
Defining the attributes and characteristics of various target users, commonly referred to as “persona archetypes,” is a great way to describe your target customer so that everyone on the product team understands for whom they are designing and building the product.
Start with a high-level hypothesis of your target customer and continually revise it as you learn, refine and tweak the features of your product in order to improve it, a process known as iterating.
Identify underserved customer needs
After forming a target customer hypothesis, the next step is to understand their underserved needs. Identify the specific needs that correspond to a good market opportunity.
Address customer needs that are not adequately met in order to create value for customers.
Define your value proposition
A value proposition is the essence of product strategy and outlines a plan for how a product will meet customer needs better than the alternatives. Choose which customer needs your product can address.
Figure out what unique features of your product will delight customers and how your product will outperform competitors.
Specify your minimum viable product feature set
After you define your value proposition, specify what functionality your minimum viable product will include. This approach is aimed at building only what is needed to create enough value for your target customer to validate that your product is headed in the right direction.
The goal of this approach is to iterate until you have a minimum viable product that customers agree is viable.
Create your minimum viable product prototype
Create a minimum viable product prototype which allows you to test your idea before building an actual product. Show your target customers a version of your product in order to get feedback and integrate that feedback into the product.
Prototyping tools such as inVision can usually simulate the user experience of the final product with enough fidelity and interactivity to obtain critical feedback from customers.
Test your minimum viable product with customers
Once you create your minimum viable product prototype, solicit feedback from your target market. Use a “screener”—a short survey to ensure market research participants have the attributes of your target customer. Schedule one-on-one meetings with each customer to user test. Olsen recommends conducting user tests in waves of five to eight users.
During the test carefully observe what the target customer says and does while using the prototype. Ask clarifying questions to glean deeper insights and gain the most value from user tests.
Avoid asking closed questions that mandate a yes or no response from the interviewee. Ask non-leading, open-ended questions to encourage insightful responses.
After conducting user tests, analyze and interpret the feedback received. Identify patterns of similar feedback and prioritize any customer concerns so you can address them. Then refine the initial prototype to incorporate their concerns and experiences.
Implementing this six-step iterative process at the outset of product development will lead to more efficient use of resources and a high degree of confidence that when you launch your product, customers will find it valuable.