I recently met a product team, let’s call it Team Red, who is developing a new product in an established, traditional industry. On the surface Team Red has it all: it is cross-functional, fully-staffed, well-funded, working towards clear business goals, and is empowered to make decisions.
And yet as we sat down to talk, I sensed that something about the project made the leaders of team Red quite uneasy. The polished slide deck communicated all is good, but the problem revealed itself when I asked this question:
Do you think you have found product/market fit?
The answer was a resounding No. The team leads didn’t even have to think too hard — they knew full well, and they looked genuinely relieved being able to admit this unspoken truth to someone.
Why Product/Market Fit Matters
The term Product/Market Fit, or PMF, was invented by VCs to describe a major milestone in the life of a startup. Internet pioneer and mega-investor Marc Andreessen explained the concept in a famous article: PMF is first and foremost about finding a “good market” — a market that has strong and clear underserved needs, and that is either already big or growing. Creating a product that satisfies the needs of the market will lead to product/market fit, but the product doesn’t have to be great (at least not initially), it just has to “basically work”.
The concept was invented both to evaluate startups and to guide them. Before PMF it’s best to conserve cash and have a very small team work quickly to discover the market and the product that fits it. Once PMF is found (and that’s much harder said than done) it’s time to switch gears and capture the opportunity. This is the right time to raise money and hire engineers and designers, and iterate quickly to build missing features and capabilities. In parallel the company will work to discover a business model, and start hiring its first marketing and Sales people. When the company has both product/market fit and a scalable business model it should move into growth.
Product/Market Fit is a model, and like all models, it won’t always match reality. Still I find that it’s a good way to explain and often to predict success and failure. In 2011 the Startup Genome project analyzed 3200 startups and concluded that premature scaling, i.e. switching to growth before product/market fit, is the leading cause of startup failure — 70% according to the report.
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Premature Scaling in Established Companies
Going back to team Red, we can see why the leads are justifiably worried. Although the team is working on a product that is quite new and untested, they’re operating as if they had found product/market fit. They committed to a specific market and product, and are expected to deliver according to a pre-approved timeline. There’s a full team of engineers and designers that need to be kept busy, and Sales and Marketing are likewise already trying to promote and sell the non-existent product. The project is firing on all cylinders, but whether it’s headed in the right direction is unknown.
There’s rarely a good ending to these stories. Well-funded projects tend to run slow and long. When the product finally launches, the results typically fall well short of expectations. The company may try to save its investment with a series of rescue projects, but doubling-down on a product that misses the mark rarely works.
The right decision is often to kill the product or pivot it strongly, but due to the sunk cost fallacy, that rarely happens. In my workshops after we learn how to measure Product/Market Fit, I ask the participants to identify which products in their company have PMF, and which do not. The results are quite consistent. In most established companies there are 1-2 clear successes, usually the ones that launched the company, but there are far more non-PMF products that linger on for years, sometimes decades. The same is true for major features. Most are hardly used, but they are allowed to stay and bloat the product. Having to maintain these unloved products and features is not a great experience.
There’s no mystery about the underlying problem: the company demands predictability. Once a project is approved and funded, the team is expected to build a product that will launch on time, within budget, with the right quality, and make its business numbers. Most product people know that these are simply not things you can predict or force into happening, yet many, like Team Red, have to maintain the facade of false predictability.
Talking to hundreds of teams (and committing this same mistake many times myself), I can tell you this is a very wide-spread phenomenon. Lots of people seem unhappy about it. too Posts like the one below persistently get the most shares and likes.
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What Can We Do About It?
There’s a massive volume of books, articles, and podcasts that discuss the alternatives to output-focused, deterministic product development. But there’s a dual challenge: what methods to adopt and how to drive the change.
I too have written a lot about this topic. There’s a lot to cover, but here are some pointers to relevant articles, tools and and approaches:
- Start introducing the concept of evidence-based confidence. Many product leaders tell me that my Confidence Meter is helping them differentiate between strong evidence and opinions disguised as facts.
- Make the business case for change. Your leaders are treating the product org as a production line because they think that’s the most cost-efficient way to develop products. Create a spreadsheet to show them how much money they are wasting this way. Here’s my take, and Rich Mironov’s.
- More broadly aim to reform your product development framework to be evidence-guided. It’s a big change, so it’s useful to break it into separate parts and tackle those one at a time. There are multiple models to choose from. I tend to teach GIST – Goals, Ideas, Steps and Tasks.
- Start making inroads to combining building with learning. Come back with evidence if you wish to challenge the core idea behind the project. You’ll find ways to test product ideas cheaply in my Testing Product Ideas Handbook.
- Develop your skills dealing with top-down projects, must-have features, stakeholders, and roadmaps.
False predictability is a problem partly because many of us silently commit to what we know is not real. It’s hard to go against the norms of the company and the expectations of your managers, but living a lie can also be soul-crushing. I’ll leave you with a quote from a man who was able to bring about great change against tough odds by always staying true to his inner conscious:
Even if you’re a minority of one, the truth is still the truth — Mahatma Gandhi