Understanding Product-Market Fit

“The term product/market fit describes ‘the moment when a startup finally finds a widespread set of customers that resonate with its product” – Eric Ries

I’m currently advising the management team of a multi-national technology client who are looking to commercialise a B2B SaaS platform they acquired recently. The software isn’t a standalone product so doesn’t have market traction nor product-market fit (PMF). Whilst a plan to achieve PMF is critical, a more immediate task is to educate the management team on the actual concept. I’ve discovered recently that it isn’t a commonly understood term within the client, although the high-level meaning behind it is.

From my start-up days, the concept of product-market fit (PMF) is firmly engrained into my way of working (and thinking). Before that experience, I hadn’t come across it. I had forgotten that PMF within corporates probably isn’t an assumed way of understanding product development.

To help me plan and educate the client, I did a deep-dive into the research for articles. The best one is a brilliant summary from Tren Griffin reposted on the blog of Silicon Valley VC Andreesen Horwotiz. It is so good that I needed to share it here. It’s a must read for anyone working in business today.

The Hype Cycle

I came across an article today which talked about why IoT has fallen short of expectations (check it out here). In summary, the key themes were:

  • Optimism of prediction
  • Niche consumer value
  • Privacy concerns
  • Inconsistent standards across hardware/software
  • Costs and limitations
  • Slow promise of the smart home use case

Reading this reminded me of what tends to happen with the adoption of most disruptive (or new) technologies, whether the Internet, AR/VR, AI, blockchain, or cryptocurrency. It is best represented by the Hype Cycle for Emerging Technologies who shows the rise-fall-rise of how markets tend to adopt innovations.

Below I’ve pasted in a Hype Cycle dedicated to IoT:

The key takeaway from the above charts is time. People always overestimate how quickly the mass market will adopt new innovations. There’s an entire body of work dedicated to explaining the reasons and not for this post. But it’s just not easy to get technology to a cost/performance level that works beyond the early adopters. A lot of things have to go right. And that includes one of the biggest things beyond technology: changing human behaviour.

 

Interview – Lance Plunkett

One of the first people I met when moving to Guernsey was a fellow Australian called Lance Plunkett. He was in the early stages of MVP development for his lost property start-up Found. I thought it would be a good idea to get to know him better and help me flesh out my developing theories around ‘start-up thinking’. I compiled some questions and shared it with him via email. Lance was good enough to provide great responses, so below is is what I received back:

What is your start-up? It’s called Found. We are a funky, agile and innovative start-up aiming to become the known brand in lost property, so that if someone ever loses or finds something they immediately turn to Found. We are leveraging the Found network of businesses and individuals to offer various insurtech products, which fit perfectly into the world of lost property and allow users to protect their valuable items. We are exploring utilising blockchain technology for proof of ownership and fraud prevention purposes.

Why do you pursue this path vs something else? It’s a really big challenge and I love challenges; for me life is about really going for it and pushing and challenging yourself in everything you do.

Why do you think you are (or will be) good at it? I know where my strengths and my weaknesses lie which enables me to identify the people I need around me in the team to pick up on the areas I am not so good at! Being a founder is a tough and lonely journey at times so having people around to help support, motivate, complement your skills, focus and enjoy the journey is important.

As I see it, one of my key skills is being creative and innovative in problem solving I really enjoy this process. I am very willing to listen to and learn from others so that I can develop my own skills, self analysis and being honest with yourself and your own performance is important you have to be able to take criticism from others and I am good at this.

I am prepared to make sacrifices to make this happen I worked for a year on my business earning no money and living on a boat!

For me personally one of the keys to success is building relationships; relationships with investors, clients, customers and your team. It’s important to be personable, honest, human and considerate to others – these are hugely important values to me.

I really believe in what I am doing and share that belief and passion with others.

What does ‘entrepreneurship’ mean to you? For me it’s about being creative and innovative in solving problems and finding better ways of doing things.

What do you consider to be the ‘start-up mindset’? Which do you think are the most important for start-up success? Please explain with any relevant examples. I have met many successful business people/entrepreneurs; some are great visionaries, some are great creators, some are crazy, some are straight-laced and some are great with numbers BUT the one common thing amongst them all is their commitment and determination to their business or idea. The start-up mindset is about commitment to your goals and conviction in your business. I had the idea to solve the problem of lost property three years ago and have kept working on it and have maintained a true belief in it ever since which I know will see it through to success.

I liken my approach to business to the first time I went skiing. I learnt as an adult and went to the slopes with my three best mates, all of whom could ski really well. I remember thinking ‘Right, what’s the quickest way to get good at this so I can ski with them and not get left behind?’ and I concluded that it was by teaching myself on the most difficult black run! Charging head first into many big crashes, I got up and went again and again. I did learn very quickly and could ski down that black run in no time. It was a riskier approach but one that I calculated was worth it and that I could achieve — the rewards were big – I could ski with my best mates! Throwing yourself with commitment and passion is important and I certainly try to do this in life and business. As an entrepreneur you have to take risks however the risks I take are certainly calculated and thought through.

What are the different ways you have used to develop or improve such attributes? (If helpful, refer to any practical tactics, tools, habits, experiments or other useful strategies) I read a lot about successful people and how they do things. I study the characteristics and behaviours of sportsmen, coaches and entrepreneurs. I am very observant of others around me and how they behave, and learn from mentors, friends, peers and family.

How has a failure, or apparent failure, set you up for later success? Do you have a favourite failure? Learning how to fail and how to lose is a key to growing as a person. I played professional football for many years at a high level but failed to reach the very top level. I had the opportunity but didn’t really commit myself, as I should have. I have certainly applied the lessons I learnt from that to my business life now. Learning from previous mistakes would be in my top five tips for success!

When you feel overwhelmed or unfocused, what do you do? (If helpful, what questions do you ask yourself?) I find being healthy mentally and physically helps and if it all becomes too much a good walk with the dogs in the fresh air can help clear the head. I am good at dealing with stress and tough situations. Talking through my business problems with those trusted colleagues, friends and family is really important.

In the past five years, what new belief, behaviour or habit has changed your life?For me personally I was very immature and unfocussed for many years. I loved that part of my life and don’t regret it for a second – it was fun and I learnt a lot! But I now feel a new maturity and confidence in my skills and have the focus and ability to channel those skills into something I really believe in.

Where do you derive creative inspiration for new products / services? How do you put it into practice? I naturally look at processes/the way things are done and am always imagining what I could do to make that process better. I think of new businesses or ideas to solve problems daily. Looking at new technologies is fascinating and a great way to see how they can help make things better, safer, cheaper, faster etc.

What is your approach to managing risk?  Please provide any example(s), if relevant. I take risks everyday as a business owner but they are calculated risks, all decisions are carefully considered, researched and discussed with others when needed. Surrounding yourself with good people minimises risk and I try hard to do that.

How do you know when it’s time to pivot, change direction or quit? Please provide any principles, tactics, criteria etc. I think this is easy to identify – needs must type thinking. If you are set up as a lean agile business change should be easy.

What advice do you have for your 20yo self about to enter the ‘real world’? What advice should they ignore? I wouldn’t want any advice or change a thing, the mistakes I have made are all part of learning and growing.

Are there any quotes you think of often or live your life by? 

There are no wrongs or rights in how to become successful;  there are many paths to where you want to go.

Success takes all shapes and forms – it doesn’t necessarily mean how much money you have.

Be humble, kind and considerate to others.

Always listen to others’ advice – you can pick up teachings from everyone you meet even if it’s ‘that’s not how to do it’!

Take the road least travelled.

What are the books that you most recommend or gift to other people?

I like Richard Branson’s books they are fun, honest and an easy read with some great lessons within.

Why Start-Ups Fail

I came across this infographic recently. It made me grin. As I’m a few years passed my own start-up failure, I can now chalk it up properly as lessons learned.

See the source image

Looking at the list, the scary thing is that just about all apply to my experience. The only ones that don’t apply are passion/burn-out (although the final year 4 was tough), poor marketing, ignore customers, location, & legal issues. Everything else was a contributing factor. Now, that’s a heck of a lot of (expensive) mistakes to make. I was in control of most of them as well. So it’s not as if I can shift responsibility to others. The buck stopped with me. So what happened? At the end of the day, I just didn’t have the product-market fit piece understood, let alone nailed. The words of Marc Andreesen (founder of Netscape turned VC) sums up nicely what was (or wasn’t) going on:

“You can always feel when product/market fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of ‘blah’, the sales cycle takes too long, and lots of deals never close. And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can. Reporters are calling because they’ve heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house. You could eat free for a year at Buck’s.” – Marc Andreessen

1 Trillion Connected Devices

In a previous post I talked about how SoftBank recently announced that by 2035 1 Trillion devices would be connected. Whether or not that happens is not the point, as it’s about the ambition & not necessarily the result. But for that to happen, what needs to occur?

1. Market adoption by consumers and businesses of new products/services that help them solve most of their important daily problems & challenges;

2. Significant improvement in connectivity, cloud, data analytics & management, AI & other IoT solution & related technologies to help enterprises and the ecosystem handle all the real-time data being generated by the devices at such a significant scale;

3. Digital transformation of established enterprise & government to rapidly adapt to the new paradigm and compete with IoT focussed startups;

4. Deep ecosystem & cluster development with value-chain players working together & aligned in R&D and GTM within specific industry sectors or use cases.

5. Significant lowering of device manufacturing costs to enable business model innovations to drive market adoption, such as subscriptions, service models and so on.

There may be others but this is just a sample of my initial thoughts right now. If you have any others be sure to let me know

Internet Regulation

 

2018 has been a significant year for internet regulation. The EU’s GDPR has significantly raised the bar for data protection & leading technology companies have been hammered from all sides due to various scandals & Congressional investigations. Today more than ever, citizens & governments are rightly concerned about personal data & issues including privacy, security, payments etc. Whether or not the regulators & consumers will be able to force the requisite amount of change on the leading tech companies, we shall see.

Interestingly, these issues were hot topics way back when the internet was early but going mainstream. Between 2000-2004, I wrote and delivered a brand new university course called ‘e-commerce law’ with key modules covering these issues. In 2004, I analysed the Governments prohibition of online casinos in my first academic article published in QUT’s law journal, titled ‘The Prohibition of Online Casinos in Australia: Is It Working?’. If you fancy a read, access it here.

I’ve pasted the introduction here as a few points are still interesting:

Preliminary online research of consumer gaming activity was utilised to develop an assumption that [after 2 years of prohibition] prohibition is not working. A key reason for this is the futility of prohibition given the unique nature of Internet technology. This article will also critique Government motives for prohibition, as arguably, the best approach to deal with interactive gaming was not implemented. The relevant question for public policy appears to be not whether online gambling can be controlled, but the extent to which it can be controlled.

These issues are still relevant in today’s online world where a handful of companies control the majority of our online data, purchases, browsing habits etc. Whether the current local & global regulatory frameworks and user tools go far enough to balance that control – and whether enough users actually care about this – only time will tell.

Business Wars

Today I came across a new podcast called ‘Business Wars‘. It profiles some of the biggest format or competitor battles over the past 20 years. As I travelled from Guernsey to Jersey I listened to a 5-part series covering Napster’s battle against the record labels during the late 90s and early 2000s. It was brilliant.

I’m slightly biased as I’m quite familiar with the topic. In the early 2000s I lectured a new university course called ‘e-commerce law’ where copyright on the internet was a hot topic. Then in 2004, I researched & wrote my university honors thesis (about 100,000 words) on the impact of digital music distribution on established music industry participants, applying disruptive technology theories from Clayton Christensen & interviewing CEOs of Sony Music, EMI & independent labels, as well as music retailers including HMV.

Beyond the Napster case study, Business Wars covers Pepsi vs Coke, Southwest Airlines vs American, Red Bull vs Monster, Nike vs Adidas, & many more. I can’t wait to listen to more of them. To access it, head over to https://wondery.com/shows/business-wars/

 

Introducing Start-Up Thinking

Since exiting the start-up I founded in 2011, I’ve been thinking a lot about lessons learnt. In particular, what were the ways of thinking, working and operating that helped me ride the roller-coaster that is entrepreneurship. Here is the initial list I came up with:

Curiosity
Creativity
Agility
Vision
Grit
Experimenter
Ownership
Tenacity
Failure
Innovative
Collaborative
Constraints
Confidence
Risk

Looking at this list, it begs the questions. Why is it important? Can anyone learn or develop these attributes? What principles, tools & tactics could someone follow to improve work and life? Should these be the future talent management model companies should instead focus on?

Clearly, in this day and age the pace of change is more significant than ever. Established firms typically do not have the agility to respond & most talent management frameworks are likely still aligned with old ways of working & operating. It certainly would be an interesting study to see the results if recruitment & training focus shifted to some of the attributes outlined above.

But can anyone learn or develop these characteristics? Of course they can. I certainly did. And so did the millions of start-up founders & entrepreneurs that came before and after me. I’ll do some digging on this and blog about it here over the coming weeks.

The Art of Customer Development

I recently crossed paths again with an excellent summary (from Mike Fishbein – link below) of key questions when developing a new product or exploring improving an existing one. It reminded me of how useful it was to be validating a potential new product idea back in 2013.

At that point I was desperately seeking a new product to hopefully facilitate a do-or-die pivot of my failing activities & experiences marketplace start-up (The Social Experiences Club). Although we had launched in 2011/12, it wasn’t on the back of much customer insight and their problems, needs, challenges etc. In fact, it was based on a tonne of assumptions. Some of these were tested (off-line by running a specific live experience/activity with paying customers), but the wider product concept (central place to discover and book all sorts of experiences) was not.

Back then there wasn’t a ‘handbook’ on running a start-up in the Internet/mobile era or properly managing customer development or producing tangible evidence of why the problem you’re solving is such a major problem for a big addressable market. Lean Start-up was only in the very early stages of traction and certainly no-one in London was talking about it. In hindsight, that lack of customer insight was one of the key reasons (and there were quite a few) for eventual failure.

In 2018, there are now a significant number of free (or cheap) online resources & services at the disposal for any budding entrepreneur to test, validate & build MVPs for that side project or next big thing. What an amazing time to be around and have an idea. The same old challenges remain however: to (a) find and solve a problem that is important enough to a significant number of people, and (b) stop watching Netflix in your spare time & get out there and work hard to find out if your idea has legs. Check out the questions below with thanks to Martin Fishbein

Customer Segmentation
Depending on how you obtained the interview/how much background you have on the person, you may need to make sure they are within your customer segment, and/or understand more about their demographic. I usually try to keep it to a max of three.
What do you do professionally?
Who handles [process you’re improving] at your home/office?
Tell me about your role at [company]?
How much time do you spend on [process you’re improving]?
[Specific questions related to your product/customer] – for example, do you have kids?

Problem Discovery
Questions to validate your hypothesis about a problem, or to learn about problems.
What’s the hardest part of your day?
What are some unmet needs you have?
What product do you wish you had that doesn’t exist yet?
What tasks take up the most time in your day?
What could be done to improve your experience with [process/role]?
What’s the hardest part about being a [demographic]?
What are your biggest/most important professional responsibilities/goals?
What are your biggest/most important personal responsibilities/goals?

Problem Validation
If your customer did not talk about the problem you wanted to address, use the below questions to begin validating/invalidating that your customer has the problem you think they have. In addition, it’s often not enough to just solve a problem, sometimes it also needs to be one that people are highly motivated to solve. Some of the below questions can help with that too.

Do you find it hard to [process/problem]?
How important is [value you’re delivering] to you?
Tell me about the last time you [process you’re improving] – listen for complaints
How motivated are you to solve/improve [problem/process]?
If you had a solution to this problem, what would it mean to you/how would it affect you?

Product Discovery
Questions to help generate ideas or to validate your idea. The below questions are intentionally very open-ended. By asking yes or no questions specifically related to your product, customers may feel inclined to agree with you or not be critical. By asking more open ended questions, you can be more confident that they’re giving you honest input. If in response to the questions below, your customers tell you they’re looking for similar to what you have in mind, you might be on to something.

What do you think could be done to help you with [problem]?
What would your ideal solution to this problem look like?
If you could wave a magic wand and instantly have any imaginable solution to this problem, what would it look like? – I’ve found that about 80% the time the answers I get to this question are not very informative – solutions that aren’t feasible or most certainly wouldn’t be profitable. But the other 20% of the time there are some really informative responses that make the other 80% acceptable.
What’s the hardest part about [process you’re improving]?
What are you currently doing to solve this problem/get this value?
What do you like and dislike about [competing product or solution]?

Product Validation
Questions to validate/invalidate your idea.
What do you think of this product? – this question is intentionally vague. Listen to whether they talk about wanting to use the product or how it could be improved. Given how vague the question is, the former is positive, while the latter may be a sign that improvement is needed.
Would this product solve your problem?
How likely are you/would you be to tell your friends about this product?
Would you ever use this product?
Would you be willing to start using this right away?
What might prevent you from using this product? – might reveal ways that you could improve the product. Potential hurdles might be budget, time, perception’s of the product’s value, a competing product, etc.
Will you pay $x for this product? – see if they will put their proverbial money where their math is. Often times when you ask this question, no matter how small the price, you will start hearing key insights that you wouldn’t have heard otherwise.

Product Optimization
Questions to help you improve your idea or product.
What could be done to improve this product?
What would make you want to tell your friends about this product?
What’s most appealing to you about this product?
What might improve your experience using the product?
What motivates you to continue using this product?
What’s the hardest part about using this product?
What features do you wish the product had?

Ending Interviews
Questions to ask at the end of an interview. You may also need to ask for their contact information if you don’t already have it.
[Summarize some of your key takeaways] – is that accurate? – I usually do this throughout the interview.
So based on the conversation, it sounds like x is really hard for you, but y is not. How accurate is that?
It sounds like x is very important to you, while y is not. How accurate is that?
Is there anything else you think I should know about that I didn’t ask?
Do you know anyone else who might also have this problem that I could ask similar questions to? – small form of validation if they’re willing to give you referrals
Can I keep you in the loop on how the product develops?
Can I follow up with you if I have more questions?

Favourite Business Books

I was looking at my book cabinet the other day and realised that over 90% of my books are ‘business books’. There must be over 100 books in the collection which has spanned 15-20 years. Taking a look further, I noted that specific themes are:

  • Biographies
  • Entrepreneurship
  • Leadership
  • Management
  • Strategy
  • Innovation
  • Startups

Looking at the collection got me thinking. What are the best business books I’ve read? After a few days I came up with an initial list. I’m sure I’ve missed something but these are the ones that came to mind:

  • Steve Jobs by Walter Isaacsson
  • Pour Your Heart Into It by Howard Schultz (also his more recent book, Onward)
  • Delivering Happiness by Tony Hsieh
  • Rework by Jason Fried
  • Winning by Jack Welsh (& Straight From The Gut)
  • Losing My Virginity by Richard Branson (& all others he has written)
  • The Innovators Dilemma by Clayton Christensen
  • Good To Great by Jim Collins (& Built To Last)
  • The Lean Startup by Eric Ries

My initial thoughts when seeing this list now is (a) wow, what a great set of insight and (b) I must pick up all these again and get them done again in 2019. I’ll let you know how I get on.

The Big 5

This post won’t be about what you might see on an African safari. Instead, today I’m thinking about where we are now, and where we are going in relation to the full potential of five disruptive technologies that get the most attention: AI, IoT, Blockchain, AR/VR, & Big Data.

Each technology is still in their infancy but fast maturing and gathering steam. We saw with cryptocurrencies in 2018 as a key use case for Blockchain which drove significant consumer & business adoption & later, government intervention

As I look ahead, the most interesting thing for me two-fold: (i) the timeframe(s) for the intersection of these technologies from a market adoption and technology maturity perspective, and (ii) the subsequent implications for established firms, and opportunities for new ones. If we think back to the late 2000s (over a decade since consumer internet introduction), it wasn’t until the launch of next generation mobile phones (via smartphones, tablets) that dramatically accelerated internet adoption driven largely by e-commerce. This opened up entirely new ecosystems (Apple, Google, Facebook, Uber, Amazon) whilst destroying others (Nokia, Motorola, Sears) in the process. For B2B/C, this enabled a new lawyer of applications & services for consumers & businesses alike, such as local discovery (e.g. restaurants), on-demand services (e.g. taxis, TV), & mobile (e.g. Amazon, eBay, banking). All designed to make life easier & better.

In 2018, such continued technology disruption – driven by the intersection of mobility & the internet – is only getting started (think retail, financial services, real estate etc). If we layer on top one or more the Big 5 technologies, it will be like pouring kerosene over an already burning fire. I can’t wait to see how it all plays out.

The IoT Opportunity

Softbank recently predicated about 1 trillion connected devices by 2032. That’s up from about 30 billion today. The chart below shows the growth until 2025.

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It’s pretty impossible to easily grasp how big of a number that is. A better way is to look at what all those devices enable, what consumer and business benefits will it deliver, and how will life become easier, better, and so on. Here are some examples:

  • Smart Cities equipped with self-driving transport, smart energy management, intelligent security systems, and automated environmental monitoring.
  • Smart farming with the entry of monitored farming devices like sensors to determine soil moisture levels for enhanced irrigation systems.
  • Connected vehicles with remotely monitored engine diagnostics or infotainment systems.
  • Industrial safety, where natural disasters like floods are easily detected in high-risk areas to prevent damages to valuable assets.
  • Health sector where remote patient monitoring & associated self-services will transform the operating model with established healthcare providers across the entire ecosystem.
  • Livestock management, such as successfully impregnating cows by using a smart pedometer strapped to the leg to help figure out exactly when is the best time to inseminate the cow.
  • Consumer products such as mattresses, using IoT technology to help identify and offer the right kind of mattress to offer customers as per their body shape, sleep patterns, & movements during the night.
If you compare this with what happens today, the next 5-10 years will be fascinating. Even moreso if you think about the inevitable confluence of other emerging (and equally disruptive) technologies such as Blockchain, AI, AR/VR, & Big Data. It is anyone’s guess as to how these technologies will interconnect and enable each other, although with IoT growth, this means lots of data. Advanced data & analytics through AI, ML & Big Data will be critical here. More on that in another post.
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