Seriously - what is product/market fit?
Product/Market fit is a strange term that has come to dominate the modern discussion of startups and strategies.
On the one hand, its usage is ubiquitous. You hear it as much as “disruptive” or “unicorn,” and the concept of “achieving product/market fit” is now a recognized benchmark of startup success. But, on the other hand, it is a famously nebulous term. After all, what is product/market fit? I’ve been on a small quest lately to figure that out, and to decide how we can leverage a more traditional framework on strategic thinking to give us more insight into achieving it.
So, what is product/market fit? Apparently, the term originated with venture capitalist extraordinaire, Marc Andreesen. According to Andreessen:
product/market fit means being in a good market with a product that can satisfy that market.
For a canonical definition, this remains somewhat unclear. What qualifies as a good market? How do you know if your product satisfies that market?
It turns out that there are a lot of other people trying to bring more rigor to the concept of product/market fit. Henry Hobhouse over at Quora pulls together several varying definitions and clarifications:
[Product/Market fit] is also described in more detail by Carlos Eduardo:
“Product / Market fit can be loosely defined as the point in time when your product has evolved to the point that a market segment finds it attractive so that you can grow your product / company scalably”
There are attempts on how to measure if businesses have achieved product/market fit but I see these as (potentially bad) litmus tests rather than definitive methodologies. Some of the notable examples are:
Sean Ellis: “The achievement of product/market fit can be measured according to a specific metric: when, in a survey, at least 40% of users say they would be “very disappointed” without your product or service.”
The post goes on, but I think we’ve go the gist. In essence, people want your thing. Simple enough. But how does that tie in to our framework for strategic thinking?
Well, let’s refer back to What is Strategy? by Michael Porter. I’ve summarized this a couple times, but I’ll pull a quote from the article to get us back in the right frame of mind:
Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.
Porter encourages us to think critically about our market and our activities. Engage in a specific set of activities to provide value to a well-defined market - that’s his thing. Really, that’s the same thing product/market fit is telling us. I think the only real difference here is that Porter frames it as tailoring your company’s activities to suit your target market, while Andreessen and company focus on tailoring your company’s product definition to suit your market. Company activities, product definition/feature selection - these are just two ways to same the thing. The latter is just tuned to the modern world of software, where the product (and its feature set) is the company activity.
This is not to say that Andreesen's product/market fit and Porter’s strategic positioning are exactly the same thing. Porter defines other ways of structuring your company’s activities that don’t line up well with product/market fit. In his “variety-based positioning”, you choose to do a very limited set of activities that appeals to a very broad group (Jiffy Lube is the canonical example). In his access-based positioning, you tailor your activities to reach a difficult or non-standard group (such as rural locations).
Product/market fit is really another way of thinking about Porter’s second strategic positioning - a needs-based positioning.
A [needs-based] positioning is that of serving most or all the needs of a particular group of customers. ...this needs-based positioning comes closer to traditional thinking about targeting a segment of customers.
It seems business ideas, like fashion trends, go around and around with the times, and often resurface with a shiny new label. Product/market fit is another way of thinking about a tight needs-based positioning. So if you find yourself trying to figure out more about product/market fit, I’d recommend reading some Porter in addition to Andreessen, Eduardo, Ellis, and the others. After all, you can’t go wrong with the classics.