As a new entrepreneur, your number one goal is to succeed. You want to make a profit and the way to do that is to create a product that consumers will buy. With that in mind, making sure that your product is wanted and needed, before you spend time and money on the development, is a priority.
Let us introduce you to a term that can help make your development dreams into a reality. ‘Product/market fit’ is a phrase first coined by Marc Andreesen in 2007. The broad definition is, “the degree to which a product satisfies a strong market demand.” If your product solves a problem that similar products already on the market solve, it’s chance for success decreases. When the product/market fit is validated, the degree to which you will succeed is significantly higher.
Throughout our article, we will convey the need for determining product/market fit on your next development project and how you can validate the problem you are solving before you get started.
Why Startups Fail
If you are coming to this article with a new and innovative idea it can be easy to want to jump in full steam and start your development, but the reality is that 90% of digital startups fail. You have an idea and you want to see a profit as soon as you can, but moving too fast can actually have the opposite effect – you could end up losing money because you didn’t take time to research the market.
34% of startups fail due to a lack of product-market fit. That is a high number of entrepreneurs who will never see a profit because the market didn’t feel a need for their product. At 34%, it is the number one reason why startups fail, followed closely by lack of marketing support as the number two reason. If you can solve the product-market fit problem, you can greatly increase your chances of success.
Validate the Problem Before You Begin
When it comes to developing a new digital product, there is a big chance that the solution you want to provide to consumers already exists. The market is oversaturated with products that aim to solve a whole list of problems. How can you make sure that yours stands out?
This is where understanding the product/market fit comes in handy. The more you know about the consumer, your competition, the problem you are solving, and the solution you are offering, the more your product will succeed. The first step we suggest is to start with the problem, not the solution. To find your problem, follow this three-step process.
- Identify the problem
If you already have a problem that you want to solve then you are ahead of the game! If you don’t, that’s okay. Take time to examine the areas of your life where you are experiencing a problem.
This could be something related to a problem you experience at work or at home. What frustrates you and makes life more difficult? Or maybe you don’t experience the problem first hand but know other people who do.
We recommend identifying multiple problems at this stage. As you work through the next two steps you will eventually find one problem that has a better chance of being solved and a better product/market fit than the others.
- Understand your assumptions
The second step is to take the problems you have identified and record all the assumptions you may have. Assumptions are everything you believe to be true and false about the problems. Recording your assumptions helps you have a better understanding of what experiencing the problem is like.
For example, if the problem you have identified is ‘teenagers don’t know how to budget their money’ you could make several assumptions based on that. These could include: teenagers are relying on parents to provide them money, teenagers spend money on unnecessary items, and teenagers don’t have access to budgeting material. Record all the assumptions that you think of, big and small.
- Validate your assumptions
After you have recorded your assumptions, it is time to validate them. The easiest way to do this is to ask people who are experiencing the problem. They are the best source of research and the people you choose to bring into your project at this stage will be valuable testers when your product is complete.
If you can, take the time to ask the people in person. You will learn more about the problems they are experiencing and will be able to validate your assumptions better by speaking to them face to face. If that isn’t possible, send out a survey via Google Forms or create a group on social media where you can ask your questions. Validate with several people because the more you learn at this phase the better your product will be.
Prove That People Want What You Are Making Before You Make It
After you have completed these three steps, you should be able to prove that you have a real problem with validated assumptions. If you went through the steps and came out with a problem that turns out to already have a widely-accepted solution or does not need to be solved, start over. You are looking for customers who are desperate for your product. If they aren’t desperate, it means there is likely a good alternative already on the market.
The best advice we can give you at this stage comes from Andy Rachleff, “Don’t write a single line of code before you have validated your idea.”
If you don’t start with the problem that has been validated, you will spend a lot of time and money building something people don’t want. If you have ever watched the show Shark Tank, you have seen products that seem new and innovative, but that don’t necessarily solve a real-world problem. Investors are less likely to invest in the product because they know that the shelf life will be short – causing them to lose money.
Validate the Solution to Find Product/Market Fit
In our next article, we will discuss how to validate the solution. Product/Market fit is all about finding a place for your solution and validating that the market can sustain it. We will discuss how to talk with potential customers about the solution, create an MVP, and collect emails.