How to find Product-Market fit: The 5 step process
Stories move us. They make us feel more emotion, see new perspectives, and bring us close to each other: Netflix on their website.
With more than 200 million users across the world, Netflix is a treat to all our breathing space, and we couldn’t thank it enough for keeping us sane.
Huh ?!, this is not going to work. It’s all blah – this was the reaction from almost everyone when Marc Randolph and Reed Hastings first shared their idea of Netflix with others. But can’t blame. They were right. Then, after a ton (literally a ton) of experiments, they arrived at the final thing that made sense(something similar to what we have now). It took almost 18 months for Netflix to find the product-market fit finally.
Finding a product-market fit is not like going to the corner shop to get ice creams. And most importantly, it is not straightforward. You need to understand the problem, validate the solution, and not forget to be ready to accept and iterate until you reach there.
You may ask, okay, I do all that. But how do I know when I achieve Product-Market fit? Because it is not like the sinking feeling, you feel when you rush from the top of the rollercoaster to identify instantly. And most of the time, you don’t know how to find the Product-Market fit.
You can check this out if you’d like to know whether you have a PMF or not: What is Product-Market fit, and Why is it important?
Going forward, in this article, let’s discuss more on How to find Product-Market fit based on “The playbook to achieving Product-Market Fit” by Dan Olsen.
Dan Olsen, the author of “The Lean Product Playbook,” is an entrepreneur, consultant, speaker, and expert in Product Management. After noticing a particular pattern in how PMs manage the product, Dan Olsen put forward the 5-step process to achieving product-market fit in his book.
Product-Market fit pyramid: that’s what he named it. This PMF pyramid has multiple layers built one above the other, providing a structured framework to achieve product-market fit.
The bottom layers of the pyramid are the market, and it forms the foundation. One has to keep in mind that if you try to make any changes to the bottom layer, the whole layer will fall like pieces of Jenga. So, you pick the market you want to go after and start building the product on top of it.
Let’s take a look at the product-market fit pyramid before getting into talking about each layer in detail.
As we see, these are the five steps in the product-market fit framework: Target customer, Undeserved needs, value proposition, feature set, and UX. All you have to do is go through each of the steps in the pyramid, from bottom to top, test and optimize the hypotheses to improve your product.
1. Determine your target customer
Building a new product or a new feature, determining your target customer, is the first step because they are the ones going to decide whether your product satisfies their needs or not. Again, market segmentation and personas come to your escape here by helping you dive deeper into the specifics of your target customers and making it not so troublesome for the team to understand what and whom they are building for.
Though you don’t have the meticulous details about your target customers, it is okay to start with what you have and iterate as you move on in the process.
2. Identify underserved customer needs.
You have the recipe for your favorite dish with you. What next? The ingredients. You have the hypotheses of who your target customers are. Now what? Their needs. Yes, understand their needs. To do this effectively, Dan proposes a method called Problem space vs. Solution space.
The problem space is the customer problem/need the product should address, whereas the solution space is what you build to address that problem. You should ideally spend more time in the problem space than the solution space. Many products fail because they dive straight into the solution space without spending enough time evaluating the problem they are solving.
3. Define your value proposition
You understand what your customer’s needs are. How are you going to serve for it, and how is it better than the other competitors? This is your value proposition. Dan recommends an interesting method to work with this. It is called the Kano method. This method demands you to ask three questions. (seems pretty simple, but it’s kind of the deciding ball).
- List in rows the most important benefits of your product space.
- Create columns for each of your competitors.
- Rate your competitors.
By the end of this exercise, you know what your key differentiators are and double down on that to build a product that is valuable to your customers.
4. Specifying your Minimum Viable Product (MVP)
As you are now settled with your value proposition, it is time to specify the MVP. What functionality will your MVP include? You don’t want to start all the way from the top after investing so much time and effort into building something that doesn’t make sense to your customers. And at the same time, it is not okay for it to be full of bugs and lack proper functionality just because it is an MVP.
Dan mentions that an MVP should be like this.
Whatever substance or functionality you are biting off, you make sure it is functional, reliable, usable, and delightful enough. It doesn’t have to be perfect, and it is still an MVP. So, keep that in mind while you are testing your value proposition.
5. Launch your MVP
You have made a bunch of hypotheses, from identifying the target customers to reaching here. It’s time to launch the MVP and get your hands dirty with feedback from the customers. But, make sure you build a prototype with good UX to understand how it will work before testing your MVP with the customers.
Iterate, Iterate, and Iterate
Get feedback from your customers and close the loop. The Product-Market fit pyramid is an iterative process. The whole process continues, and you will have to revisit some steps time and again based on the feedback. After a point in time, you will see all the negative feedback fading, people finding your product valuable, and recommending it to others. You now see your confidence skyrocketed and ready to launch the product. By now, you have achieved the product-market fit.
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