Before product market fit
Product-market-fit (PMF) marks such a critical turning point in the company lifecycle. Life changes significantly. But don’t try to get there too early …
Product: Trade the fine-tuned product with market knowledge. Lean methodology is a must have knowledge. Many entrepreneurs who mean to follow the lean methodology get stuck in a product spin, fine-tuning their Minimum Viable Product and neglecting the fact that a product without a market is … not a commercial product. Luckily lean methodology thinking pushes the startup towards the market. That’s fine.
Market: Chances are you trying too early
The backside is that the drive towards customer understanding also fertilizes the idea of going to the (mass) market. And the problem in that respect is that many startups try scaling to early when they ought to continue obsessively seeking PMF.
Why? Because these startups have fine-tuned value propositions that target early adopters with a need quite different from that of the pragmatists, who dominate the (mass) market. Early adopters are attracted by high-risk, high-reward propositions and are less price sensitive, whereas pragmatists’ motivation is to gain sustainable productivity improvements, from proven applications and market leaders. A completely different ball game.
Fit: You know when you nailed it
The number of attempts to describe PMF is proportional with the importance. Facts are, there are no definite measures. But the majority agrees that startups with a bulls eye product will know and feel it – all of a sudden the market takes off, sales increase, churn is acceptable, and cash starts flowing in. Bonanza!
After product market fit
… And when you do, be prepared for a different life.
For many leaders scaling upon PMF is an absolute nightmare. Not to Peter Odgaard-Jensen, however. Peter is the CEO of CT Global – one of the scaleups that definitely reached PMF. It hasn’t been an easy ride and it wasn’t a bulls eye after the first attempt. Exactly as David Skok pointed out – their product didn’t fit the entire market from day one.
Fast forward to today. CT Global has made onto the next level, and that has required quite a change across the organization. What I learned from the CEO was that as much as CT Global is an extraordinary company, the transition they went through was no surprise:
Take school of thought: Whereas startups worry about hypothesis testing, business model testing, customer development, venture finance – Peter, as a growth company executive, worries as much about execution, accounting, engineering, management and administration.
Or metrics: Startups consider customer acquisition cost, customer lifetime value, average selling price/order size, monthly burn rate. But Peter’s focus is as much on balance sheet, cash flow statement, and income statement.
Or management: Where startups work 24/7, are opportunistic & agile, perhaps autocratic, and work very much hands-on with a passionate vision, Peter manages people, plans,, and processes; and has a primary focus on execution and repeatability.
Why does it matter?
Because performing according to your place in the life cycle creates most value.
I see quite a few worrying about the wrong things or at the wrong time. It destroys value in terms of missed opportunities, low productivity and so on.
Everything from value proposition, to communication, operations, metrics, and management – changes subject to your point in the company life cycle. As an executive you must adopt the competency of adjusting to changing environment as a chameleon or get out of the way. Best of luck.