Before product market fi
Product-Market-Fit (PMF) marks a critical turning point in a company’s life cycle. 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. Many entrepreneurs who want 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. Fortunately, lean thinking pushes the startup towards the market. That’s a good thing.
Market: You may be trying too early
The flip side is that the drive to understand the customer also fuels the idea of going to the (mass) market. And the problem is that many startups try to scale too early, when they should be obsessively looking for PMF.
Why? Because these startups have fine-tuned value propositions aimed at early adopters, whose needs are very different from those 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 are motivated by sustainable productivity gains from proven applications and market leaders. A very different ball game.
Fit: You know when you have it right
The number of attempts to describe PMF is proportional to its importance. The fact is, there are no hard and fast measures. But most agree that startups with a hit product will know and feel it – suddenly 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 executives, scaling PMF is an absolute nightmare. But not for Peter Odgaard-Jensen. Peter is CEO of CT Global – one of the scaleups that has definitely achieved PMF. It wasn’t easy, and it wasn’t a slam dunk. Just like David Skok said – their product didn’t fit the whole market from day one.
Fast forward to today. CT Global has moved to the next level and that has required quite a change in the whole organisation. What I learnt from the CEO was that as much as CT Global is an extraordinary company, the transition they went through was no surprise:
Take the school of thought: While startups worry about hypothesis testing, business model testing, customer development and venture funding, Peter, as the leader of a growth company, worries just as much about execution, accounting, engineering, management and administration.
Or metrics: Startups look at customer acquisition costs, customer lifetime value, average selling price/order size, monthly burn rate. But Peter is just as focused on the balance sheet, cash flow statement and profit and loss statement.
Or management: Where startups work 24/7, are opportunistic and agile, perhaps autocratic, and work very 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 acting according to your place in the life cycle creates the most value.
I see a lot of people 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 the value proposition to communications, operations, metrics and management changes depending on where you are in the business lifecycle. As a leader, you need to develop the chameleon-like ability to adapt to the changing environment, or get out of the way. Good luck.