Markets Matter Most

A lot of times we tend to think of ideas and then reverse-engineer problems that those solutions will solve. Especially in technology, with processing power being what it is today, it is very tempting to whip up a prototype of a cool new idea and show it off. Sometimes we’re still awed by the fact that in our world today we’re actually able to bring life to ideas far quicker than our forefathers would have, because of the resources at our disposal and the sheer ease of connectivity that we have to other people. Every other week I have a lightbulb moment wherein I think of an awesome new idea and I know I’m almost always just a month or two away from single-handedly being able to breathe life into this idea. Spin up an AWS instance, download some free SaaS constructs, spend a weekend or two writing the code that will be the core differentiator (or ask an engineer friend to help you out)… and Voila! The prototype is ready.

Although that sounds great, more often than not you’re not likely to see much success after this point. The reason for that, is something called Product-Market fit (or the lack of it thereof).

The “M” Factor

In Dan Olsen’s The Lean Product Playbook, Olsen talks about many things related to making products successful. But underneath all of them, and he rarely forgets to reiterate this, lies the one big principle that determines your ultimate success: Product-Market fit.

This is consistent with the general opinion Marc Andreessen expresses in his famous write-up titled The only thing that matters. Andreessen addresses this article mainly to start-ups and small-sized companies, but as a concept this fits in just as perfectly in the arsenal of a large-company Product Manager who is looking to product-manage one feature in a large product. One of the most interesting ideas he brings up is that of the three elements in a company – the team, the product, and the market. Although most people tend to think that the biggest influencing factor to the company’s success is the team, in reality what ends up mattering the most is the market. A good team and a good product with an unreceptive market will likely lead to failure, whereas a fitting market will “pull” even a simple viable version of the product towards success. Even if the team is mediocre but capable of building this viable product, it could still lead to success since the market is receptive.

So since the market matters so much, how do you find the right target market?

Problem-Space v/s Solution-Space

In order to achieve a reasonable product-market fit, Olsen argues that a good strategy would be to start with thinking about the problem-space rather than the solution-space. Before building or even defining the product, the answers to the following three questions are of utmost importance in terms of determining your decisions from there on…

  1. What problem are you trying to solve?
  2. What alternatives are available to the target market today?
  3. Is there a need to solve this problem in a different way, that addresses inadequacies of the presently available solutions?

The first question will help you identify what your target market is. Is there an existing target market? Are you hoping the product will create one, like VMware did with their server virtualization software and like Apple did with their iPads? There are no wrong answers to this, but whatever they may be, it is important that the person owning the product understands them well.

The second and third questions help you identify, given a target market, how this solution (note that we haven’t designed a product yet, at this stage) will be different from others that are targeting the same market. The market will only respond to your solution if you give them something they don’t have already, and more importantly, something they still need.

Uber is an example of a company that hit the nail on the head, in terms of finding product-market fit. Need I get started with how hassle-free getting from point A to point B was back in the pre-Uber era? Now that we have the benefit of hindsight available to us, we can inspect those three important questions, and visualize how, what would have been their answers to those questions, led them to build a product that the market just ended up “pulling” into the magical land of success. Their original UX and feature-set arguably wasn’t as fancy as it is now, but they packed just enough good stuff in it to make it easy to use and understand. It wasn’t about how much good stuff they packaged into their app and service, it was about packaging in the right good stuff to capture the market with.

A Deeper Look At Uber

[Andrew Caballero-Reynolds/AFP/Getty Images]
The original idea behind Uber, called UberCab, was supposedly discussed between Travis Kalanick and Garrett Camp, while they were hanging out in Paris, France, wishing there was an easy way to just order a fancy ride and not have to wait ages for it to arrive. UberCab was initially just a bunch of Limos available in the city of San Francisco, that rich people could order with the push of a button. Kalanick hints during a talk he gave at Startup School that this initial idea was probably just two rich dudes solving a first world problem for other rich people like themselves.

This was one of the crucial points in the lifecycle of Uber’s offering. UberCab was doing great; all of the ten Limos were fully booked on the average Friday and Saturday night. If we put ourselves in Kalanick’s shoes at that point, here are some of our options:

  • Invest in the team: Get super-talented people on board and work on making this app and the business even better than it is right now.
  • Invest in the product: Focus on making the app more intuitive and user-friendly, and one that serves the needs of the rich people who are using it even better than it already does.
  • Invest in the market: Think about the best target market with underserved needs and design and build a product for that market, while making a calculative compromise on the team and product.

Clearly, market was the right way to go.

UberCab came out to market in 2010. Even by 2012, Uber only had 60 employees in their HQ in San Francisco, and an app that was extremely simplistic compared to the Uber app on our smart phones today. They weren’t focusing on the elite market anymore. They instead decided to focus on capturing a much, much bigger market than that. It’s interesting to walk through a hypothetical product-market fit analysis for Uber at this pivotal point in time…

Target Market: People who want to get from point A to point B at a reasonable price and in a reasonable amount of time.

Existing alternatives at the time, and some of their associated drawbacks:

  • Taxis:
    • Not always available, depending on location
    • Sometimes over-priced
    • Uncertainty about when they will arrive (i.e. no ETA)
  • Driving yourself:
    • Parking could be an issue
    • Could be tiring
    • Too many DUI cases due to lack of reasonable alternatives

The folks at Uber were successful at identifying a target market and a cornucopia of underserved needs of that target market, and that right there was their biggest victory. They didn’t need rocket scientists to build their simple app; they needed a talented UX team and operations teams to help solve these problems in a way that was easy for their target market to understand. The app would start off by showing users a map, their location, and the locations of the cabs around them. When the user entered a destination location, the map started showing only the location of the cab that was selected to pick the user up (along with an estimated time of arrival). Details and contact information of the driver were displayed, and that was enough information for customers to have a seamless experience.

The Importance of Product-Market Frameworks

One of the main roles of a product owner is to make sure that the product being built is something that will actually be used. This isn’t something that can be left to be figured out after the fact. Of course, it is obvious that you wouldn’t intentionally build a product no one will use. But the stress here is on making sure there is an *explicit framework* to ensure that the product will have a recipient market in the foreseeable future, and to make sure that the process of figuring this out is started as soon as it is possible to do so, because it is that important.

Olsen’s method of doing this is using what he calls the “Lean Product Pyramid”, at the very bottom of which, and this is where a product owner should begin, is the step to identify a target market and the needs of that market that haven’t been served well enough yet. There is no point building a product if you aren’t confident that the product will serve the needs of the customer convincingly better than an existing one already does. This is one way to identify the problem-space.

Once the problem-space has been identified, you now have a better frame of reference to think about the solution-space, or how exactly it is you are going to solve this problem. This is where we determine the “value proposition” of the product we are considering building. This is also where we identify the feature-set that our product will have. Notice how, with the problem-space and target market so vividly defined, it is now much easier to define the set of features your product will have.

What’s in it for me, the PM?

  1. Saying No
    • When talking about how crucial it is for a PM to be able to say No, people often quote Steve Jobs’ famous line “Innovation is saying no to 1,000 things.” Having a framework in place makes it that much easier to say no and to help the rest of the team focus on what is really important.
  2. Defining a True MVP
    • Your MVP is now based truly on the minimal set of features you need to serve the needs of the target market. It is not necessarily minimal in quality or in any other way. It is minimal in the sharpness of its feature-set. It is focused. There is minimal waste of crucial resources and energy on things that matter less.
  3. Successful Mini-CEO
    • Ultimately, focusing on product-market fit right from the early stages of a product or feature puts you, the PM, in the best possible position to guarantee success at the end of the road. Everyone is happy when a product or feature is successful.

Success can be defined in many ways, but if we think of it as an outcome in which your product or feature has an increased user-base or a happy one, a thorough framework for product-market fit can do you no wrong.

Leave a Reply