Editor’s note: The 2015 Lean Startup Conference is just around the corner (it’s from November 16-19th in San Francisco, and there’s still time to get your ticket!). We have dozens of excellent speakers and mentors who are eager to share their product development, entrepreneurship, and innovation stories–you’ll never see these experts in one place ever again. Learn more about them in our ‘Lean Startup Speakers’ series.
Next up is Dan Olsen, Lean Startup consultant and author of The Lean Product Playbook. He’ll be giving a talk on A Playbook for Achieving Product-Market Fit at the 2015 Lean Startup Conference. Learn more about him here.
Product-market fit is one of the most important Lean Startup concepts, yet it is also one of the least well defined. Marc Andreessen coined the term product-market fit in a 2007 blog post where he said, “Product-market fit means being in a good market with a product that can satisfy that market.” You can find plenty of articles that mention the term, but they don’t provide detailed guidance on how to actually achieve product-market fit.
The Product-Market Fit Pyramid
Based on my work helping many teams achieve product-market fit, I created a framework called the Product-Market Fit Pyramid, which was first published in my new book The Lean Product Playbook.
The Product-Market Fit Pyramid is an actionable model that defines product-market fit using five key components. In this hierarchical model, each component is a layer of the pyramid and is directly related to the levels above and below it. From bottom to top, the five layers of the Product-Market Fit Pyramid are: your target customer, your customer’s underserved needs, your value proposition, your feature set, and your user experience (UX).
In the process of trying to define and build a successful product, you form hypotheses in all five of these areas (whether you realize you are doing so or not). The Product-Market Fit Pyramid helps you be more explicit and rigorous about your hypotheses.
The Lean Product Process
The Lean Product Process—also described in The Lean Product Playbook—is an iterative, easy-to-follow process based on the Product-Market Fit Pyramid. This process guides you sequentially through each layer of the pyramid from the bottom to the top. The process helps you articulate, test, and revise your key hypotheses so you can improve your product-market fit.
The Lean Product Process consists of six steps:
- Determine your target customer
- Identify underserved customer needs
- Define your value proposition
- Specify your Minimum Viable Product (MVP) feature set
- Create your MVP prototype
- Test your MVP with customers
Step 1: Determine your target customer
It all begins with target customers who will ultimately decide how well your product meets their needs. You should use market segmentation to get specific about who your target customer is. Personas are a great way to describe your target customer so that everyone on the product team understands for whom they should be designing and building the product.
You may not have a precise definition of your target customer at the outset: that’s okay. You just need to start with a high-level hypothesis and then revise it as you learn and iterate.
Step 2: Identify underserved customer needs
After forming your hypothesis about your target customers, the next step is to understand their needs. As you try to create value for customers, you want to identify the specific needs that correspond to a good market opportunity. For example, you probably don’t want to enter a market where customers are extremely happy with how well the existing solutions meet their needs.
When you develop a new product or improve an existing product, you want to address customer needs that aren’t adequately met: their “underserved” needs. Customers are going to judge your product in relation to the alternatives, so the relative degree to which your product meets their needs depends on the competitive landscape.
Step 3: Define your value proposition
Your value proposition is your plan for how your product will meet customer needs better than the alternatives. Out of all the potential customer needs your product could address, which ones will you focus on with your product?
Steve Jobs said, “People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying no to 1,000 things.”
You need to figure out how your product will be differentiated from competitive products. How will your product outperform the others? What unique features of your product will delight customers? This is the essence of product strategy.
Step 4: Specify your MVP feature set
Once you are clear on your value proposition, you need to specify what functionality your minimum viable product will include. You don’t want to spend too much time and effort toiling away only to find out later that customers don’t like the product you’ve built. The MVP approach is aimed at building only what is needed to create enough value in the eyes of your target customer to validate that you are heading in the right direction.
Customers may end up telling you that your MVP lacks an important piece of functionality. Or they may tell you that they wouldn’t use a particular feature that you decided to include in your MVP. The goal is to iterate until you have an MVP that customers agree is viable.
Step 5: Create your MVP prototype
In order to test your MVP hypotheses with customers, you need to show them a version of your product so they can give you feedback on it. You will need to apply user experience (UX) design to bring your feature set to life for your customers.
While you could build a live, working version of your MVP, it’s usually faster and more prudent to create an MVP prototype. A prototype is a representation of your product that you create without having to build your actual product.
Prototypes can vary in fidelity—the level of detail to which they resemble the final product—and interactivity—the degree to which the user can interact with the prototype compared to the final product. A hand sketch of your product (on paper or a whiteboard) would be low fidelity and low interactivity. For web and mobile products, medium-fidelity wireframes and high-fidelity mockups are frequently used.
You can use a set of high-fidelity mockups of your product’s pages/screens to create a clickable/tappable prototype. Prototyping tools (such as InVision) make it easy to specify clickable/tappable hot spots and link them to other pages/screens. Such prototypes can usually simulate the user experience of the final product with enough fidelity and interactivity to obtain valuable feedback from customers. Prototypes are a powerful way to look before you leap.
Step 6: Test your MVP with customers
Once you have your MVP prototype ready, it’s time to test it with customers. It’s important in this step to ensure the people from whom you are soliciting feedback are in your target market. If you don’t, you risk receiving customer feedback that can send you iterating in the wrong direction. A screener—a short survey to ensure research participants have the attributes of your target customer—helps achieve this goal. You then schedule time to speak with each customer one-on-one.
During the user test you want to carefully observe what the customer says and does as they use the prototype. You should also ask clarifying questions when appropriate to gain deeper learning. Asking questions is an important skill to gain the most value from user tests. A good moderator will avoid asking leading questions such as, “That was easy, wasn’t it?” Compared to a non-leading question, a leading question biases the response from the customer.
A good interviewer will also avoid asking closed questions such as, “Do you like that feature?” Such questions mandate a yes or no response from the user, which doesn’t provide much learning. Instead, you should ask open-ended questions such as “Could you please tell me what you thought of that feature?” Non-leading, open-ended questions give customers latitude in their answers and also encourage them to tell you more.
It’s beneficial to conduct user tests in batches or waves. A wave of five to eight users strikes a good balance between too few (where you risk not detecting some issues) and too many (where there is repetition and low incremental value of additional tests). At the end of the wave, you want to look across all the feedback you’ve received, both positive and negative. You want to identify patterns of similar feedback from multiple customers and prioritize any customer concerns that you’ve uncovered so you can address them.
Iterate to Improve Product-Market Fit
The Lean Product Process is an iterative process. After analyzing the customer feedback in step 6, you want to revise your hypotheses based on what you learned and loop back to an earlier step in the process. The feedback will determine which step you should return to next. If you only need to improve your UX design, then you can just go back to step 5. But if your hypotheses about feature set, value proposition, underserved customer needs, or target customer need to change, then you would return to the earliest step that requires revision and proceed from there.
In each iteration through the process, you will end up revising your MVP prototype, which you test again with a new wave of target customers. From one iteration to the next, you hope to see an increase in positive feedback from customers and a decrease in negative feedback. You may find that you just can’t seem to make much progress despite trying several iterations. If that happens, you should take a step back and revisit your hypotheses. You may conclude that in order to achieve higher levels of product-market fit you need to pivot (change one or more of your major hypotheses).
Ideally, after repeating the Lean Product Process for additional waves, you iterate to an MVP prototype that customers have no negative feedback on, consider easy to use, and find very valuable. At that point, you have validated your key hypotheses and have designed a product with strong product-market fit and should feel comfortable investing the resources required to build the product. Following this process should give you a high degree of confidence that when you launch your product, customers will use it and find it valuable.
To learn more about how to achieve product-market fit, come to Dan’s talk at the 2015 Lean Startup Conference.