What is Product-Market Fit?
On surfing and entrepreneurship
TL;DR:
Product-market fit it is when companies are in the right market with the right product.
Markets are like oceans. A founders job is to pick the right wave and have the skill to stay on it - in other words, finding product market fit.
While each product-market fit story is very different, many companies use a similar toolbox to find it - focus on hard problems, talk to customers, identify key emotions, and iterate on your products.
What is Product-Market Fit:
I surf, very poorly.
Still, surfing is my favorite analogy for startup markets (inspired by this post from Sarah Tavel).
The market’s like the ocean - full and open with possibility. A founders job is to pick the right wave. If the sea is big enough, you’ll have plenty of waves to choose from. So how to pick the right one?
First, the wave needs to be big enough to give you the momentum you need for a long ride. Momentum can make even new surfers look like experts.
Second, you need to be in the right spot. The best surfers are looking for the peak of the wave - the darkest spot with the critical mass of water - and paddle straight towards it. Founders want go straight to the critical mass of user; what are they doing and what problems do they have? Of course, if the wave is big enough, you can catch the tail end and still do well. But generally, at the peak of the wave, all it takes is a few quick paddles to for a long ride. Other points of the wave will take more work to get on the wave for a shorter ride.
Third, staying on the wave is up to you (and your teams!) talent and expertise. Expert surfers can feel the water underneath them, finding the right flow to stay on the wave. This is your product market fit - changing what you do to keep riding the momentum. If you’re on the right wave, you’ll discover the product to meet the market’s needs.
How Does Product-Market Fit Work?
Finding product market fit is different for every company. My favorite tool for understanding PMF is listening to the stories of companies that have found it.
Uber and Slack are two examples of very different PMF stories.
When Uber launched in SF, demand was seemingly instant. People in SF were tech-savvy and it was very hard to find taxi cabs across the city. Uber rode the smart phone wave and solved a very frustrating pain point for users.
Slack’s founder, meanwhile, famously emailed his investors saying “"I do not feel that we are pouring gas on a fire here: more like pouring good whiskey on a drugstore heating pad.” They were building a multiplayer game called Glitch and had not found product-market fit. Meanwhile, an internal team had developed a messaging tool to chat across teams because email had become so annoying. Slack launched in 2014, smack in the middle of the massive software-as-a-service wave.
Focus on hard problems: What are the most frustrating problems? Often, founders find problems at work. They start a company to solve a problem they have. They know the problem deeply, and often even know their first few customers.
Talk to (potential) customers: Create a list of everything you know about your ideal customer who has your problem. Go find a lot of people who fit that description and talk to them. Keep building that list as you learn more. Customers can reliably tell you about their problems, but they can’t reliably create solutions (this is the old faster horse vs. car scenario!). Listen to customer problems, but it’s up to great founders and companies to get to the heart of the issues to build the right product.
Identify key emotions: We buy products based on emotions. Anytime you talk to a customer, jot down any key emotions - anger, frustration, excitement, happiness. This is not only a clue to their most pressing problem, but also how to sell them a solution.
Iterate: Test products with your customers. Watching potential customers use your product will give you the best insight on how it works. Remember, like the wave, product-market fit will change over the lifecycle of your company. Keep focusing on your customers problems because they will change over time.
Back to Step 1!
Why Does Product-Market Fit Matter?
Product-market fit means you’re solving the right problem for a valuable customer base. Keep going!
Often, we see the product-market fit framework in the context of venture-backed companies, but I’d argue it’s important for every company to consider:
What market am I in?
Who is my customer?
What wave am I riding that will make my company successful?
Just keep surfing!
Read More:
Acquired: Wonderful company stories. Check out the Uber, Slack, Costco, Hermes and Ikea stories for incredible examples of product-market fit.
Lenny’s Newsletter: Product management playbooks and stories of company at scale.
Sarah Tavel’s Newsletter: A former product manager talking about markets and investing.