Product Development Series #2: About Product-Market Fit

In the previous series we have discussed about Product Management and Product Manager in a development process.

Next will be discussed about the condition of Product-Market Fit. Simply put, Product-Market Fit is achieved when the right solutions are created for the right markets. The nature of Product-Market Fit is to validate the ideas of the product being designed. So if you look at this definition, to achieve Product-Market Fit, the key is that startups must be able to solve consumer problems with their business processes.

In this process, measurement is the key to assess whether the developed product has achieved Product-Market Fit or not. Regarding the measurement, each product will have a different way, depending on how the product is distributed and used by the community.

Generally in a digital product startup, the measurement standards are the number of people using the product/service, the growth rate of product/service users from time to time, to customer satisfaction related to the product/service provided.

For startups, to carry out the preparation, validation is needed for each hypothesis they have. For example, some examples of Product-Market Fit achievements for large startups today. First Dropbox, the hypothesis is that businesses will provide a free version of the service with a certain capacity to get a large number of consumers. So from this hypothesis Dropbox will achieve Product-Market Fit if a certain percentage of users are willing to pay for more storage capacity.

Then another example of the Groupon hypothesis. With its services businesses provide huge discounts in a short period of time to get a number of new customers. Then Groupon will achieve Product-Market Fit if it can consistently convince businesses to make discount deals with its services to attract new customers, and be able to repeat it for a variety of businesses and areas.

Preparing to achieve Product-Market Fit

There are several things that can be done to bring startups to Product-Market Fit. Before discussing the technical and schema related to the product (will be included in the discussion of Minimum Viable Products in the next series), there are some pragmatic analyzes that need to be done. The first is understanding the market – in which there are various variables related to potential users. Observations also need to be carried out in detail, not only focusing on value forecasts alone, but must really understand up to the level of market segmentation.

The principle is for the market, the more specific the business focus and startup products are developed. In addition to direct observation, one thing that can be done for market identification is discussing with experts. Generally, investors or mentors have a clear view of the market. Why is the view around market share important? This will be correlated with the processes being worked on in Product Management, when the Product Manager gathers with the Business Development people to ensure the product achieves Product-Market Fit.

Value Proposition to achieve Product-Market Fit

There is one business component that is closely related to Product-Market Fit is the Value Proposition. Namely about what value the startup will provide to the market segment. To get it, the most valid way is to communicate directly with potential customers, through interviews or surveys. Sometimes it requires a process in certain iterations, so that the important elements that will become the DNA of the product are well defined.