Lesson: Accelerating Early Product with Amy Jo Kim

Step #8 Market: Clues to indicate fit

I define product/market fit as the point where you have created a product, or at least a version of a product, that the people that you think should like it are liking it and it's growing. They're bringing in their friends and you no longer have to struggle with where are the few, the proud that are going to like this? You've found your early adopters and you're ready to cross over into early majority.

Some people would say it's when you've found your early majority. I think there's a graph a lot of people keep and product/market fit depends on what metric you're measuring. If you're measuring sign-ups it's when the graph goes like that. If you're split-testing a fake landing page and you find out one of them makes the sign-ups go through the roof, you've got product/market fit unless you're promising something you can't deliver. Then you've just shot yourself in the foot.

Some people say it's when you start bringing in real revenue. It depends on what you're trying to do. If you don't care about revenue, you're just trying to build up a huge mailing list and sell that, you have a different issue.

I think it's when you shift from seeking to growing. You're like "Okay, we're hitting it now. It's time to pour some growth fuel into that." Product/market fit means this is worthy of growing, this is worthy of putting some growth acts in. Before that, it doesn't make sense to really grow. You're trying to find it. So that's another definition. A lot of people come to me and tell me they've already found product/market fit and it's all over the map. It's just all over the place. Some people say that and they've talked to their ten friends. Good luck with that. I mean sometimes it works out.

You want to look for a growing market, not a shrinking market. So for example, if I was doing a product and I was looking for product/market fit and I found a need among, say, journalists, I might look at that and say, "Journalism is a shrinking and struggling market. Maybe that's not a market I want to be in," for instance. But maybe there's some disruptive element of the journalism market you do want to be in. Absolutely, you want to be in a growing market, but if it's an obvious growing market everybody's going to be all over it and it's going to be red ocean.

You want to be in a growing market but you want to be at the blue ocean end of that where it's not that obvious to people. That's why the small passionate early market is so important to link up all the loops. That's the signal that there's a growing market that maybe everybody doesn't know about yet.

One thing about market is that it's much easier to succeed in a market you really understand. There's also the common wisdom that if you don't know anything you're a much better entrepreneur because you don't know what you don't know and you're brave, but I also have seen a lot of people come into the gaming market not understanding it and really struggle.

Last fall one of the teams participating in my program was a doctor and his colleagues, who was a very tech-savvy doctor. He had a year's sabbatical based in Malaysia and was an expat who mostly lived in Britain but traveled the world. He knew from his own experience that there was a big expat medical community who really needed to prepare better for a certain recertification test in his area. So he saw there was a need for better, easier recertification for doctors who weren't in one place but were traveling a lot.

He had an idea for how to do that online and he was using my program to test the idea and develop it. It was great. What he learned during the program is one, people had a need for that but they weren't willing to pay for it and they felt like the current things, which were the in-place programs were trusted and that the certificates from that would be respected. So they were very suspicious of the new online certification program coming from someone who didn't have an association with an established player. So they were interested, they had a need, they were very suspicious about it as a business.

During the same interviews he also found out that they actually had a much more pressing need that made their pupils dilate. It made them say "If you could deliver that, I'd pay you." Made them say things like that spontaneously. It wasn't what he started out to do. It was actually a need to figure out, "If I'm a doctor and I get an opportunity, like a fellowship to move to Britain, how do I do it? Step-by-step, how do I emigrate? How do I get my papers? What do I need to do? Where's the right place to go to find housing?" All those questions, no good solution and he ended up talking to 30 people with that need.

So he found market need. He actually found that his original idea, he had market need but he needed to know if they'd pay for it and they said no. They were pretty clear. He found this other market need, was very excited, and then sat down and ran some numbers and said "What does that look as a business? Is that a business I want to be in?" And he concluded it wasn't a business he wanted to be in, partly because he did some competitive research and saw there were actually quite a few good resources out there for free.

So it was valuable to him, saved him a lot of time, taught him a lot, but he ultimately concluded that he actually had found product fit, but product/market fit was another thing and it wasn't something he wanted to pursue. Someone else might pursue that as part of a larger business, but it didn't make sense to him as someone trying to make money in the next two years.