For Starters #15: When Can We Expect Overwhelming Demand?
"Markets can remain irrational a lot longer than you and I can remain solvent." - A. Gary Shilling
It’s possible to run a successful, long-running, profitable company without ever attaining product-market fit. I’m thinking of all the storefront businesses in the strip mall up the street from me.
Lines out the door? No.
A fixture in the neighborhood for decades on end? Yes.
In addition to being a jargon more evoked than understood, Product-Market fit isn’t about outbound marketing, sales, maturity of a product, or how minimum the minimum viable product - it’s a measure of incoming demand. A measure of achieving and maintaining extreme levels of customer demand.
From the originator of the phrase
I fully agree at the visceral quality of product-market fit. I’ve experienced glimpses of it: Servers are crashing, there’s an onslaught of bug reports and customer service requests, the queue of new customers keeps getting longer and longer, money is flowing into the bank accounts. I know of one organization that survived a year-long onslaught of overwhelming demand on the power of the sales people’s apologies. If you’re going to quantify product-market fit I vote for: “how much time are sales people spending apologizing for downtime to evermore hungry customers?”
Twitter’s launch at SXSW in 2007 comes to mind immediately, but it’s a shitty example (as is the entirety of the ad-subsidized consumer web) because users don’t pay. I’d even argue, Twitter never achieved product-market fit with it’s advertising business the way Google and Facebook did. Apple’s iPhone release is a perennial example. In the B2B world, I’d say Stripe, Square, and again Google ads, Facebook ads.
And if the org’s incentives are more about outbound sales than understanding & delighting customers product-market fit is an unnecessary indication of success. If however, the organization is resource constrained, allergic to over-investing, and wants to ensure a quality customer experience - product-market fit is the most cost-effective indication of success.
But again, this indicator isn’t for the company leadership or even the product itself - for they’re frantically trying to keep their heads above water through the overwhelming demand. So, if the indicator isn’t for the company…who is it for?
Go back to the originator of the concept - it’s for investors trying to determine winners. Product-market fit signals one company is on its way to capturing a market with a product so compelling - it markets itself.
Previously, I talked about 10 customer commitments to as sufficient interest to continue developing a product. Securing these 10 commitments is not capturing a market, so, no not product-market fit (hasn’t stopped founders from asserting otherwise to me). Product-Market Fit would be these 10 customer commitments arriving, unprovoked, every hour of every day. This requires massively strong word-of-mouth. So, probably not within the first 3 months, 6 months, even the first year. Might take two years. So, not a helpful concept early on.
A more helpful concept, for starters: “Make something people will pay for.”
This does pre-suppose a deep understanding of customers, this deep understanding so often comes from deep industry experience. Which is why one of my first questions to founders is, “why you? why now? why this?”
Even with experience, a bit deeper understanding of your customers makes the levers to increase demand that much more obvious - product-market fit or otherwise. If you’d like some ideas on where to start, just reply.