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Product Market Fit

Recap of Webinar 7 by Michal Gilon-Yanai

· Product Definition,Product Market Fit,Know your Customer

Steve Blank & Bill Aulet discuss product/market fit, a term coined by Marc Andreesen, who in a blog post from 2007 wrote: “The only thing that matters is getting to product/market fit. Product/market fit means being in a good market with a product that can satisfy that market.”

He also added that “you can always feel product/market fit when it's happening”. However, getting to that point is not so simple. Our speakers – Steve Blank and Bill Aulet, both well-known entrepreneurs-turned-educators have, over the past decade developed courses now taught around the globe, which present effective methodologies that help entrepreneurs get to product/market fit and build new ventures more likely to succeed.

Steve was our first speaker, and in his talk he described his course, “The Lean Launchpad” which is taught at Stanford, Berkeley and Columbia universities and has been adopted by many other institutions around the globe. Following a request from the US National Science Foundation (NSF), he developed a version of the course for commercializing scientific inventions called “Innovation Corps” (iCorps) and this program is now being rolled out to many additional government agencies. Steve’s teaching materials along with other useful resources for entrepreneurs can be found at http://steveblank.com/.

The Lean Launchpad is based on three main pillars – “Customer Development” which Steve first described in detail in his first book, “The four steps to the epiphany”; agile computing and iterative product design and development - a component added by Eric Ries who coined the term “The Lean Startup” in his book; and the “Business Model Canvas” (BMC) developed by Alexander Osterwalder and outlined in “Business Model Generation”, which serves both as a framework for systematically testing the assumptions about the different elements of a business model, and as a “score card” to keep track of progress in validating or refuting these assumptions in the Lean Launchpad class.

Students are asked to populate the BMC with their assumptions about their business, and then focus on one block at a time, running experiments and speaking with at least 100 customers and other stakeholders during the course to evaluate these assumptions. Product-market fit, according to this approach is the match between two blocks of the BMC: the “Customer Segment” that you wish to create value for, and the “Value Proposition” that you believe will be appealing to this customer. To help students analyze this relationship, Steve incorporates into the course the “Value Proposition Canvas”, also by Osterwalder. According to this canvas, the most important elements of a customer’s profile is the “job” they are trying to get done (based on Clayton Christensen’s “Jobs to be done” featured in our qualitative primary market research webinar in Bob Moesta’s presentation), the pains related to getting these jobs done, and the gains that they hope to achieve – positive outcomes and benefits that customers expect and desire. The value proposition part of the canvas describes the features of the value proposition that are designed to address these particular jobs, pains and gains.

Bill Aulet, both hosting and presenting this time, shared the “Disciplined Entrepreneurship” approach and the “24 steps” that it follows in his book by the same name and in the course that he teaches at MIT and around the world. Bill views the whole course as focused on product/market fit. His starting point for developing the methodology was that end point that every entrepreneur aims to achieve. He asks students:

‘What is the singular necessary and sufficient condition to have a company?” The answer is: a paying customer. With this end point in mind, Bill created the 24-steps, which he emphasizes is not an organized linear process but rather an iterative, messy one in which entrepreneurs often need to go back and repeat steps already marked done based on new findings. The process begins with a group of steps titled “who is your customer”. Bill explains: “yes, it’s important to ‘start with why’ as we are often advised, but the ‘why’ depends on ‘for whom’, and it is only when you deeply understand your target customers, their profiles and their needs, that you also understand why you should develop a product or a service.”

The next set of steps deals with what you can do for your customer. This includes the value proposition, a high level product specification, a full use case scenario and your competitive advantage. As the map of the 24 steps shows, working through these issues creates an even better understanding of the customer, making it possible to actually identify your first 10 customers. The next sets of steps deal with reaching the customer, understanding how you will make money, and product design. By the end of this path, some steps visited multiple times, the expected outcome is achieving that necessary and sufficient condition – a paying customer, which means product/market fit has been achieved. All of Bill’s teaching materials are open sourced and available to educators here

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