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There’s a fun post from Ben Horowitz in 2010 titled The Revenue of the Fat Guy that weaves in comments from Fred Wilson about product/market fit where Fred argues in his post Being Fat Is Not Healthy. While ostensibly it’s a post about lean vs. fat startups, it really is about discovering product/market fit and it gives a good history lesson on the thinking circa 2010 on this issue. Ben eventually states, and then explains, four product/market fit myths.

Myth #1: Product market fit is always a discrete, big bang event
Myth #2: It’s patently obvious when you have product market fit
Myth #3: Once you achieve product market fit, you can’t lose it.
Myth #4: Once you have product-market fit, you don’t have to sweat the competition.

The author then started to realize that part of the illusion of product/market fit is that there’s a belief that once you have it, you never lose it (myth #3). There’s also the belief that there’s a magic moment where you have it and declare it (myth #1). Worse, there’s the belief that it’s obvious when you have it (myth #2). And tragically, a lot of companies believe when they have it, they don’t have to worry about anyone else because they’ve won (myth #4).

  • JB

    Joseph Bentzel

    over 5 years ago #

    Good write up and useful conversation.

    Product/market fit is and will remain a semi-useful planning construct---especially for developer-led startups in which there are no experienced product managers/marketers in the founding team itself.

    But the concept has always had a gaping hole in it which the author above is pointing out---and in a relatively polite way.

    Here's the gaping hole. The role of competitors---especially alpha vendor competitors and cross-category superpowers in changing the rules on a given market landscape. In "Asymmetric Marketing: Tossing the 'Chasm' in the Age of the Software Superpowers" I call this 'category regime change'. Here's an example using Netscape, Andreessen's own company, from the 'browser wars' period.

    Netscape, as a strong first mover, established Netscape Navigator as the leading browser in the emerging web market. They gave Netscape Navigator away via a download, but also sold multi-seat and OEM licenses for it for the enterprise and ecosystem partners.

    As their dominance grew to 90% market share, Andreessen proclaimed that the browser 'is the new desktop', calling out Microsoft in public, despite the fact that the browser 'lived' on the MS Windows desktop in large part. Microsoft responded to this threat from a 'disruptive innovator' (i.e. Netscape) by using its PC market muscle and OEM distribution advantage to push Navigator out of the market with a 'free' ('It's part of Windows) model. While Netscape Navigator still had 'product/market fit' at the user level, it no longer had 'product/partner fit' at the distribution channel level. Netscape ended up being split in two---one half going to Sun and the other to AOL. A classic textbook case of 'category regime change'.

    Let's fast forward to now and apply this very same concept of category regime change to the emerging 'MarTech' tools category. On the one hand we see (per Scott Brinker's research) almost 2000 vendors (many small growth hacker friendly startups) and on the other we see cross-category 'marketing clouds' emerging from the software superpowers like Adobe, Oracle, IBM, HP, Salesforce, SAP and others. What's clear is that many of the MarTech startups will either be eaten by or displaced by the marketing cloud superpowers over time. That's category regime change applied to MarTech in both the enterprise and SMB.

    Here's the real deal about 'product/market fit'. Marketing is a 'contact sport' and competition ultimately can explode the various myths around product/market fit as a static 'big bang' event. This is why my own focus---while in violent support of downstream user growth hacking innovation of the type we see in this community---is primarily focused upstream---on alliance building and pre-emptive partnering with the superpowers.

    Are there exceptions to this general rule. Sure. But most of those exceptions (e.g. Amazon, Salesforce) still struggle with GAAP profitibility, while others, e.g. Facebook, benefited from massive amounts of invested capital (some of it from the software superpowers) and the market fumbles of their competitors (e.g. MySpace) to become kingpins.

    Context matters. Competitors coming to eat your disruption for lunch is context. Factor that in to the PMF exercise before you spike the ball in the end zone.

  • AA

    Anuj Adhiya

    over 5 years ago #

    This really is a must read for all in pursue of product market fit.

    @sean - would love your thoughts on this piece (since you're mentioned in it)

    • SE

      Sean Ellis

      over 5 years ago #

      I loved this article and thought it was spot on. Really interesting thoughts about the connection to MRR and product market fit. I'm sure this will become one of those articles that I come back to often and reread.

      • AA

        Anuj Adhiya

        over 5 years ago #

        @sean Just like @lincolnmurphy said earlier, I too find it just amazing that given how long the idea of PM fit has been around that no one has said what's in this post before.

        Any guesses as to why that might be?

        • SE

          Sean Ellis

          over 5 years ago #

          Well a lot of what was in the post were quotes from other people's posts, so that stuff has been said before... All kidding aside, this stuff is all pretty fuzzy. He shared some great new thoughts on SaaS MRR stages as they relate to product market fit. But at the end of the day, it's just his opinion. I generally agree with his thinking, but I'm not sure that you can't be at product market fit with only 50K in MRR. I think the most important thing he pointed out were the risks of growth at various MRR levels. But it's not like we'll ever be able to uncover laws of physics here such as the speed of sound. It's just not that exact. Still, I really enjoyed the article because it makes you think - and because he put my name next to Marc Andreessen's name :)

          Ultimately we're all trying to make sense out of something that is really hard to nail down. I came up with the survey.io question, because it was directly useful for me to identify when a startup has a fighting chance to scale customer acquisition. In this video https://growthhackers.com/videos/video-alex-schultz-growth-lecture-start-startup/ Alex Shultz makes an observation of what Product Market fit looks like as a retention graph. Essentially we are saying the same thing. I'm looking for people who say they would be very disappointed if a product disappeared, and he's looking at people who keep using a product. In both cases it's the same group of people analyzed differently.

          So frankly I would have been shocked if anyone could have independently written an article with the exact same observations or even observations that were pretty close. Unfortunately we're all making this stuff up to try to make sense of something that will always be inexact.

  • LM

    Lincoln Murphy

    over 5 years ago #

    I don't think I've ever seen Product / Market Fit talked about like Brad does in this post, but it's awesome.

    Companies and Markets (and customers, and users, and...) evolve, and it's good to be remind of that in the form of an article... rather than learning that lesson the hard way. Good stuff.

  • SV

    Sascha Pascal van Opzeeland

    over 5 years ago #

    Great post with regard to the myths, something to think about.

    I do wonder though whether the MRR approach is the best one to measure product - market fit. Wouldn't it be better to look at metrics like conversion rate, customer lifetime, referral rate, etc.?

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