Channel/offer fit instead of product/market fit
jakobgreenfeld.com
jakobgreenfeld.com
The problem I have with this essay, after sitting with it for a few minutes, is that it's predicated on the notion that every failed startup is a great idea that deserves to exist, but just hasn't found its paying customers, yet.
Sadly, this is simply not true. Lots of founders drink their own Kool-aid and build significant amounts of IP and software and merchandise before actually verifying that real people want to give them real money for it. Telling them that they just haven't found the right Instagram demographic is actively harming them now and in the future.
Look, I often tell founders that they need to identify what success looks like, and what failure looks like, and then stick to those definitions to the maximum degree possible. This gives us the opportunity to celebrate our wins (which can otherwise be fuzzy until you ring that IPO bell) but just as importantly, it gives founders the ability to differentiate between "don't listen to the haters" and "it's time to be honest with ourselves about the fact that this isn't going to work".
There's an art to knowing when to stop. You really don't want to allow the sunk cost fallacy to damage your ability to move on to the next idea. After all, our time is finite, and the optimal time in your life to start a company is even more so.
"Channel" is a concrete redefinition of the vague term "market" that describes an actual group of people plus the means of reaching them. "Offer" is a redefinition of "product" that includes a strategy for communicating its value. These are pretty important distinctions, and I agree with the author that this framework holds a lot of value.
The question remains, how and when do you decide that your product just doesn't have enough value to anyone you might pitch it to? Obviously you start your venture believing that it has value, and at any point your next iteration might reveal the magic combination. Or it might never come. I think there is no good solution, and it is, as you say, an art.
I feel investors and traders can answer this to some extent. The framework I'd have as a trader, and to a lesser extent as an investor, is simply an expected value calculation.
I put x amount of time in with milestone a, b, c and d. I expect on average to make y amount of money, which means that I need to make p revenue on milestone a, q revenue on b and so on.
Obviously this is a super rough outline and one could do without the milestone idea and simply look at it as a 1000 hour investment hoping to make $20000 + growth potential, for example. If you didn't hit you target you quit.
I already hear some people say: but what if it took 1001 hours to hit the motherlode? Well, sure, but you can always ask the same with trading as well. What if the price would've gone up even more? Shouldn't you have hold your stocks/options? No you shouldn't. In general, that'll be an unstable psychological basis to operate from and the biggest mistake to make in trading/investing is to not stick to your initial strategy.
Anyway, there are probably more perspectives, but I think the trading/investing perspective has a framework of answering this question. For me personally, it answers it in a satisfactory way.
My only issue with it is that it's purely from a monetary perspective and it doesn't answer anything related to the emotions of a founder and how it deals with stopping after a 1000 hours when it turns out not enough revenue has been made. So the perspective does need to be augmented with a perspective that has a grasp of the emotional side of entrepreneurship.
Moreover, entrepreneurship offers following your own personal mission while solving problems in a way you want to solve them. It's the ultimate sandbox game in the "adult people world" when it comes to "having a job". So some entrepreneurs might even argue that it's not about money at all. In that case the trading/investment perspective offers little value, especially if you can fund your own endeavour.
Let's say that you wake up one day obsessed with the idea that since GitHub made programming better, a GitHub for datasets is definitely something that data people want and need. Of course, they just don't know it, yet.
After you get together with your cofounders and decide that you're really going to quit your jobs and do the startup thing... this is when you should define what success looks like and what failure looks like, and start the clock.
You might say that your first success milestone could be 25 paying customers in three months. Maybe that's a lot, maybe that's too little. 25 is more than 0 and less than 100. You want to set a target that will make you sweat a bit, but not be impossible. A set of conditions where you can go to whoever gave you seed capital and say, look: It's working!
You might say that your failure milestone would be not getting 1 customer in the first month, after you put together a cool presentation or demo video. It might be that you only get 80 users signed up, and only 2 of those users ever engaged beyond the first screen. It could be that after three months, <1% of your beta users transitioned to a paid plan - even though that plan is discounted 60% for the first two years.
And then stick to those criteria and those dates. Don't move the goalposts more than once. Give yourself a bit of slack if you didn't calibrate well out of the gate, but cut that shit out if you find yourself self-funding an idea that has failed to find even a humble audience of true believers who are willing to pay for it and tell their friends without you having to ask. There's a term for this: putting good money after bad.
HTH
He talks about market - model - channel - product fit. In that order.
https://brianbalfour.com/essays/product-market-fit-isnt-enou...
From my position (running innovation programmes inside a big mature organisation) the idea of channel / offer fit is just as important internally as externally.
You need to be able to explain the idea in ways that internal stakeholders understand, and describe it in terms of channels or offers they understand.
In the organisation I work in, we are basically consultants - so any new innovation has a much greater chance of success if it can be described in a way that fits with a time and materials sale. Building a product is much harder, and can take years to gain traction - more internally than externally.
I'm sure the same applies with VC funding - having a product or service that maps onto your investors' worldview makes the conversations much easier.
- 'Distribution' is really the hot button this is about, even if I didn't see the word there. "Build it and they will come" is rare. Such product/market fit thinking sweeps that difficulty under the rug, while channel looks at it straight on. The article's notion of 'order' also gets into repeatable selling motion for after a customer is in the funnel -- customer success etc etc -- which can also be tough.
- ex: For us as an enterprise product, we found amazing users who would go as far as spending every evening and weekend to investigate their data. Being a tool investigators love (sec/fraud/social/blockchain... and now commercial analysts like supply chain) means initial product/market were just about there. But..... that didn't mean we just sold and grew. Figuring out the selling process is huge: how prospectives find it, try it, make their decision, purchase it, etc. Especially for 5-7 figure software, getting a predictable (& ultimately scalable) journey can mean figuring out a lot of smart targeted nudges & streamlining between your external channel partners + in internal sales/marketing/success folk.
I know it's popular to think of customer acquisition and customer retention as entirely separate topics. Tilt your point of view just bit and with a subscription service you're really acquiring not one or even two kinds of customers. It's three. In one instance, you're acquiring fresh customers who aren't familiar yet with the product class and are getting started. In another, you may be luring customers away from other, similar services. Finally, come renewal time you're sort of reacquiring your existing users. The decision the customer makes in any of these scenarios is different from the other two. It's still your job to get as many potential customers to decide on your offer in each of them.