When you become an entrepreneur, usually it is because you have fallen in love with an idea. You believe that ‘this will work,’ so much so that you will probably bet your life’s saving on the idea and on your ability to make it work.
It’s a tough decision, and we all often come across examples of failures more than successes, which makes it tougher to walk on this path. For example, when I started my business – I failed, again and again. But each time I failed, I learned something, and that ‘learning’ helped me create a $250,000 company.
I want to share those learnings and practical experiences that will help solve complex business problems, achieve sustainability and ensure growth.
Essential of a Product assessment
When you build a product, you need to determine the core of your product and its feature.
Each product is built on solving market problems that your competitors couldn’t solve, and your product is a better and efficient solution to that problem. So the ‘one problem that the product solves should be the core, and the rest of the solutions should be the feature of your product.
You will often see products that solve many minor problems and merge them for a core offering. It is another way of creating a core, but the first way is considered much more efficient and sustainable.
Understanding the Product-Market relation
When you offer a product to the market, analyze its strengths and weaknesses from a market perspective or, simply put – from the target audience perspective. If the product fits uniquely into the puzzle of your market’s need, then you have achieved the nirvana state of ‘Product Market Fit.’ It is the degree to which a product satisfies strong market demand.
Now, the following questions you might have – how do you evaluate your product? And how do you achieve a product-market fit?
How do you evaluate your product?
Evaluating your product-market fit is not a simple yes or no answer; it’s an elaborate-open-ended question. First, you have to analyze and understand to what degree your product satisfies the market need or how efficient your product is for the market?
To determine the answer, we have two theories – Kunal Shah’s Delta-4 theory and the 10X rule.
Kunal Shah’s Delta-4 theory
When evaluating the product, you should consider three aspects:
1. Quality of the product
2. Speed of accessing your product
3. Cost of using the product
If you create a 4-point difference in the market on any of these three aspects, then you have created an irreversible change for your audience. It means people will not go back to using the old ways/products, and it will stick with you for a long time, at least till the time someone else creates a 4-point difference.
You can measure the difference by market research, talking to your users, and collecting surveys. For example, if the average rating for your product is 4-points higher than the current product, you have achieved a Product-market fit.
The 10X Rule
When offering a product in the market, create a core value proposition ten times better than the previous version. If you succeed in this 10x better model, the product will sustain the market and redefine the market itself.
Before you conclude if your product is a 10X product, you need to determine the metrics on which you evaluate your product. These metrics will be unique to each market and the current products available in the market. But three broad categorizations can help you in this process –
- Intent to use: The action your customers take to show that they intend to buy the product
- Activation: The point at which a customer-first derives real value from the product.
- Engagement: The degree to which a customer continues to gain value from the product
Much of your product and its market fit will be specific to the market sector you are dealing in, but the broader picture will give you a direction to take it a step further.
Why you need a product-market fit?
Achieving a product-market fit is measuring how your product fits into the market and give you an insight into what you need to do to make it more effective and efficient for the market.
When you achieve a product-market fit or start moving towards it, your life will become much more manageable. You will get customers quickly; you will not only attract paying users but also supporting investors. It’s like achieving ‘Nirvana.’
If your product speaks for itself, you will get more referrals, more retention, and most importantly, return on your capital is much higher than the cost of capital.
Most of us think that achieving a product-market fit is like reaching a stage and then surpassing it. But, on the contrary, it’s a process. You need to keep working to ensure you are solving the correct problems and you are always relevant in the market.
It’s a persistent journey of the right approach, taking risks, and evolution. Yes, evolution! Remember, your audience is evolving each day, their aspiration is growing, and your product has to match their evolution and fulfill their aspirations. That’s the only way you will be relevant and retain the customers you have acquired through the journey.
Being an entrepreneur is not limited to delivering what your audience needs today but seeing the future and investing in the ideas that solve tomorrow’s problems.