Product-Market fit is the last thing you should be trying to achieve.

I find it interesting that many use the phrase “product — market fit”. The last thing I would be trying to achieve is figuring out how my product fits into a market.

What I want to focus on is “what is the problem in the market that needs solving (one that has significant quantifiable benefits if solved) and how do we build a product to solve this differently and better than any other solution or current approach”.

This is called “Market — Product” fit.

This is more than semantics and re-phrasing. It is context that helps us with the approach we take. It is this type of context that helps with how we go approach this critical stage of our business.

Further beliefs in Market-Product fit.

• It isn’t a plaque you achieve and hang on the wall. It changes and goes through cycles, new entrants come in, new external factors impact the category, etc. Market-Product fit is organic and requires a continually probe in the market to understand where it is moving.
• It isn’t binary. Think of it as a spectrum from weak to strong.
• It’s hard to precisely define and even harder to measure. So difficult, in fact, that I’ve heard several people resort to the “I know it when I see it” phrase.
• It isn’t enough to have signed contracts, product usage and new customers signing. To have real Market — Product fit you also need to “prove” value and “realize” that value in an ongoing and sustainable manner.

Let me demonstrate the last point with a recent conversation I had with a CEO of a $5M vertical SaaS company:

Do you have Market / Product Fit?

Founder: Yes, we have strong product market fit

Me: Mind if I stress test that for a minute?

Founder: Sure

Me: In your customer’s words, what’s the $ value being created when your customer uses your product, an average is fine.

Founder: Well our ACV is…

Me: Oh sorry, let me clarify. Not your ACV, the value your customer replays they are receiving from your product.

Founder: Oh, I don’t know. It is very hard to measure.

Me: So how do you know they’re receiving value?

Founder: Well I guess it’s assumed in the contract value.

Me: OK, let’s assume you’re right, follow-up question, how do you know you’re not leaving money on the table?

Founder: Objectively we don’t, but if we are, I’d like to know how to change that ASAP.

My point is you do not necessarily have market — product fit if you have:

1. Have signed contracts
2. The product is being used
3. You are signing new customers

However, if you add the following, you’re on the right track:

1. Proven value: Customer accurately relays quantitative value exchange
2. Realized value: Customer pays 10–20% of that accepted value
3. Value sustained: Customer validates your value creation is sustained (versus one hit) during your periodic check-ins.

This all brings me to my definition of Market / Product Fit

It means having a product that solves an important problem — without custom work and better than existing solutions — for a significant number of independent customers in a large market — who are experiencing sustained quantitative value and are paying a fair exchange of that value.

Strong market product fit occurs beyond usage, it occurs when you focus on the problem and market, then search for the solution; you prove and realize quantifiably the value of solving this problem; you continually monitor this value exchange; and you continually probe into the market to understand where it is moving.

Thanks for reading. I’m John McAuliffe and I help companies accelerate growth more consistently and with greater predictability using repeatable processes.