Product-Market fit and the risk of premature scaling

Building your startup from scratch? Looking for a product-market fit? If so, make sure you’ve checked off your to-do list the following: there are customers that do have the problem you’re aiming to solve; they do care to solve it and most importantly they’ll choose your solution over your competitors’. 

Product-Market fit and the risk of premature scaling

The last part is, more or less, what product-market fit is all about. And, below, we present an overview of this crucial part of the product development process, touching upon risky aspects involved, such as premature scaling.

In search of the product-market fit

Finding your product-market fit is challenging. No one can doubt this. You’ve got to focus on three critical parameters of the business you’re trying to build: 

  1. Your customers 
  2. The solution itself
  3. The market type 

These are the ones that you’ll have to efficiently iron out throughout your journey; and these are the ones that will define your business, in the end. Here they are:

1. Finding out what your customers’ actual needs are

This is, perhaps, the most crucial factor of the equation you’re trying to solve. And that is, indeed, very difficult to work out. Especially if you’re diving into an industry you’re not familiar with or have no previous experience on.  

2. Translating those needs into a tangible solution

They say that theory is far from practice; and they’re right. To put it another way, it’s way too easy to demonstrate ideas and promises for customers on paper, rather than implement them into the final offering; one that does get your customers’ approval. And customers approving your product means that they will pay to use it and solve their problem(s).

3. Standing out in a crowded market

Let’s admit it. Things have changed a lot in the last decade or so. If we look back at the beginning of the history of startups — focusing on the tech-related ones — it was much easier for a startup to come up with a brilliant solution and shine. Even if that solution was not that perfect or polished, in the absence of alternatives, customers accepted the product with excitement. We’ve come a long way from that.

Today, there is an overabundance of offerings. There are plenty of products out there that come with long lists of features; and promise to solve even the most minor problems in an industry. Even a sub-category of issues or derivative problems coming from problems already being solved. Or problems a niche market is faced with. Needless to say here, all of these products are readily available to customers of all walks of life, to choose from. So, is it possible for your product to stand out? Or, at least, get noticed?  

Re-examine, re-adapt and re-evaluate

It’s quite difficult to make heads or tails of a situation like this — and just focus on one of these aspects. Simply put, there’s no sequential procedure to follow. At least, not one that will ensure that if you’ve done this and that, you’re ready for the next step. All of these aspects of the business, namely customers’ needs, solutions offered and market types, are strongly linked together. That’s why you need to re-examine, re-adapt and re-evaluate each of them throughout your customer development journey.

Allow me here to clarify something that was mentioned above, but was probably a bit blurry at the time. When we refer to customer needs and market type, that doesn’t mean we’re describing two entirely different things. Customer needs, as you have previously captured them during the problem-solution-fit stage, are just a snapshot of what a portion of the market needs in that specific period of time.

The next thing to do is to validate — again, temporally — that these needs match the needs of a wider part of the market, longtail or not. And see, that way, if there’s a product-market fit for your offering. The wider the part of the market interested in your product, the better your potential to grow.

Working towards a product-market fit

Once you have validated your problem-solution fit for a specific build of the product and a specific market segment, it’s time to get off the ground. How? You need to give the sales and marketing process a boost. In other words, you now need to gradually take the steps that will allow you to find out whether this “validated fit” translates into wider acceptance on the market.

Needless to say, you need to be careful enough so that your marketing efforts will not create a “fake” and short-lived traction. Avoid vanity metrics in a make-believe situation. Balance your efforts. High-priced marketing combined with low-priced products, to bring early traction, are a recipe for disaster.

How to tell whether you have or haven’t reached a product-market fit

Let’s say you’ve been sufficiently verifying all things pertinent to the customer segment you’re initially trying to reach. You’ve adjusted your content, your ads and all of your marketing efforts to that goal; and that’s for a predefined time-span, right? A time window of sorts. You may even decide to prolong that period, if you’ve noticed some good progress. When will you be sure that you finally did it? When will you have reached that longed-for product-market fit?

The answer to that question as it happens with all — or the majority of — burning questions is that, within startups, it won’t come as a binary measure. In all practicality, it’s all about percentages. That’s what your metrics and results will look like. So, to understand where you’re standing, just focus on the tendencies you’re experiencing. Here are some things to consider:

You’re approaching product-market fit when…

  • You’ve found at least one marketing (distribution) channel that works for that segment.
  • The Customer base is growing and then growing some more.
  • You’re being noticed and the reviews you’re receiving give your team the strength to work harder.
  • You need to hire more people. You’re beginning to have difficulty in handling customers with your existing team, as is. Customer success is not just another title and you need to do something about it.
  • And, of course, your automated payments engine has paid off. Your bank account is finally getting some traffic.

You’re probably not there yet when…

  • The number of sales seems to have a disheartening effect.
  • You’ve got no reviews from customers, whatsoever.
  • Repeatable sales and word of mouth are just phrases in the dictionary.
  • You find yourselves in a stalemate

If your startup is better described with the second scenario, don’t be discouraged. You just have to roll up your sleeves and follow an alternative approach. Perhaps, the market segment you’re targeting is not the one that needs your solution; or you may just need to adjust your marketing strategy. It’s time for testing and for smaller or greater pivots in different aspects of your strategic endeavor.

Now, even though this scenario may sound devastating, it’s not. And that’s because you’re aware of the problem and there are still things you can do to bounce back. It’s all about resilience after all, isn’t it? But what if you’ve done it and have already popped a champagne? You might be scaling up. But, you might still be travelling a risky road, completely unaware of it. Premature scaling is such an example; and it’s a precursor to failure. Read on!  

What is premature scaling and how does it relate to a product-market fit?

Well, premature scaling is a term initially used — or coined — by Steve Blank. And describes startups that are, oftentimes, skipping steps in Business Model validation or do things more quickly than expected. In particular, they may be spending huge amounts of money marketing their product; skipping the problem-solution fit or product-market fit steps, altogether.

This shady “strategy” will probably result in traction that does not correspond to real market demand. A leap of faith remains the rule of thumb for them, for the majority of decisions they make. And actions are usually backed up by a huge but quickly-diminishing budget. As a result, when growth is fictional, then, as expected, they will swell up and burst. As Steve Blank put it, that’s the Startup Death Spiral.

What’s next?

So, have you managed to reach a product-market fit for yourself, or not just yet? If you cannot tell for sure, it means you probably have to keep working on your current customer segment, the way we explained above. Or even move towards addressing new target segments. And that would also be recommended, if you’re actually getting the results you expected. By empowering validated customer segments and by concurrently making efforts to expand to alternative ones, you have a fighting chance at growth 😉.

Product-Market fit and the risk of premature scaling was last modified: September 29th, 2020 by Konstantina Ferentinou
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Konstantina Ferentinou

The Starttech Ventures Content Marketing Writer. Studied Computer Engineering and Informatics at the University of Patras. She has working experience in technical writing, sales and support related roles. She now focuses on content creation. Channeling her creativity into writing, she hones her ability to communicate the right message through various content types.