Tiina Apilo @TiinaApilo
Before entering the Product-Market fit phase, you will have succeeded in identifying a suitable problem and then – through small experiments – a solution which interests potential customers. Now, in the Product-Market fit phase, two issues should take centre-stage: where to find suitably sized markets and based on what value propositions. Suitable markets may be quite different to those you envisioned during the first two phases. You may have defined the markets well when identifying the problem, but test marketing shows that the value proposition or another part of the business model needs to be completely revised. In the Problem-Solution fit phase, it was enough to get customers to buy once, but repeat purchases are already needed for solutions that ‘wear out’ quickly. The key question during the Product-Market fit phase is: How to acquire and retain customers on the basis of a scalable business model?
Initial business model
“An initial business model provides a good overview of how to create a business, but is not yet about actually creating one. It is a vision of it.”
As in my previous post about business acceleration models, with the help of the above matrix I present the readiness level of each of the business model’s four components. However, you should bear in mind that, in practice, development is iterative and covers a number of more or less distinctive solutions. The bullseyes on the dartboards describe the issues that must be completed during the Product-Market fit phase. So, both the solution and value proposition are validated in this phase. The initial business model can still be adjusted in the Scaling phase, even though a fairly clear idea has already been formed of the sustainable business. The initial business model is a shared understanding between your entire development team of how the new business will be built on a large scale.
Methods and measurement
” Here you have to be very innovative, on the level of ‘Can we find a business model that works.’”
“In a sense we know the things that we should do better. To move forward, we need resources, more funding.”
The Product-Market fit phase is mainly about doing – developing the solution alongside customers and measuring your success in this. When we asked Accelerate project companies about the methods they developed during their Product-Market fit phase, they referred to business modelling such as Business Model Canvas and Lean Canvas, and the related trials. Some had used internal start-up experiments and a range of experimental social media accounts to test new markets. Digital content marketing and growth hacking enabled companies to gain the attention of customers and offer solutions for trial. The companies were positive about the analytics tools offered by social media platforms, despite the fact that many had developed their own analytics systems.
What should be achieved before moving to the Scaling phase?
“A vision of what would follow if money and resources were deployed here. An understanding that you should move to the scaling stage.”
During the Product-Market fit phase, the focus was on testing a suitable value proposition and revenue model for the selected market. A clear vision of both should be included in the initial business model, before moving to the Scaling phase. Resourcing is another critical issue, since the Scaling phase is resource intensive.
We developed a new business acceleration model via the Accelerate project. Previous publications on the model include How to accelerate the development of new business activities?, Without problems there are no solutions and Problem-solution fit.
The quotes are comments from companies, given in validation interviews for the Accelerate model, on their own business acceleration stories.