Product-market fit fills need-shaped holes

What comes first product or the need? Stories of hustles, early proof and pivots while building a great business

May 19, 2021

The Button

OpenTable was an online restaurant table-booking startup. It saw success in the US, so Daniel Tonkopiy wanted to launch the same idea in Ukraine.

He and his team built a CRM reservation backend. But the more exciting innovation was a 3-D interactive image of each restaurant. This allowed customers to get a feel for the place and pick a seat visually. He called it a one-button booking system.

This took a year of work.

Since they only earned $1 per reservation, they needed scale to make any money. They got only four bookings in the first week. The product was too sophisticated for the problem it was trying to solve. A phone and paper did the job just as well and faster.

There was no product-market fit, and they failed.

Door Dash

In 2013, DoorDash cobbled together a landing page on PaloAltoDelivery.com. It was a basic, even ugly product - just a collection of PDF menus from the Palo Alto neighborhood.

45 minutes after their website launched, they received their first order. The founders (Stanford students) jumped into a car, picked up, and delivered the order.

The next day, they got two more calls, five the day after, then seven, and then ten.

Door Dash went for an IPO in Dec 2020 at $72bio valuation.

What comes first - the product or the need?

The happy irony is that we don't need marketing or even a polished product if we have a product-market fit. Consumers spread the word, happily wait in line, and even overlook mistakes.

Techies have founded most Silicon Valley startups. They love to tinker with technologies, so they end up with a product before they have a market. They believe, 'if I make it, customers will come'.

Not always true. This report from CB Insights shows 'no market need' to be the biggest reason for new company failure.

CB Insights - no market need is the top reason for startup failure

Founders of consumer goods companies were like the software engineers of today. They were chemists, doctors, and engineers who loved to tinker with new products and were lucky enough to find a market.

Henri Nestle was a pharmacist who developed a mixture of milk, wheat, and sugar for malnourished kids. And Nestle was born.
Eugene Schueller, a chemist, developed a hair dye that he sold to Parisian hairdressers. L'Oreal was born.
John Pemberton was a chemist. He invented a coca wine containing alcohol to help him with his morphine addiction. During the prohibition, he removed the alcohol from the drink and called it Coca-Cola.

The journey from a good product to a great business does not happen instantly. For most consumer goods companies, it has taken 100+ years.

The truth is that either the product or the customer base - often both- must be tweaked multiple times to succeed.

These tweaks are called pivots.

Pivots

The business world is bursting with stories of smart pivots that got start-ups to success. Here are three.

Instagram used to be Burbn - a location-based social network with an optional photo feature. When its founders saw that users were only using the photos and filters. Burbn pivoted to Instagram and became the best app for posting photos with filters.
Play-Doh used to be Kutol - a material to clean the black coal residue from walls. As electric heating replaced coal, this material was relaunched as multi-color modeling clay - play-doh.
William Wrigley Jr. was a soap salesman. He used to give free chewing gum to his customers. He soon realized that the gum was more popular than his soap. So, he started manufacturing his own gum and created world-famous chewing gum brands.

Early proof and hustle

The brightest founders get early proof of product market fit. Sophisticated PE funds call this MVP (minimum viable product) ;-). I call it hustle.

Innocent Drinks was started at a music festival. The founders asked people to vote by disposing of their empty bottles into bins labeled 'Yes' or 'No' to whether they should give up their jobs to make smoothies. The 'Yes' bin was full. The founders quit their jobs the very next day and started Innocent Drinks.

Zappos started like Door Dash, as a side hustle. Nick Swinmurn, was not sure if people would buy shoes online. He went to a few stores and took pictures of some shoes. He then made a basic website with those pictures. When he got orders, he bought the shoes at full price and shipped them out.

Sexy story is not equal to Product-market fit

Consumer marketers tend to fall into the trap of spending a lot of time and money trying to get advertising-market fit instead of product-market fit. We think that simply making a great ad will get us a sustainable business.

We forget the most fundamental rule - the product has to fill need-shaped holes in the consumer's life. Sexy stories about bad products won't get us far.

We are products too

This got me thinking -
1) we are all 'products' too. Are we in the best market for us as professionals?
2) are we relying only on sexy stories to get by instead of perfecting our product, i.e. our skill?
3) are we continuing to pivot our product from a good product to a great one?
4) are we hustling for some early proof as we pivot?

Thanks for reading!