UScale’s Product-Market Fit approach offers a multi-level development framework for innovators, product owners and marketers.
Why is a good product-market fit so crucial to success?
In the public discussion and at start-up events, particular importance is usually attached to the ideal composition of founder teams and technology development for success. The product-market fit of the new products or services is rarely the focus, especially in German-speaking countries. At UScale, however, we consider precisely this to be so central to entrepreneurial success.
Is Product-Market Fit underestimated in Germany?
A post-mortem analysis by High-Tech Gründerfonds (HTGF) shows that an insufficient product-market fit is the most frequent cause of their failed investments. Problems with the composition of the founding team or technological development, on the other hand, are less significant.
An analysis by the American tech market intelligence platform CB Insights comes to a similar conclusion. Among the top 20 reasons why start-ups fail, “no market need” is in first place.
Assessing and improving the product market fit helps start-ups on their way to success and convinces investors in the early seed phase. At the same time, it can serve investors as due diligence from a customer’s perspective.
No Use – No Revenue
A critical aspect in developing the product-market fit is to assess the actual readiness for use and acceptance by the target group. Established methods such as the Value Proposition Canvas help to identify the extent to which the new product or service solves an existing customer problem. What is not sufficiently addressed, however, are the new barriers that arise for users, which go hand in hand with adoption and ultimately influence the decision to use.
Perceived barriers differ individually and depending on the customer segment. They can, for example, concern the letting go of a habit or the integration of the innovation into the existing (IT) ecosystem. Especially in the case of usage-based, so-called pay-per-use-based business models, the relationship between the value added (the benefits) and the perceived barriers is consequently decisive for usage and thus for the success of the company.
At UScale, we have developed a simple and universal test procedure that uses qualitative and quantitative methods to determine the actual readiness of the target group to use the product. At the core of our approach is a key figure that quantifies the product-market fit and makes it measurable.
UScale’s PMF development framework
Our approach consists of a multi-level development framework. The aim is to work with our clients to gain a deep understanding of the market, competitive and customer environment in order to identify and fully exploit the potential of the product or service. We accompany our clients from the initial idea to the after-launch process and support them as a critical discussion partner.
Central components of our development framework include the identification …
… of its own market positioning.
- Determination of (application) markets and regional delimitation (TAM, SAM, SOM).
- Analysis of the competitive environment and products/services.
… the target group.
- Analysis and identification of user groups.
- Formation of personas.
… of their own value proposition per target group.
- Evaluation of problem-solving competence.
- Identify key barriers from the user’s perspective.
… the target group’s willingness to use the product.
- Qualitative and quantitative survey of the target group.
- Determination of the target value “product-market fit”.
- Segmentation and periodisation of customer segments.
… further market potential.
- Identification of further development potential (e.g. features, services or backlogs).
- Identify next customer segments.
- Analysis of competitor activities.
Product-Market Fit achieved. And now?
The work on product-market fit is not over with the market launch. Even in the growth phase, it is particularly important to check whether the value proposition is still sufficiently perceived. After the first user groups, new customer segments enter the market or want to be conquered. Their gains and pains are different. Working on product-market fit is therefore a continuous task.
From our point of view, product-market fit is a KPI, a central target value that must be regularly measured, checked and readjusted. This requires metrics and measurement methods. With our consulting and market research approach, we offer the relevant instruments. You can read more about our approach in our white paper n the topic HERE.