WHITEPAPER
Product Market-Fit is dead!
From ideation to go-to-market: Learn how to build products that deliver true value by refocusing your teams with the VCP, a new framework guaranteed to help you hit hyper-growth.
Author,
Andrea Saez
Author,
Dave Martin
Introduction
By definition, product-market fit is the degree to which your product satisfies a particular market.
Founders have been building B2B products under this premise for years - and for years we’ve seen many products fail.
This is because markets aren’t looking for a product to “satisfy” their needs. B2B markets are looking for more than an emotional connection, they are looking for a product in which they can find true value within the context of the problem they are experiencing.
Problems change. People change. Markets change.
Product-market fit has become overused and poorly defined to influence the borrowing of capital and forge ahead to build a product without having understood the meaning of value to the user.
⚠Your customers don’t care about product market-fit!
The success of your product is not based on how much money you can raise or how many widgets you can build. If anything, you might find that the more features you add, the less traction you have. This is because there is a gap between what customers find valuable, and the undefined value assumptions you are making as you’re expanding your product.
It’s at this point that products start losing momentum and revenue growth. While revenue may continue, it is missing the potential and is far from exponential ambitions the product could be delivering. We call this the product momentum gap.
In contrast, successful hyper-growth products have two key ingredients:
Teams understand what customers find valuable within their product.
Teams understand value is contextual to a specific problem and market.
In other words, think of your customers and the value that you present them as growing, changing and adapting. In order to build successful products, you have to treat the idea of product-market fit as product-context fit, and continuously learn and iterate on that value. After all, product-market fit was never meant to be used as a static point in time that define success.
Problems change. People change. Markets change.
In order to facilitate aspects of continuous learning and iteration, the Product Value Creation Plan was created. In this whitepaper we’ll tell you all about what it is, how to use it, and refocus your team to think about value, and close the product momentum gap in order to hit hypergrowth. The rest of this white paper introduces the Product VCP (or Product Value Creation Plan) and explores how to exploit it.
What the heck is a Product Value Creation Plan?
The Product VCP
The Product VCP is a framework that serves as a way to tie together your product’s strategy, objectives, and roadmap, with a unique focus on customer value.
While your product strategy focuses on what and how - that is, what your strategy looks like, what problems you are solving, and to an extension how you might provide solutions, the Product VCP highlights your customer’s needs, including:
Who you are solving problems for, including use cases and personas?
Why this is important to the customer?
What experiences do you want to provide for your customers?
How we influence new and better behaviours?
The Product VCP itself is made up of four different parts:
Target audience: Enables teams to understand customers' value and their relation to the business goals.
Customer Value Explorer: Understanding the user’s behaviours that create value for your customer.
Value Assumption Builder: Help leaders articulate how product impacts value and create better user habits.
VCP Tracker: Enables teams to monitor value indicators tracking your product’s impact on important customer behaviours.
Why not just use a product strategy?
A product strategy is a crucial step towards defining the future of your product. Unfortunately, product strategies often also get misunderstood and fail to pinpoint the value assumption leaving dangerous ambiguity open for interpretation.
I’m pretty sure you’ve all experienced this: a situation where you start a vision, a set of goals, and some high-level ideas. Yet somehow, everyone’s got a slightly different view about how things should be approached and what is important.
This in itself is a problem, but it can be worse when some of those views end up being dramatically different. This in turn causes teams to get distracted, and the more we try to fix things, the more distraction we end up causing for ourselves. In the most serious examples, investment is driving activities going in opposite directions.
If you don’t have your team aligned, or your strategy aligned — how on earth will you have your roadmap aligned? Executing the strategy is hard, this is where the Product VCP comes in.
It answers those ambiguous questions that are left as assumptions for everyone to interpret differently, and brings it all back to who we are building things for: our customers.
It’s important to note that the product VCP is not a replacement for your product strategy - it’s a measurable articulation of the strategy.
How does the VCP support your product strategy?
Creating a product strategy can be tricky, and aligning your team around it can be a daunting task in itself. It’s not uncommon to find that team members have different interpretations or approaches to the same strategy, which then leads to misalignment within the team. We then in turn ask ourselves - but how did this happen, were we not reading the same document?
It’s in this grey area that the Product Value Creation Plan (VCP) was born.
The Product VCP gets rid of a lot of that ambiguity and makes it very clear that there’s a direct relationship between the strategy we are aiming to execute on and the value the product is meant to provide our customers.
At a high level, your product strategy should focus on the following areas:
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• Product vision
• Business models
• Positioning
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• Personas
• Competitors
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• Goals
• Initiatives
This looks fairly comprehensive, but there are still a few unanswered questions - the most direct being: How do we know where we are providing customer value?
Adding focus to customer value actually helps us deliver on business objectives.
In doing that, it means we've got to really understand where customer value and assumptions intersect with our business goals.
It's these value assumptions that regularly go undiscussed, are not defined, or are missing entirely from the product strategy. We need to validate those assumptions and gather as much evidence as possible to proceed with a particular direction.
Product Strategy vs. VCP focus
The product strategy and VCP are complementary to each other.
The Product VCP framework
The Product VCP adds to your product strategy by adding focus to three areas that, as discussed, tend to go undefined, or even worse, assumed.
Target customer
Product strategy documents will usually include something around a target customer, but usually in the form of personas. They tend to focus on their industry, sector, role and some high-level information about their frustrations and outcomes. This is a good base, but there’s a lot more to learn and understand about your intended audience.
I don’t want to go down a rabbit hole about whether personas are good or bad - everyone has a love-hate relationship with them. However, it is important to consider that personas should not remain static and need to be continuously updated and evolved as your product and your market grow and mature.
So where does the VCP complement your target customer profile?
By adding focus to areas like:
What are the use cases for the different solutions you offer?
Where is the intersection of personas vs. use cases, and how might you then help support the market further (and move into new markets)?
A persona profile focuses on one single intended audience, but it’s important to understand the overlap between them, and how your product may support them further.
Customer value
Customer value is probably one of the most important things to outline in the VCP. It helps clarify the perceived value by the customer, and how you might be able to provide that.
Mapping this out is a great team exercise to help everyone think about the customer and put their needs front and centre.
As an example:
For every business objective that you have, map out some perceived customer values. For instance, you might have “Increase acquisition” as an objective, for which confidence in your product and company is a perceived value by the customer.
Then the question becomes: Why? Why is it that the customer has to have confidence in the product in order for that to help us increase acquisition?
It might seem pretty obvious - but again, it’s these “obvious” yet assumed statements that when undefined, make way for misunderstanding.
Behaviour
Behaviours and influencing factors are part of the psychological aspect of building products. What is your product helping the customer do, how do you build those habits over time, and what experiences help influence those behaviours further?
A good question to start out with is whether or not you are actually intending to change behaviours. When building solutions, you do have the ability to change the behaviour of the user, or create some sort of action users will take that will affect their habits (goes without saying, in a positive manner!)
It is these changes in behaviours, alongside product experiences, that provide customer value over time.
How to measure customer value?
Product management is a journey of lessons and experiences, not just for our users, but for ourselves. Learning from our failures and successes helps us drive product development with the right amount of data to be able to support our decisions.
How do we measure customer value with the Product VCP?
It is important that we encourage understanding of what that behaviour is, not from a feature perspective, but from an outcome perspective. What does that positive behaviour look like for the customer, and how do they benefit from it?
This isn’t something that is easy to answer. There is no quick “round-up” of good behaviours to list. These are unique to each product.
What matters here is that once you are able to identify the positive behaviour changes, you will immediately be able to create value for your users and business.
Data and measurements
Instead of having KPIs that focus on downstream value (vision to solution), the assumption builder allows you to articulate how the product is going to achieve that vision. In other words, we’re describing the strategy, but stepping away from ‘timelines and features’ to ‘how do we help the customer achieve an outcome,’ with a unique focus on customer behaviour.
Once we are able to articulate value from the point of view of the user, it becomes easier to prioritize what to build. You must be able to measure success for every problem solved, be it binary, quantitative, or qualitative.
Ultimately, the measurement is an indicator of responsiveness. We need to see the change quickly, rather than something that takes 6 months to get out, making these leading indicators of success. Their leading nature is more critical to successful product development than their tolerances of accuracy.
Empowering outcome-focused teams
Outcome-focused product development is not just about changing from features to problems or dropping timelines. It’s about understanding what the value is for the customer and identifying ways of making that happen.
Value is often not understood or articulated accurately in many companies. Product strategies fall apart because there’s too much emphasis on what to do, not on how the product makes a difference. In the absence of confidence, executives end up making ill-informed decisions.
This leads to another whole set of problems… executives should not be making decisions for everyone else (that is when they become mandates!) Instead, the decisions need to come from the product team.
Product managers need to be able to make quick decisions, but these must be educated and based on evidence. As long as there is a foundation to be able to give the business the confidence that those decisions are based on data, research, and measured properly - only then can the team be outcome-focused.
The Value Assumption Builder
The Value Assumption Builder is part of the framework that feeds into the Product VCP and the Customer Value Explorer.
Before getting started with the VAB, you should define as an organization:
Business objectives.
Customer values to explore.
Assumptions about how customers may recognize those value points.
Partnered up with the behaviour tenant of the VCP, we've understood the actions that influence those behaviours and further impact those values. Now we need to look at how our product could make those actions better.
This is where the Value Assumption Builder comes into play.
The VAB looks at three areas:
Customer behaviour: What the customer wants to do.
Modifier: How the product might help do that better (these can be binary statements, or measurable metrics)
Value: What the value is for the customer (from the Customer Value Explorer)
How it all fits together
Let’s use an example scenario to tie in what we’ve learned above.
Let’s pretend we are building a workforce planning app and we want users to be able to schedule faster.
Intended audience: Anyone having to schedule a warehouse workforce.
Customer behaviour: Build weekly schedules. The modifier to this behaviour might be to complete the task faster and more fairly for the workforce, with less accidental bias.
Customer value: The value for the customer might be increased staff retention for both workforce administrators but also the warehouse staff.
Another example could be for an e-marketing software company.
Intended audience: E-commerce marketers.
Customer behaviour: Target email campaigns. The modifier to this behaviour might be to broaden the reach without reducing the relevancy of the campaign.
Customer value: The value for the customer might be increased campaign effectiveness, maybe click-through rate, leading to increased revenue.
Now that we have identified a behaviour we want to influence and an assumption around what the value might be, the next step is to do some research around the assumption, the perceived value, and how you might potentially solve that problem.
A product strategy might help you understand problems to solve and potential opportunities, but without factoring in influencing behaviours, experiences, and customer value, we’re potentially missing out on executing the strategy to build truly amazing products.
Evaluating the product market
Finding the right positioning can be challenging. You need to provide value for your customers, but also make sure you’re differentiating yourself enough with a unique value proposition against your competitors.
On odd occasions, I’ve seen companies have a great product, with a great solution, yet not target the correct market. This can give the perception that you don’t have the right product when in reality you might have a great product - you’re just selling to the wrong market.
This is where it becomes important to understand the difference between problem-solution fit and product-market fit. Having a great solution is the first step, but ensuring you’re focusing on the right market is the growth differentiator.
Don’t be afraid to explore and break into new industries and sectors. Run research, don’t be afraid to get out there and start having conversations. It may be that you’re just sitting parallel to where your unique growth market is.
Increasing growth
Once you have moved past product-solution fit and into product-market fit, don’t be afraid to move further out and explore other markets. Having product-market fit in one industry or sector doesn’t mean you can’t also find it in another. As we’ve discussed before, there is such a thing as continuous product-market fit, and this applies to both your existing market(s) but also potential ones you might have in the future.
Your product should focus on solving problems and addressing use cases, not necessarily just on a set of personas.
I won’t go into the rabbit hole of the persona should-we, shouldn’t-we (that’s a discussion for another day!) But whether we like it or not, personas are useful. They help us understand how to speak to different audiences about the use cases that solve a variety of problems for them.
Make sure that you have an understanding of the problem you solve (the what and why), who you solve it for (your personas), and where your unique value proposition is (using the VCP.) This will help you break into new markets and continue to solidify your market share.
Why does this matter for product?
If you’re wondering at this point: why does this matter? Is this not product marketing’s problem? Is this not up to my marketing team?
Let’s clear one thing up - product marketing is product. Your product marketing team is there to be your strategic partner and the communication side of everything you do. Lean on them to help define your VCP and socialize it across the organisation.
Product is also the best-positioned function to recognize the problem in different markets.
Whereas your marketing team will look at how to message and communicate with different verticals and find common language in different industries - it is up to product to recognize where the problem exists.
Once the problem is recognised, the next step is to understand the context in which your product might be helpful to a specific audience, understand the values customers are looking for, and research the types of behaviours your product might be able to improve.
As a product leader, you’ll be a lot more equipped to lead your team into new territory. However, instead of approaching it blindly, you’ll be armed with all the information you need to expand into new markets and close that product momentum gap that much faster.
Get ready to hit hyper-growth.