Finding Product / Market Fit: Introducing the PMF Matrix - Presentation by Rishi Dean to MIT Sloan Breakfast Club

1. Rishi Dean rishi@rishidean.com www.rishidean.com [ Using the PMF Matrix to uncover your killer app ] MIT Sloan Breakfast Club March 12, 2010

2. Founding member of:  Other experiences:  Formal & informal start‐up advisor (EIR @MIT)  Hundreds of product cycles…with scars to prove it  Rishi Dean – www.rishidean.com  2 

3. 6 out of  1,000 funded  60% fail  30% ﬂounder  , <10% + returns <1% get big  ,  Source:  .01% ”major success”  http://bit.ly/ startupfailurerates  Rishi Dean – www.rishidean.com  3 

4. Rishi Dean – www.rishidean.com  4 

5. 1)  Why did you fail?   2)  Why did you run out of money?   3)  Why do you have no customers?   4)  Why did they have unﬁlled needs?  5)  Why did you not achieve product / market ﬁt?  Unchecked false assumptions kill companies  Rishi Dean – www.rishidean.com  5 

6. *    Start with a ﬁrm vision    Design & develop speciﬁcations  FAIL   Follow a “waterfall” development model    Converge to a massive “launch”  Source:     Let the sales roll in  Steve Blank, The 4 Steps  to Epiphany  Rishi Dean – www.rishidean.com  6 

8.   Globalization increases competition     Lower technical barriers to entry     Increased capital eﬃciency    Cost of acquisition is near zero   Markets evolve faster  ‘Revolutionary’ innovation is harder  Rishi Dean – www.rishidean.com  8 

13.   Engineers want to build for mass adoption by providing a high  performance and responsive system that will “satisfy” customers    Fear that releasing “junk” too early will tick oﬀ customers and kill the  company    But you don’t know what customers want, nor their access  patterns, until you release a “suboptimal” product    If you release a “fully operational” system too late, it may not  conform to what user’s want and you’ve optimized for the wrong  thing  don’t build the elegant thing no one will use    Get feedback. Learn fast. Move fast…after all, you’re a startup,  right?  Source: http://bit.ly/engineersparadox  Rishi Dean – www.rishidean.com  13 

14. BEFORE  AFTER  Product / Market Fit  Product / Market Fit    Customer discovery &    Build the sales,  validation  marketing, and delivery    Measure, iterate, pivot  machine    Burn as little as possible    Build the company   to survive    Get big, fast  But, how do you ﬁnd Product / Market ﬁt?  See:   http://bit.ly/8YwPIn   Rishi Dean – www.rishidean.com  14 

16. Market / Pain Understanding    Figure out where you really  are  Product / Remedy Understanding  “Good hypothesis, no    Diﬀerent resources and  Weak  “Many right answers”  conclusions”  inputs will determine your  starting point    Where you are should  dictate milestones,  revenue projections,  funding requirements, etc.  Strong  “Build it and they will  “Technology in  come”  search of a problem”    Assume you know less  than you do, until revenue  proves otherwise  Strong  Weak  Rishi Dean – www.rishidean.com  16 

17. Market / Pain Understanding    You will move between  Product / Remedy Understanding  blocks as business / market  “Good hypothesis, no  evolve, or  diversity across  Weak  “Many right answers”  conclusions”  product lines    You can remove  uncertainty over time, but  uncover others as you dig  deeper  Strong  “Build it and they will  “Technology in  come”  search of a problem”  Strong  Weak  Rishi Dean – www.rishidean.com  17 

18. Market / Pain Understanding    Most start‐ups being with a  Product / Remedy Understanding  great deal of uncertainty –  “Good hypothesis, no  goal is the same, but  Weak  “Many right answers”  conclusions”  starting point diﬀers  depending on available  resources    Not mutually exclusive  models – overlapping  principles:  Strong  “Build it and they will  “Technology in  come”  search of a problem”    Prototyping    Customer development    MVP  Strong  Weak  Rishi Dean – www.rishidean.com  18 

19. 1) Rapid Prototyping: gain feedback fast  2) Cut to the core: it’s hard to take away   Subjective  Value  (Utility)  LOSSES  GAINS  See:  http://bit.ly/prototyping  See:  http://bit.ly/prospecttheory  3) Measure Everything: understand what  works, and more importantly ‐ what doesn’t  Source (Dave McClure):   http://www.500hats.com  Rishi Dean – www.rishidean.com  19 

20. Market / Pain Understanding    Locate key markets with  compelling dynamics    “Where else would it  Product / Remedy Understanding  work?”  “Good hypothesis, no  Weak  “Many right answers”  conclusions”    Pick a few applications /  markets and identify a  hypothesis to solve for    Look for markets primed  for speed of innovation  Why Not?  diﬀusion  Strong  “Build it and they will  Rigorous market exploration  come”    Understand the ﬂow of $  “Technology w/o a problem”  and inject into an existing  pattern  Strong  Weak  Rishi Dean – www.rishidean.com  20 

21. How much better is your innovation than the  1)  Relative Advantage  incumbent solution?  How easily can your innovation fit with the  2)  Compatibility  existing infrastructure and ecosystem?  Is your innovation easy to adopt and use,  3)  Complexity  relative to the current method?  How easily can customers see the  4)  Observability  differentiation and benefits of your product?  How easy can customers pilot or test your  5)  Trialability  product?  Does your product impact current social  6)  Social Acceptability  norms?  Are there legal or bureaucratic issues related to  7)  Regulatory  your innovation?  Source: http://bit.ly/innovationdiffusion  Rishi Dean – www.rishidean.com  21 

22. Market / Pain Understanding    Lead users  are easiest  path: transform an ad‐hoc  solution to something  Product / Remedy Understanding  Design Thinking  mainstream  “Good hypothesis, no  Weak  Design Thinking + Agile  conclusions”    “Imaginary assistant”  “Many right answers”  notion  Strong  “Build it and they will  “Technology in  come”  search of a problem”  Strong  Weak  See:  http://bit.ly/webdesignthinking   Rishi Dean – www.rishidean.com  22 

23. Source: IDEO  Also see: http://bit.ly/webdesignthinking   Rishi Dean – www.rishidean.com  23 

24. Market / Pain Understanding    Fundamental feedback  loop powers all startups:  Product / Remedy Understanding  Lean Startup  IDEAS  Weak  Customer + Agile Dev’t  “Many right answers”  LEARN  BUILD  “Fail small, fail fast”  DATA  CODE  MEASURE  Strong  “Build it and they will  “Technology in  come”  search of a problem”    Minimizes total time  through this loop until you  ﬁgure “it” out  Strong  Weak  See:  http://startuplessonslearned.com  Rishi Dean – www.rishidean.com  24 

25. Source: Steve Blank, 4 Steps to Epiphany  Rishi Dean – www.rishidean.com  25 

26. Market / Pain Understanding    Works in incremental or  evolutionary innovation  Product / Remedy Understanding    Slicker, quicker, better,  “Good hypothesis, no  cheaper  Weak  “Many right answers”  conclusions”    Technology‐driven  problems (e.g. cure cancer,  build a teleporter)    There are special cases  Product Development  where a ﬁrm vision (be the  Strong  Waterfall – but agile too  “Technology in  search of a problem”  customer) + iterative  “Build it and they will come”  releases can work well   (e.g. 37Signals)  Strong  Weak  Rishi Dean – www.rishidean.com  26 

28.   Embrace ignorance    Characterize your situation    Pick the right starting point and employ the  requisite approaches to ﬁnd PMF    Set the business goals accordingly    Common themes: prototype, listen, measure,  learn, iterate    Traverse the matrix    THEN scale up the business  Rishi Dean – www.rishidean.com  28 

29. Blogs    Lean Startup: http://startuplessonslearned.com     Customer Dev’t: http://steveblank.com   Lots more like Dave McClure, Sean Ellis, Brant Cooper, Andrew Chen, Diego Rodriguez  Books  Customer Dev’t  Design  Design for  Tech in search  Prod Dev’t  Bible  Thinking  techies  of a problem  done right  Rishi Dean – www.rishidean.com  29 

30.   E‐mail:  rishi@rishidean.com    Blog:  rishidean.com    Twitter: @rishidean  Rishi Dean – www.rishidean.com  30 