Business Model - Market Fit

by Eric Anderson

Perhaps it's over simplified, but I feel like business used to be pretty simple. You came up with a physical product, had someone design and manufacture it. You then promoted in paper-based periodicals and distributed into retail channels. The formula was so pervasive that it seems the terminology of our financial statements, from cost of goods sold to marketing expense, were built around it.

Not any more, we live in a much more exciting time, right? The old concepts of business have turned on their head. We don't hold inventory, products are services, and data is king. And yet, I wonder if some of us still hold onto this product-centric view, perhaps perpetuated by the phrase product-market fit. Do we neglect to test or better yet, innovate on, other parts of our business model?

I was very impressed with the BabbaCo product and team, and they could serve as a good example. They discovered and satisfied an under-served population. Early on, they did all the right things on the product side from interviews, observation and iteration. But once they got it right, the first assumed channel of growth was Google and SEO. Just like in times of old, innovation occurred on the product and then marketing happens through traditional channels.

To BabbaCo's credit, they've since moved on to a more diverse set of channels, but I wonder if there isn't a benefit to adopting a broader view of one's offering, including factors like go-to-market, earlier and bake that into the innovation cycle. I would advocate seeking business model-market fit before scaling and challenge the usual go-to-market strategies.

Similarly, the Aardvark founders were the prototypical iterative, customer-centric developers. But listening to the customer didn't create a viral engine. It wasn't until they had developed interaction by email, instant messenger, chat, etc. that they realized that referrals weren't happening at a sustainable rate. Not every product is inherently viral, like Dropbox, but perhaps as we are testing products we would do well to have an early vision of customer acquisition. Maybe it doesn't have to be a cost-center. If a view of customer acquisition was baked into our early innovation cycle, it could become core feature of the product rather than an afterthought.

This came to light for me at a recent start-up advisory session with the folks at IDEO. Each attending team described their value prop on paper. They also challenged us to envision how customers learn about our product/service and then to draw it. Suddenly adwords and word-of-mouth seemed silly. Before my team and I were pitching a vehicle maintenance tracking service with a small device shipped directly to you. Now we want to have oil change centers install it. Our product vision has changed to include value creation for both the user and our new distributors. While we are a long way from market, we think considering broader aspects of our business model in the early stages of development the way we view, test and build a product- an offering one more likely to find business model-market fit.


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