You Don’t Need to be Needed

By Steven Pearson

With Valentine’s Day just behind us, there’s no doubt that it’s nice to be needed.  But let’s keep romance out of business.  Sure, it’s nice when customers need your product or service.  It gives you pricing power and it makes your customers sticky.  It saves you sales and marketing costs since customers come to you.  But don’t get carried away; you don’t need to be needed.  Many businesses primarily sell just-nice-to-have things, and they make piles of money doing it.

Product/market fit is often discussed in terms of whether users need your product.  However, the test that Sean Ellis proposes is that product/market fit has been achieved when at least 40% of users would be “very disappointed” without your product.  This does not necessarily have anything to do with needs.

Despite the way we often talk about business, the world is not neatly divided into ‘nice-to-have’ and ‘need-to-have.’  We need basic foodstuffs in a different way than our business needs an ERP system or your roommate ‘needs’ an iPad.  Nice-to-have vs. need-to-have is more of a nuanced spectrum than a binary distinction.  In evaluating business opportunity, we should examine why users might need your product along two dimensions: usefulness and desirability.  A few examples are below:

Obviously, being both useful and desirable is best.  Individual consumers may trade off differently across these two dimensions, and we will all quibble about where the various examples I have suggested above actually should fall on this chart.  But the point is that lots of successful businesses exist outside of true needs.  Even for truly essential items, your business’s product may not be specifically needed; competitors and/or near substitutes abound.

The important thing is not where you think your product offering falls on the chart above.  What matters is where your customers think your offering is on that chart, and whether or not you know where your customers see you.  Then let that knowledge inform your business strategy.  I give a few ideas in the chart below about possible strategy implications (sorry for a second chart – forgive me for my consulting background).

Finally, let’s not forget that people change and the world changes.  Not that long ago, I would guess that far fewer than 40% of users would have been ‘very disappointed’ if their car didn’t have air conditioning or power windows; those were just luxury, just nice-to-have features.  Even mobile phones were just nice to have in the early 1990s.  As I believe Clayton Christensen would argue, successful incumbents often ignore new businesses precisely because their offerings are just nice-to-haves… but those nice-to-have offerings can quickly become true need-to-haves.  Businesses that can anticipate or even help determine what customers will someday view as need-to-have offerings will be successful.  Startups with just nice-to-have offerings are not doomed to failure, and waiting too long to achieve ever better product/market fit is perhaps as dangerous as scaling too soon.


Popular posts from this blog

Quiz Time 129

TCS IT Wiz 2013 Bhubaneswar Prelims

The 5 hour start-up: BrownBagBrain