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By Mike Rothenberg Marc Andreessen famously writes that "the only thing that matters is product-market fit" (1) .  I'd tweak it slightly to say "the only thing that matters is finding product-market fit before you run out of cash." If we learned anything from RC Fin, it's that for-profit businesses are as valuable as the NPV of their expected cash-flows.  Start-ups are a tricky beast not because we don't want to value them based on their cash-flows, but rather because we have no idea how to project their cash-flows.  Hence the "expected" part of "expected cash-flows" becomes the focus.  Until there is product-market fit, the start-up is just a start-up with no basis for expecting cash flows, and not a real business with a foundation on which to pin the expectation of future cash flows. The "product-market fit" concept is essential for entrepreneurs and managers to help them focus their team on creating useful products and se...

By Matheus Riolfi I am not sure that entrepreneurs need to build MVPs if the problem they are trying to solve is well identified. This is something I am struggling in my startup (Tripeese, www.tripeese.com ). We are addressing a clear pain point: organizing group travel is a painful experience; most people agree with that. So, I have two options: 1) follow the Lean Startup methodology and build a MVP that will not solve the problem but will allow me to test some hypothesis; 2) go ahead and build a solution that will be robust enough and may solve it, now. The experience of planning and booking trips with friends is broken, but fixing it is harder than it sounds. Other companies have tried and failed, mainly because their products were not compelling enough, which made user acquisition too expensive. I believe the winner in this space will be the company with the best customer experience, the one that creates the “WOW” effect. That’s my MVP dilemma. If I followed the MVP approach, I wou...

By Josh Petersel I’m really worried about this word. Dictionary.com (above) seems to grasp what many tech founders conflate: the word “customer” can describe two very starkly different relationships. There’s a customer as someone you sell to, and a customer as someone you “deal with.” The site even highlights the critical differentiator for its vexed readers: Informal. Perhaps, to be on the safe side, the word “customer” should be rejected out of hand in discussions of modern tech businesses—particularly those establishing multi-sided platforms, and most especially those in which one side of the platform is serviced completely for free. For example: As an individual, I am with quite certainty NOT a “customer” of Facebook. I don’t give them money for anything. I don’t buy the gift cards, or the Farmville tokens, or click the ads, or anything. (I suppose, you might argue, that in this instance Dictionary.com’s “tough customer” moniker would actually be quite appropriate). As far as Face...

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...

By Alex Pak Having spent the last twelve years of my life studying and applying lean methodologies in production and corporate environments, I was surprised upon arriving at HBS that the language of Lean had become a fundamental part of entrepreneurship in this community. In a manufacturing environment, labels didn’t matter (call it Lean, Six Sigma, TPS, Continuous Improvement, HMM, etc.) and mindset was everything. At the end of the day, the goal was the relentless pursuit of eliminating waste best expressed as a “zero loss” mentality. This impossible ideal focuses an organization on profitable customer value creation above all else. However, what I observed at times was the danger of taking process frameworks, arming people with tools and verbage, and unleashing them upon organizations. The end result is a rigid and sterile outcome that only superficially mimics the intent of the process improvement rather than genuinely applying it. For example, a workplace organization process that...

By Gabriel Parisi-Amon Surprisingly, there were start-ups before the lean methodology became the most talked about phrase in entrepreneurial education and there will continue to be start-ups after ‘lean’ has faded away. I am not saying lean isn't a useful way to apply the scientific method to a venture idea. I am saying that it won’t produce cost effective renewable energy, the next Google, or even the rebirth of supersonic commercial flight. If we only teach lean methodology we will make 1,001 better cars, but never get one to fly. Big ideas are leaps not calculated steps The origins of “lean” begin in the corporate world with Toyota Quality Management in the 80s. From there we have been given 6-sigma and many other tools to make corporations, and research, more efficient. These processes institutionalize lean methods, and have been great for perfecting things like the production of the car. However, we only had a car to begin with because inventors thought of something beyond hor...

By Krista Nylen The definition of success at my first job was to create an error-free Excel model accompanied by a set of PowerPoint slides in which every textbox was perfectly aligned. It was both excruciating and satisfyingly perfect. Upon entering the world of entrepreneurship at HBS, I’ve been surrounded by more amorphous tasks that cause the obsessive angel on my shoulder to start screaming. In order to meet the lofty goal of launching a successful product, I’ve been taught to build something that isn’t right, to fail over and over, and to conduct customer research with full knowledge that the data will not yield the answer.   In my own experience as an entrepreneur, daunting undertakings like “obtaining product-market fit” and “developing an MVP” have at times sent my mind reeling. How do you measure success while continually encouraging yourself to fail? And how is it that I’ve seen case after case in which smart, driven entrepreneurs have failed (or have yet to succeed) eve...