book.chapter Fundamental principles

Throughout my professional journey, I've had the opportunity to both contribute to and closely examine a wide array of products. A deep dive into the underlying reasons behind product failures often reveals a recurring theme. The primary cause of failure is the inability of these products to fulfill customer needs more effectively than their competitors. This concept is at the heart of achieving a strong Product-Market fit. The essence of crafting an exceptional product lies in introducing something to the market that perfectly aligns with the existing demands of the marketplace. Exceptional products stand out by offering substantial value to customers, clearly surpassing all alternative solutions. To better understand this, consider the Product-Market dynamic as a structure composed of five distinct layers. The Market encompasses all current and potential customers who share a common need or a set of related needs. This segment is divided into two layers: firstly, the target customers, which refers to the overall number of customers in the market or the total revenue these customers generate. Secondly, the underserved needs of these target customers, highlighting the areas where current products or solutions fall short in meeting their requirements. Identifying a significant group of potential customers with a shared, unmet need they are willing to pay to resolve signifies a substantial market opportunity. The Product represents a specific solution designed to address these identified customer needs and is comprised of three layers. The user experience (UX) is the first layer, focusing on the customer's interaction with the product or service. A well-designed UX brings the product's functionality to life. The second layer consists of the product features, which are the functionalities provided by the product. Typically, a product includes several features, each designed to offer a specific benefit. The third layer is your value proposition, which outlines the customer needs your product aims to satisfy. This proposition encapsulates the value your product delivers to its customers. Product-Market fit is essentially how well your product (encompassing the top three layers) meets the needs of the market (the bottom two layers). The degree of fit is signaled by your target customers through their purchasing decisions, comparing your product against other available options. Achieving Product-Market fit means your product addresses underserved needs more effectively than your competitors. A prime illustration of this concept is Intuit's Quicken personal finance software. Despite the existence of 46 other personal finance products in the market, Intuit's cofounders Scott Cook and Tom Proulx identified that these products were too complicated for the average user. They hypothesized that a checkbook-based design would be more appealing. Through developing beta versions and gathering feedback from potential users, as well as observing new customers' interactions with the software in their homes and offices, Intuit was able to refine Quicken into a product that offered a superior user experience, propelling it from the 47th position in the market to the leading spot. The Lean Product Process emphasizes the development of products that resonate with the market by addressing existing problems, frustrations, or needs. It's crucial to distinguish between the "problem space" and the "solution space" within any market. Products exist within the solution space, whereas the problem space is devoid of products and instead is where customer needs, including jobs to be done, pain points, and desires, originate. A common mistake is to dive into the solution space too early, resulting in a product in search of a problem. The Lean Product approach advocates for the opposite: developing products that address pre-existing needs in the marketplace. As a product manager at Intuit, I was taught to craft detailed product requirements that remained within the problem space, avoiding premature entry into the solution space. We were trained to prioritize understanding "what" the product needed to achieve for customers before delving into "how" it would achieve these goals. Strong product teams often differentiate between the "what" and the "how." The "what" refers to the benefits the product should offer the customer—what the product will accomplish for the user or enable the user to achieve. The "how" pertains to the manner in which the product delivers these benefits, encompassing both the design and the specific technologies employed. "What" belongs to the problem space, while "how" resides in the solution space. Many companies adopt an "inside out" approach to product development, creating products based on what employees believe would be beneficial. A more effective and lower-risk approach is the "outside in" method, which begins by understanding the actual needs of customers before developing a solution they will appreciate. Steve Jobs, the co-founder of Apple, famously stated, "You've got to start with the customer experience and work backwards to the technology. You can't start with the technology and try to figure out where you're going to sell it. As we have tried to come up with a strategy and a vision for Apple, it started with: What incredible benefits can we give to the customer? Not starting with: Let's sit down with the engineers and figure out what awesome technology we have and then how we're going to market that. And I think that's the right path to take." This sentiment is echoed by Dave McClure, CEO of 500 Startups, who remarked, "Customers don't care about your solution. They care about their problems."