Future Foundry LIVE 9: The Highlights

You know, this concept of product-market fit especially has become very widely accepted. It's implemented a lot in the startup world. You know, it's represented a paradigm shift essentially in product development, not just product development, but, but probably entrepreneurship too, right? Because like it emphasizes the importance of understanding the market and the needs of the customers first before investing significant resources in product development. And we do that today as innovators in our pilots, right? You know, we make sure that there's sizable market demand for, you know, the new product, the new service that we're developing, because if it doesn't, then investing in rolling those out is gonna be really, really costly, right? But product market fit as corporate innovators isn't the only fit that we need to be aware of, because before we even get into pilots, we have to have ideas, right? And we also have to make sure that, you know, before our ideas even turn into pilots, that they have what we call problem solution fit. So, um, you know, is this thing that we're working on actually solving a genuine and significant customer problem in a better or maybe a more efficient way than existing solutions do that? Or is Is it a solution looking for a problem? And before we even get to ideas, you know, we should also be making sure that the opportunity areas that we're working in, you know, align with our company's strategic objectives, with the resources that we have available, the skills, the culture of the business. Otherwise, there's very little point in developing ideas, much less pilots within this space. So I'm gonna break these down for you. So first of all, let's look at opportunity company fit. And I want to show you an example first of all of what great company opportunity fit looks like. So launch of iPhone in 2007. I know this is a trope, but, but bear with me because I think it's super relevant to company opportunity fit. You know, Apple was already widely known for its design-focused approach. It had incredible success both in terms of personal computing and in digital music, as we called it then. I guess we just, just call it music now. Um, they had iTunes, you know, both the Mac and the iPod. And I think now when you look at iPhone in hindsight, it's probably the most natural extension of Apple's existing product line because it leverages all of their expertise in design, leverages a huge existing customer base, and it also leverages the relationships that they had with content providers. And it was a device that Apple could pretty seamlessly integrate into what was already, even before the App Store, quite a thriving ecosystem. So through that lens, mobile mobile phones, for Apple, a fantastic opportunity, right? Now, we don't have to go and change the world here with our own versions of the iPhone. That's not what I'm asking you to do. But the point that I'm making is that when you're assessing the opportunity areas you're working within, you need to be able to establish whether it's a good fit for your company. So I want to give you some criteria so that you can assess the current projects that you've got in your portfolio and also make better decisions about kind of maybe new Opportunity areas that you want to spin up. So here, you know, I'd essentially be asking five questions, right? The first question I'd ask is: What is this an opportunity that aligns with our mission, our vision, our strategic objectives, and also the core values of the business, right? And by that I mean, you know, is it going to support or enhance our mission in some way? You know, would looking at this as an opportunity area contribute towards our company's vision? You know, would it support the key objectives of the wider organization? And does it align with our core behaviors as a business. I'd also be asking, you know, whether you have or whether you could procure all the required sort of financial resources, human resources, other assets that you might need to pursue ideas within this opportunity space. And by that I mean, you know, is there any budget to go and test ideas within this space? You know, have you got the design thinking, the Lean Startup, the Agile expertise that you need to be able to explore it properly? And can you leverage the assets of the core, you know, be they tangible, maybe intangible assets that you need in order to be successful in this space? I'd also ask whether your culture is supportive of the opportunity and whether there's an appetite for it. You know, if your core business wants you as an innovator to focus on disruptive innovation and this feels more like, you know, like an incremental or an adjacent opportunity area, then it's going to be worth rethinking whether you pursue it, right? And if there's a lack of appetite, whether that's because, you know, as an opportunity space it's considered too risky, maybe it doesn't align with the personal goals of your sponsor, you know, it might not be a good use of resources, right? The next question that I'd ask is whether you possess the technical skills, you know, the managerial capabilities, the industry knowledge that you need in order to seize the opportunity. And by this I mean, you know, do you have the necessary knowledge that you'd need to succeed in this space within the business today? You know, those could be technical skills like software engineering, could be managerial capabilities, financial management, industry knowledge of the regulatory environment, for example. And finally, I'd be asking, you know, does your existing organizational structure support the execution of something within this space, right? So if you had to spin up a new entity to pursue it, For example, would that be a straightforward thing to do structurally? If you're gonna need to work with teams in other markets, maybe other team members in different business units, different functions, do you work in a structure that facilitates that kind of collaboration? And if the answer to any of these questions is no, then you shouldn't even think about finding ideas within these opportunity spaces, right? Because they'll get killed later on down the line and you'll be wasting just a ton of valuable resource in the meantime. This is, um, a bit of a throwback, not as much as iPhone, but if you remember Google+, it's a pretty classic example, I think, of bad company opportunity fit. This is essentially Google's adventure into social networking. It was designed to compete directly with Facebook, um, has some pretty unique features that I remember. There were, um, like circles, so you could group the people that you're connected with into different spaces like work, Uh, hobbies, home. Um, it used Google Hangouts for video chat, but, but it didn't really resonate with users at significant scale, right? And whilst in that sense it didn't find like product-market fit or problem-solution fit, those weren't really the issue here, right? The issue here is that there is just no company opportunity fit between Google and social networking, right? It should never have been a product. Google is a company that is organized around search, around information retrieval. You know, their core strengths lie in things like algorithms, search optimization, advertising, you know, they don't really have any alignment with social as an opportunity area, which is driven by, you know, very different kinds of user behavior, very different kind of network effects. And in 2019, after a quite painful, I assume very expensive years, this got mothballed entirely. And if you don't make sure that the opportunities on your roadmap are a good fit for your company, you know, it's going to lead to 3 really wasteful things, right? You'll be putting garbage in the top of your innovation funnel, which, you know, almost always leads to garbage out, or GIGO as IT folk call it. And then when you get to the problem-solution fit phase, you know, you're going to be directing your team to work on all kinds of the wrong things. And worst of all, you'll sort of be delegitimizing corporate innovation in the eyes of your senior sponsors, your senior leadership team, right? Because it seems that you don't understand, you know, the ambitions of the organization at large. So you've got to make sure that the opportunity areas you're working in are aligned with your corporate strategy, aligned with your resources, your culture, your skill set, and ultimately that organizational structure that you're operating in. So let's assume that you've looked at your portfolio, you're happy, you know, at a strategic level with the opportunity areas that you're working in, and now you've got to develop ideas within that space. And here what you've got to demonstrate is problem-solution fit, right? And I want to show you before we get into this probably my favorite example of problem-solution fit ever. And if you're joining us from the US or you have been to the US and you've watched TV for more than 2 minutes, you'll be very familiar with TurboTax. So before TurboTax, like, completing filing taxes was insanely complicated in the US, even more so I think than in the UK, hugely time-consuming, complicated process for a lot of people, right? They had to manually go through tax forms. They've got to read very dense tax code to understand what deductions they can qualify for. Then they've got to like try and calculate those themselves. Very, very daunting, very, very error-prone. You know, most people paid too much tax. Some people didn't pay enough tax and got fined. Some people didn't file their returns and also got fined. So Intuit, who at the the time were primarily known for B2B financial software. So they invented Quicken, for example. They recognized that there was a huge customer problem here and introduced what is absolutely a superior solution in TurboTax that completely automates tax filing for customers. So it asks them a series of pretty straightforward questions about income, expenses, other sort of tax-related matters, and then it uses that information to fill out the tax forms and it calculates the taxes. And then from there, it helps them to find deductions. And rather than paying for the software, um, it's completely free, right? Customers just pay a proportion of that refund. And so not only do I think it's great problem-solution fit, I think it's very, very clever business model. Um, it saves people time, you know, it's reduced the risk of errors, save them a ton of money. And millions of people use TurboTax every year. And this to me is what finding problem-solution fit really looks like. And to establish whether the ideas that you're working on right now or that you have in your portfolio have it. Again, I want to give you some criteria that you can kind of measure against, right? So the first question that I'd be asking is, has the problem been clearly defined and understood, right? And by that I mean, have we spoken to customers and established whether the problem that you're working on actually exists? And if it does exist— and this is a trap that I see a lot of teams fall into— if it exists, do customers care enough about that problem To go and solve it, right? Does it cause deep enough pain? Without this foundation, you're going to run the risk, I think, of developing solutions to problems that yeah, people might have, but they don't really care enough about it to pay for a solution. The next question that I'd ask is: You know, does the solution effectively address the problem? You know, by meeting the needs and wants of customers, and by that I mean, you know, when you've prototyped it, do customers? Say to us that yes, you know, it meets their functional requirements but, but also their emotional requirements? And does it solve the problem in a better or more effective way than existing solutions? If it doesn't do it in a better way than existing solutions, then when you get later on down the line into piloting and trying to find product-market fit, you're not going to get the adoption or the customer satisfaction that you're looking for at that point. The next question that I'd ask is, you know, do customers find the solution valuable, easy to use. You know, by this I mean if customers found that it addresses their problem, that's kind of only part of the equation, right? Like, would they pay to use it? If so, like, how much? Uh, or, you know, how much does the problem cost them today? And if they would, then great, but it's also got to be easy to use, right? If it's creating more problems than it's solving, then, you know, that's clearly not a good place for us to, to be in. The next question that I'd ask is, you know, have we iteratively refined this solution based on customer feedback and testing? You know, if the answer especially to the last question was no, then have we made successive versions or iterations of it? You know, are we improving it based on feedback and insight? And also, have we validated this at scale, right? Not just with a handful of customers in a focus group. And the final question that I'd ask here is a really important one, right? Is this solution technically feasible and commercially viable? Can it be achieved technically, either with your existing technologies, existing skills, resources, or by borrowing them and bringing them in? If not, then that's a pretty insurmountable roadblock. The next question, the second half of that, is it commercially viable? Can you sell the solution at a price that customers are willing to pay, and is the market big enough? Desirability really is only a third of the equation, in problem-solution fit, you've got to establish feasibility and viability too. And again, you know, you have to be able to tick yes to each of these questions, right? Because these are questions that anyone who ultimately invests in this idea, you know, whether that be for a pilot or for a rollout, you know, those are the questions they're going to ask you. And if you're working on an idea and not generating evidence for these questions, then you're wasting time essentially. These are the only thing that should matter at this stage. In 1993, in a baffling waste of huge amounts of time, money, resources, Pepsi launched this product called Crystal Pepsi, basically a clear sort of caffeine-free version of Pepsi that was marketed as like a healthier, more pure alternative to regular colas. And the company spent a huge amount of of money on this. But the problem that Pepsi assumed people had— so wanting a healthier cola alternative— in reality just didn't exist, right? It just wasn't a concern for most soda drinkers. And they also didn't really associate clear beverages with cola, didn't necessarily see the lack of color as an improvement or a reason to, to switch. And ultimately, like, they didn't find this as a solution to their problem that doesn't exist to be compelling enough reason to buy it, right? And in 1994, the whole Crystal Pepsi misadventure venture was, was scrapped. So if you don't make sure that the ideas that you're working on solve an actual problem with a demonstrably better solution, that's going to lead to 3 things, right? You'll be spending time working on solutions that you have to then go and find a problem for, which is time-consuming and basically just completely the wrong way around. You'll be working on and prototyping ideas, you know, be that digitally or physically, that nobody cares about. And you'll be jumping from the relatively inexpensive endeavor of working on ideas into the relatively very expensive endeavor of product development, right? Way, way too quickly. So make sure first that you deeply understand the problem, that you have a solution fit, that customers agree that it's a great solution, and that the solution is something that you can make and that would generate a return. Okay, finally, let's look at product market fit. You know, concepts that we've all probably heard about. I think a lot of people misunderstand it. This is what great product market fit looks like. When Toyota introduced Prius in '97, you know, it was a time when concerns around rising fuel prices, the environment were becoming very widespread. You know, there was a massive market of consumers who were very interested in more fuel-efficient vehicles that could reduce cost at the pump, lower their environmental impact, and the Prius offered significantly better fuel efficiency than anything else on the market at a massively accessible price point. And it's these things combined that helped it to become, I'm pretty sure, the best-selling hybrid in the world. In other words, Toyota was in a very good market with a product that absolutely satisfied it. You know, this is the very definition— well, Marc Andreessen's definition at least— of product-market fit. But to know if you're really finding product-market fit, I'd be looking to establish Um, these things, right? So are we seeing consistently high and improving customer retention rates? I.e., you know, are a significant proportion of users continuing to use our product over time? You know, that high retention rate is an incredibly important metric when you're looking to establish product-market fit because it indicates that people find value in the product or service, right? And they choose to stick with it over switching to alternatives. Now Ideally, that's a metric that would be improving too, because it demonstrates that we're reducing what we call churn, or customers abandoning the product. I'd also ask, you know, are we experiencing substantial organic growth through things like user recommendations and referrals? So, you know, is a primary channel for customer acquisition— is it things like social, word of mouth, maybe an official referral program? If it is, then that's a really strong indicator that customers find value. In what we're building. The next question that I'd ask is, you know, does the majority of our feedback indicate satisfaction with our ability to meet the needs of customers and to solve their problems? So, you know, from a sentiment perspective, is the common theme— you know, it doesn't have to be absolutely everybody, can't please all of the people— but is the common theme that people find the product to be worthy of their time or the money that they're spending on it, right? This is a really good leading indicator because it's going to speak directly to that previous point around organic growth. Would the majority of our users be very disappointed if they could no longer use our product? Because that would indicate very high level of perceived value. There's one survey question that we love here at Future Foundry which helps us to understand whether we're on the right track in terms of product-market fit, and we just simply ask that question, right? How disappointed would you be if you could no longer use this product? And if more than 40% of people say they'd be very disappointed, that is incredibly strong evidence of product-market fit. Below that, and we often find that, you know, products tend to struggle to get the traction that they're looking for. And the final sort of question that I'd be asking here is, are we observing an acceleration in usage as shown by increasing user purchases, signups, activity? You know, you should really be seeing quite a noticeable and increasing trend line in customer activity over time rather than, you know, consistent or maybe sporadic usage, especially if there are more purchases, right? You know, that's a sign that the product is providing value, that people are willing to pay to access that value. And this is what product-market fit is all about, right? It's about these positive signals once you've got a pilot out in the world. And you can't really say that you found product-market fit without proving these things, right? And if you can't find that product-market fit, that's fine, right? But you should kill the pilot and move on to, to what's next. Um, I think Microsoft's Zune media player from back in 2006 is a really interesting example because it's something that actually has quite a lot of company opportunity fit, it has problem-solution fit, but it does not have product-market fit. You know, the market for standalone portable music players in 2006 was already dominated by the iPod, so they're not in a great market. And by the time Zune was launched, the market itself was beginning to decline even further because of the rise of smartphones. They can obviously play music, do much more. So that's leading to a decrease in the demand for this sort of standalone media player. And it's also a pretty bulky product, you know, way less intuitive in interface terms to, to the iPod. So this is kind of the opposite of being in a good market with a product that, that satisfies And if you don't make sure that the products that you're testing in the real world satisfy the needs of a big enough market, that's going to lead to 3 things, right? You're going to be hiring teams to sort of run businesses that shouldn't really be businesses. You know, you'll be turning things that to date have been relatively cheap to produce into, you know, production-ready products. That is a very expensive endeavor. And you're going to be building a business ultimately which requires just a significant amount of investment. You've got to test and de-risk it first by making sure that you can acquire users, you can generate revenue at a significant scale before you start to fully, fully invest.