9 :: Problem-Solution vs. Product-Market Fit

🚪TL;DR:
Long gone are (or should be) the days when an innovation, new venture, or project would be launched just because someone thinks it’s a good idea. An idea is just that and it is quite easy to fall in love with a whole bunch that the market does not care about. If there is something that I have learned from the 100+ ideas I have (in)validated for the past 7 years, from new business models to internal initiatives, is that no decision based on assumptions rather than data is optimized for success. That is why data is so liberating: it tells us the way. Our potential customers tell us the way every time. And Problem-Solution Fit followed by Product-Market fit is just the how.

🧠 What is it?
All ideas are based on a few hypotheses - about the problem, the solution, the segment, the pricing, the channels. Problem-Solution and Product-Market Fit are two processes that use validation experiments (like Wizard of Oz, interviews, or landing pages) to collect early feedback about the assumptions underlying an innovation, new venture, or project. They are the first discovery stages of a go-to-market strategy to ensure evidence that it makes sense to invest in further advancing that strategy. Problem-Solution Fit (PSF) should come first and as a condition to test the Product-Market Fit (PMF) after. Whilst the first refers to the alignment between the pain identified in a given subset of people or organizations and the effectiveness of any proposed solution to address it, the second includes the market dynamics. For example, if the problem we are trying to solve is the loneliness and lack of entertainment for seniors living in rural areas, solving it with an online app to connect with other seniors probably won’t cut it, as the likely scenario is that they are not familiar with technology, do not have smartphones and might not even have a strong internet connection.

Note: The other day I heard an investor talking about Product or Market-Founder Fit which also plays a critical role in the process. This Forbes article explains it well enough.

📦 Why is it relevant?
Data-driven frugal innovators are the best innovators. In a world where most innovation executives find it challenging to justify time horizons and ROIs that are usually misaligned with their organization’s hurdle rates, ensuring the investment conditions that will maximize traction and success is key. As a CINO, when your team deeply understands, maps out, and properly tests the hypothesis underlying an innovative idea, validating it before investing unnecessary resources, you are doing just that. You are bullet-proofing, derisking it, and ensuring it fits with real and relevant market needs. With that, as you earn the trust of your stakeholders and the endorsement of your leadership, you unlock a stronger willingness to keep on innovating.

🧶 Where to learn more about it:
Stevan Blank was mentioned in this newsletter before and will most likely keep on being mentioned in the future because his contributions to this space are just unavoidable. For these concepts in particular his work on The Four Steps to the Epiphany with the Customer Development framework is a must. The Mom Test and this Lean Validation Resource Pack from Bundl are all you need to go from theory to practice in achieving both fits. The validation was also one of the topics I had the chance to discuss and learn new perspectives about at the Innovation Roundtable and EPFL event this week (the reason why this issue is being published this late on a Wednesday instead of the typical timings), so I can’t skip their community and all their events in this recommendation note. Go check it out.

See you next Tuesday! 👋