Steps to Achieve Product-Market Fit (PMF)

After the prosperity of EC, SNS, and social games, the SaaS business model emerged in Japan mainly in the 2010s, with new players emerging one after another, following the order of Horizontal SaaS and Veritical SaaS. Product-Market Fit (PMF) is the first crucial milestone for a product after its launch phase. In this article, we would like to explore PMF once again, digging as deep as possible.

Peripheral Concepts of PMF

Before digging deeper into PMF, we would like to organize the surrounding concepts: Founder Problem Fit, Problem solution fit, and Product Market fit.

Founder Problem Fit

Founder Problem Fit refers to a deep alignment between the founder's motivation and the problem they aim to solve through their business. When you try to launch a business, you will be confronted with a variety of difficulties. To overcome them, the founder or the person in charge of launching a new business needs to be deeply motivated by the issues he or she is tackling and the business he or she is launching. This motivation is the driving force behind all of this, and it will help them overcome the various hurdles.

Roelof Botha, the proponent of this concept, in confirming FPF, seems to ask founders the following questions. ¹

``How did you come up with this idea?'' I like to ask. For example, what was the moment when something hit you and you wanted to do something to address this problem? Also, after evaluating the current solution, what did you find unsatisfactory or not good enough?
After evaluating the alternatives, what is the one and only value proposition that is attractive? And when you decide to build something, why do you think what you are building is so distinctive that it has the potential to succeed and become a real business?"

As the word "Founder" suggests, most founders seem to have this, but intreprenuers who are promoting new business within their company may want to ask themselves this question once.

2. Problem Solution Fit

Problem Solution Fit occurs when we understand a specific user problem and can devise a solution to address it effectively Problem Fit refers to a deep alignment between the founder's motivation and the problem they aim to solve through their business. Users who start using the product at this point have a very strong awareness of the problem, and they will use their own imagination as well as the product to supplement the missing parts of the product. Although there is still no reason or assurance that the user will purchase the solution, this is the phase where the imagination of the initial users is stimulated and the MVP (Minimum Viable Product) is defined.

3. Product Market Fit (PMF)

This refers to obtaining assurance that the product solves the user's problem and actually creates the value the user desires. In other words, the product you want to sell and the target segment you want to buy are clear, and the appealing message that connects them has been established. It is unlikely that a product can be sold explosively from the first verification, and the PMF is achieved by repeatedly reviewing the sales history, changing segmentation, and continuously reevaluating the product from various angles.

After this, we will enter the growth phase, expand our resources, and strengthen our approach to target segments, expanding our target to peripheral segments in Horizontal SaaS, and gradually increase the number of industries in which we have achieved PMF while confirming that we are achieving PMF. In addition to Horizontal SaaS, we will also strengthen our proposals to larger companies in Vertical SaaS. We will focus on the SMB market, which has fewer business requirements at the beginning of the release, and after a certain level of PMF, we will gradually increase the ratio of larger scale companies.

In addition, after confirming the above three definitions, only Founder Problem Fit is something that is created proactively by ourselves, while the other two are work that is verified reactively, including PMF. In other words, Founder Problem Fit is the most difficult one to have.

Approach to winning the PMF

Unlike the timing of the Problem Solution fit, in the PMF, the actual product has been launched and the resolution of user feedback goes through the roof. From the perspective of users who have been using the alpha and beta versions, they will be migrating data from existing systems, Excel, etc., and building their workflow into the official version. The starting point here is the value proposition. This is a clear statement of the differentiating factors and user value that the product provides to the user.

• Identification of target markets
• Locating issues and needs in the target segment
• Specific user value propositions provided through the product
• Uniqueness and differentiation of the product compared to the competition

This is based on feedback from users during actual business negotiations and implementation support, and is periodically inventoried and goes through addendum revisions to increase its strength.

Points to note about PMF

There is no point in vaguely discussing whether or not you PMF'd. Depending on the value proposition, you will have to check whether individual hypotheses have been realized.

We will not learn much by deductively discussing the definition of PMF. We should be analytical about the target segment and the product, such as what target segment is PMFing about what functionality. This is because if the target of PMF is the product as a whole, 2-3 years after its release, various functions will have been added and the product will be in a state where user stories can be realized. Under such circumstances, discussions on the entire product will be vague. Therefore, it becomes necessary to divide the user story into each use case and question its success or failure.

The same applies to the user side. Although the focus is on acquiring leads for verification, once a certain number of business discussions are conducted, leads that were not originally targeted may also come in, creating edge cases. It is quite a logical leap to take one distinctive company as an example and develop the idea that you can sell to other companies just by the fact that that company is in the market.

Of course, it is useful to dig as deeply as possible into n=1 and why it is being used irregularly in spite of that user segment. A deeper reading of this point will generate hypotheses, and in some cases, may provide clues to exploit that user segment. However, we should not overestimate the fact that only one company in a distinctive user segment used our product.

Conclusion

In addition to PMF, we often hear about Problem Solution Fit, but whether or not we have Founder Problem Fit is not often discussed.

When discussing PMF, we should not only look for the definition of PMF or the circumstantial evidence of whether or not we are PMF or not. I think there are many discussions about PMF that only look for the definition of PMF and the circumstantial evidence of whether or not the product is PMF, without seeing what the next action is. The essence lies in whether the product fits the market. If the product or market is diverse, an analytical evaluation approach should be taken. The focus of the discussion should be on which use cases and which functions are being used well.