Andy Rachleff (Medium profile) is a lecturer at Stanford and CEO of Wealthfront Capital. He is also one of the leading figures in the product-market fit world. Product-market fit simply means: ‘to which extent will there be a demand for your product or service, once you launch it?’
This pyramid explains market fit nicely, by showing how customer needs (blue parts) are connected to the actual offering (orange parts of the pyramid). Where these two colors connect, we find product-market fit.
Focus on non-consensus
As Andy (very smartly) concluded, there is only one way to make money, being a startup: to have a solution that is by definition leaning towards ‘non-consensus’, and is right (or: successful) in what it does. What does this mean? That you cannot have a successful company when there is consensus about your product offering. Why? Because if there is consensus, it means people agree with what you’re doing (or what you have built) and thus have already been accustomed – or used – to it. Thus lacking a radically new, transformative side to it.
Think about it: all radically successful (unicorn) businesses came up with services that were completely different than the status quo at that moment in time: AirBnB lets people sleep at your house (‘are you crazy?!’), Uber makes you share your car with strangers (‘isn’t that dangerous?!’) and Netflix moved from a rent-per-movie model to a subscription model (‘why would I pay every month?!’).
And so Rachleff argues that the only really good experiences are ‘new to world’ and require adoption (and possibly a learning curve), but are also the only type of services that will make true, high market returns for VCs. Products that are based on consensus will per definition reach lower returns, although VCs still might choose to adopt them in the portfolio, as part of an ETF of investment fund (being a ’safe bet’).
The take away
The lesson is quite clear here: if you’re an entrepreneur, don’t play safe. If everyone likes your product right of the bat, you might have to rethink your entire product strategy (what’s the real novelty you’re bringing to your customers?). For example, rather than considering a product test or validation a success when everyone ‘liked’ the product, one could argue it’s only successful when you learned something. About your product, user behavior, or anything else that was genuinely surprising to you. That will bring you further in your quest in finding a true product-market fit, as you’re on your way to find an underserved need.