Lean Startup describes two well-defined milestones in any startup journey; the moment the startup achieves Problem-Solution Fit and the most coveted Product-Market Fit. Many people suspect that these two types of “Fits” are different yet sequential.
After spending the last decade working with entrepreneurs, navigating the world of startups using lean startup, I concluded that they are actually both two sides of the same coin.
The two sides of the coin!
When we discuss Problem-Solution Fit, we are actually discussing value proposition and customer segment in specific and desirability in general (which adds channels and customer relationship). When we say problem, we are talking about customers facing a painful challenge that they are actually willing to pay for something to solve.
Any entrepreneur working on the problem must spend some time understanding how big the problem is from the perspective of the customer and the business. In other words, how many people are facing this problem, and how many are willing to pay to solve it. That, ladies and gentlemen, is the potential market.
On the other hand, when entrepreneurs spend time to develop a problem-inspired solution, they are actually working on a desirable value proposition and seeking to materialize it, using technology, into an intuitive and reliable product. That, ladies and gentlemen, is the potential product.
So Problem-Solution Fit is about developing a value proposition (materialized into a product) that would be desirable to a large enough number of paying customers (market). In other words, Problem-Solution Fit is actually the Potential Product-Market Fit!
So this one side of the coin! What is there on the other side?
To actually go ahead and launch your product and implement sales and marketing strategies to materialize the combination of the validated value proposition with tech into sales from the targeted market. In other words, to attempt to achieve the Potential Product-Market fit.
That is why, when we spend time to size the market or the TAM-SAM-SOM, it is imperative to be very serious about the numbers, the expectations, and what you can achieve in the real world. Market sizing is not a gimmick to get funding. Market sizing is what will give context to your value proposition. How will you know that your product is doing well? Well of course of its sales (covering costs and making profits). Without the market context, you will never know if your product is doing well or not. You will also not know if it is priced correctly. You must compare it to something, have some sort of a benchmark to what you are doing.
I know what you think, that works well in the case of an existing and re-segmented market. How can I do that in the case of a new market?
This is a case-by-case approach, depending on the new market you are creating and the type of innovation you are using to initiate the new market.
Always have a benchmark!
So how do you know if your startup actually achieved the “fit”?
Problem-Solution Fit is achieved when you are done exploring, when you have no more critical questions to find answers to, and when all the most critical assumptions have been transformed into solid facts.
Product-Market Fit is achieved when your sales actually make that well-calculated SOM (serviceable Obtainable Market) and in a profitable way.
Thank you for reading
Goodwill and Respect!