I regularly spend time reading about successful people and successful companies. One thing is for sure, there are multiple similarities amongst the best of breed in the entrepreneurial world. However, I’m going to put aside the clichéd and more obvious characteristics, including, but not limited to, work ethic, willingness to learn, ambition, no fear, etc. I’ll focus on something critical, and a lot simpler to analyse—they’ve built a product that people actually want.
Billions in advertising dollars have been spent over the years, by long since forgotten brands and their supposedly hot marketing executives and consultants, on products that simply were not wanted, or needed, at that time. They were either too early to the party, too late to the party, or had gatecrashed the wrong party altogether.
Let’s look at a so-called ‘unicorn’ tech firm that initially got it slightly wrong, then, with some smart moves, got it incredibly right. Instagram started as a location-based social network called Burbn (which had an optional photo feature). It attracted a core group of users and more than $500,000 in funding. The founders realised that its users were flocking to only one part of the app—the photos and filters. They had a meeting, which one of the founders recounts like this: “We sat down and said, ‘What are we going to work on next? How are we going to evolve this product into something millions of people will want to use? What is the one thing that makes this product unique and interesting?’”
The service soon retooled to become Instagram as we know it: a mobile app for posting photos with filters. The result? One hundred thousand users within a week of relaunching. Within eighteen months, it was sold to Facebook for $1 billion.
The founders of Instagram realised that they hadn’t achieved product market fit. However, they clearly had a dynamic mindset and didn’t suffer from any ego-fuelled protection of their original concoction. With this new focus, pivot and iteration, they found something that people would shout about with no advertising; they optimised it, and are now at retirement level money whilst still in their 30’s.
Marc Andreesen, of the highly lauded Silicon Valley venture capitalist firm, Andreessen Horowitz, got it so right with his quote, “A full executive team with a salesforce and all that stuff, before you have a killer product, is a complete waste of time.”
When you take a look at new product launches, be it tech firms, retail stores, fashion brands, restaurants, nightclubs and the like, it’s interesting to monitor whether product market fit has been achieved, or even considered. It’s then equally intriguing to see whether pivoting takes place over the first few months of trade, and whether different iterations of the initial idea have been rolled out in order to gain traction.
In lots of cases, nothing changes. A business owner, or founding team, have sold an idea to themselves so hard that they have an unwillingness to pivot, which results in money, and more valuably, time, being lost.
I once had a chat with one of the UK marketing directors of Pizza Hut at a conference in London. He spoke about being product focused, concentrating on making minor adjustments and improvements to processes and output, delighting customers, and at all times trying to stay away from what he called ‘leaky bucket syndrome’—the pouring of water (new customers) into the bucket becomes more and more expensive if they are leaking out of holes in the bottom (not being retained). He didn’t once mention Pizza Hut’s advertisement budget, marketing initiatives, or television commercials that he was excited about. He spoke excitedly about improvements to product that would help them retain customers more effectively.
Retention is, and always will be, the key element to growth. Anyone can convince someone to try something for the first time, it’s whether they come back that counts. And do they tell everyone they know how great it was, without you having to spend relentless marketing and advertising dollars? If not, it’s back to the drawing board on product.
In short, here’s the formula:
1. Find product market fit
2. Introduce customers to product
3. Delight and retain customers
4. Benefit from organic/viral growth
5. Optimise through strategic advertising