Product-Market Fit and the use of data
Businesses, people and markets are always changing. As I read today, AirBnB has some struggles. What will they do to compensate for loss of revenue in late 2020? Do they just keep cutting costs or do they try to create a new business model? At this point, there’s no quick fixes. Only efficiencies. Where are the Innovations?
If you frame the question this way, it gives you some ideas about what kind of data you will need to accomplish your goals. If you’re selling to your existing customer base, and you’re selling the existing product, you have more than enough data and you can use typical means and methods to create efficiencies. No use employing expensive emergent strategy or innovation. I recently ran into a company that claims 15 customers make up 90% of their sales. Things have been static for years. That particular company fits into this category.
At the other extreme would be approaching completely new customers with a completely new product. There is no means to create efficiencies nor does data exist. In this case you have to use a hypothesis about the future and what are the unmet needs of customers. You need to employ concepts like jobs-to-be-done and customer psychology to figure out what to do next.
If you focus on the extreme cases it leaves you susceptible to other problems and conditions. For example, if all you’re doing is emergent strategy then are you paying attention to the existing products and existing customers? Likewise, if you’re focused on existing customers and selling them existing products and all you’re thinking about is efficiencies, you will be disrupted from an emergent organization that attacks you from the bottom. Classic disruptive innovation problems.
I ran into a company that was hacked and all of their trade secrets were involuntarily open sourced. All of their advantages were taken away in less than a minute. As a result, sales have declined by 50% in less than 1 year. They are now disrupted because they don’t have a defensible technology core – It was stolen. What do you do? Well for one thing focusing on creating efficiencies is not the answer. You will just get hacked again and those efficiencies will be taken away from you – again. In that situation you’re forced to look for Innovation; probably adjacent customers and selling incremental improvements to existing products.
It’s a tough world out there but if you don’t know how to frame the world you are in, it looks even harder than it really is. If you need help defining the product market value position and how data impacts your company and where to innovate and how much, I’m always happy to discuss business models.