Hugh Simpson is a graduate of and innovation coach at the University of Sydney Business School MBA Program, management consultant and start-up advisor.
Nine out of ten start-ups fail and the number one reason is the lack of product/market fit. You can have a great team, great technical product, but if no one wants to buy it, you will fail.
During the recent University of Sydney MBA capstone subject, I was joined by three other Innovation Coaches (Willis Gray, Chris Murphy and James Moore) tasked with guiding 20 students trying to find a way to attract and retain customers to grow the amount of savings held with UBank.
The MBA’s 6 week capstone subject, led by Natacha Ng and Josh Ratilal, is designed to take students on the lean start-up journey from problem definition to product/market fit by leveraging their entire MBA experience.
On Tuesday last week, the student teams pitched their Minimum Learnable Products to Lee Hatton (CEO UBank) and her senior leadership team – with a real possibility that their creative and disruptive ideas could be picked up by the bank.
At this critical stage of the process, the students needed to demonstrate product/market fit to Ms Hatten, but how do we do that?
Test your problem/solution fit to make sure you have a problem worth solving
‘So I have this great idea for an app…’ is how the usual sentence starts before your friend/colleague starts rattling off all these ‘amazing’ app features.
My first question in return is usually, ‘what problem are you trying to solve?’
If you can answer that question, we are one step closer developing a product that is something people want.
UBank defined the strategic challenges they are facing, however the students initially struggled to come to grips with defining the real customer problems they needed to solve.
To understand the customer problem further, the students developed in-going hypotheses and hit the streets interviewing, doing surveys and testing ideas to uncover the real pain points in the customer journey.
In this discovery phase, where teams practiced their empathy and questioning skills, they needed to keep an open mind as real problem is rarely what it seems at first.
Once the problem statement was defined with supporting customer insights, the students started the ideation stage.
However you choose to step through this process, you need to continually check that the potential solution addresses directly the problem you’re trying to solve.
Every team had to pivot multiple times which is expected and should be celebrated as it means with every iteration the teams moved closer and closer to the problem/solution fit.
Test your product/market fit to make sure you have something people want
Once the teams had developed a solution that solved the customer problem, they developed MLPs that they continued to test with customers in the field.
When developing and testing the MLP – or later the Minimum Viable Product (MVP) – it was important for the students to embrace a Build – Measure – Learn (and Repeat) approach whilst continuing to modify the product based on customer feedback.
At this stage it was important for students to not only focus on user experience, but also on developing business model aspects of the product/market fit.
Ash Muraya, author of ‘Running Lean’ highly recommends that you gather data to help you learn about the following growth or value factors:
- Acquisition – How do we find you? (growth)
- Activation – Do users have a great first experience? (value)
- Retention – Do users come back? (value)
- Revenue – How do you make money? (value)
- Referral – Do users tell others? (growth)
However you choose to gather your data to answer these questions, you need to systematically test your product and business model by validating qualitatively and verifying quantitatively.
Watching the teams pitch to Ms Hatten and her team, it was amazing to see how far the students had come and the pride in the products they had developed.
Well done all!
All views are my own.