How to stay on top….. When Product Market Fit is achieved, what comes next?

Growth companies and startups will drive revenue or more investment (obviously) back into the business. How do you decide where the investment goes? The answer is not always obvious.  Usually, there’s some way of distributing money based on what’s been done in the past. 

Success at Product-Market Fit means you have options.

Resources get funneled into operations, some money might come ‘off the table’. Why can’t you just allocate the same way?  You’ve had success and all you need to do is increase the amounts, hear out the complaints and put some money towards what people think they need. Maybe some little adjustments here or there.

In many situations time has progressed, competition has formed.  Maybe you have crossed the chasm into the ‘early majority’. Often, crossing the chasm is not as violent as one might expect. There’s a subtle shift. It’s really hard to detect sometimes.  Conversion rates start to go down, call center activity goes up.  When you average out the numbers, the company is doing just fine. So resource allocation still can be performed in a relatively linear fashion.

What is actually happening is the underserved needs of different segments are getting average together.  At Stealth Dog Labs, when we look at the different segments through our lens, we see very different people and their reaction to your product it’s quite different.

Here is your great dilemma: do you start averaging the product to meet everybody’s needs or do you start creating different products to satisfy different segments?  Where should the money go, for its Product or towards Market? How can you create a balanced?

It’s much easier to create marketing designed around different segments. You can present the product in different ways but ultimately it’s the same product. That’s the easy answer and often it will work for some time. If you keep the segments distinct, according to changing underserved needs, you can manage the expectations of the customer and your company.

One way to describe what happens is explained best by this fictitious example.

What if Apple launched an iBrick?

Imagine nothing more than a white-painted brick. You would have a certain set of loyal customers that will pay retail price for an iBrick, say $400. A certain segment of customers will need convincing, maybe marketing can solve that. Maybe you can adapt the product by painting it slightly different colors, like rose gold.  You’re going to eventually reach a segment of customers that absolutely will not buy it no matter what –  they don’t have an underserved need that includes an iBrick – at any cost.

In this fictitious, extreme example, not based on any reality about Apple, you have big changes to customer segmentation. Most companies have a hard time detecting changes in underserved needs – But they are there and they’re wreaking havoc.

Sometimes companies launch different products to satisfy different needs. An example of this is General Motors. They have many different product lines and many options for every make and model. When we examined this data, we found clear distinctions in the underserved needs by makes and models. It even changes by the year, gender, location, and so forth.

I believe we’re in an age where you’re not going to be able to brute force your way into selling products with just more marketing. It cost far too much and the customer especially younger people are much harder to convince. If you just try to average them with your older more affluent customers you don’t have a successful way of allocating Innovation resources to adjust Product-Market Fit.

What do smart companies do?

The really smart company sets aside revenue and investment for innovation – well, obviously. But Innovation does not give you the framework to create clear segmented customers based on underserved needs. Frameworks are void of quantifying underserved needs and are often not based on quantifying the customer.

Really good companies are hyper-focused on the customer.  They are listening and they’re also theorizing what comes next.

Having a fair resource allocation system that many people can contribute to does give you the best hope of fair resource allocation. According to Clayton Christensen, you have three different types of innovation and your company might need to invest in all three types.  great companies know how to place bets and invest in the different areas of innovation. They’re quantifying and goal setting along the way based on the total addressable market, and underserved needs of its customers and future customers.

While you’re reinvesting in the product, you’re maximizing the value of the company based upon matching product innovation with future underserved needs.

Innovation should include an understanding of changing customer needs and the underserved needs that you can anticipate.

Regardless, focusing on changing customer underserved needs will keep the company and its products relevant. It’s that simple but it’s also that hard. If you’re not investing in the right areas, you get off track in a hurry. What worked in the past is not always what will work in the future.

Of course, you know there’s a pitch in here. What I love to do is help people figure out how to keep up with the underserved needs of multiple customer segments.  Understanding people is a great understanding of how to allocate your limited resources just solving their problems is even better.

As the product needs updating, as well as marketing, we help you feed that information back into Product-Market Fit driven efforts at your company. This is the best way in my opinion to stave off disruptive innovation from competitors.  A little bit of disruption of ourselves is going to keep our jobs and it’s going to keep our customer base happy.