Finding Product-Market Fit with Evernote co-founder Phil Libin
Plus, bestselling author Dr. Yves Pigneur and CareerFoundry founder Raffaela Rein share how to adapt your business model on the fly
As a founder, it’s quite easy to brainstorm ideas for products. But coming up with an idea is just the first step in figuring out if it will succeed in the long run.
In the first few weeks of TOA Klub, starry-eyed founders in our cohort-based learning program have shared the ideas (and also fully-fledged products) they’ve put their heart and soul into. Founders Klub was designed to challenge their assumptions and help them take the next step. Here’s just a bit of the product development and business model insight shared by our special guest speakers.
Phil Libin’s 4 Criteria for Product Building
When it comes to the product itself, there are also important considerations to assess. Phil Libin (co-founder and former CEO of Evernote, as well as co-founder of All Turtles and mmhmm) has vast experience building products. In his Klub talk, he outlined All Turtles’ four criteria for transforming an idea into a viable product.
- It has to solve a problem affecting real people now (does the problem actually exist?).
- It has to be quantifiable (what’s the cost of fixing the problem?).
- It has to have dedicated founders behind it (are they in love with the problem?).
- It has to be timely (can it be brought to market in 12–18 months?).
According to Phil, just the first criteria eliminated 99% of ideas. The other criteria have more to do with the viability of building the product over time. This process, though, has to be quickly executed, otherwise the problem will no longer be relevant to the people it’s supposed to help.
Applying the Business Model Canvas
Another method for determining product-market fit comes from Yves Pigneur, a professor at the University of Lausanne and the inventor of the Business Model Canvas. His framework is a useful tool for not only analyzing the structure of different models, but also identifying patterns (repeatable configurations of business model building blocks) which serve as the basis for new models. These patterns fall into three categories:
- Backstage Disruption (e.g. AWS, Dyson, Waze)
- Frontstage Disruption (e.g. Dollar Shave Club, Tupperware, Nespresso)
- Profit Formula Disruption (e.g. Xerox, Kodak, Spotify)
Employing proven models as a basis for your own product can help minimize the trial and error involved in building a product. Pigneur recommends three strategies for finding what’s right for you.
Competing on Business Models
The famous poet Oscar Wilde once said: “Imitation is the sincerest form of flattery.” As it turns out, mimicking successful business models can be an excellent jumping-off point for finding product-market fit.
In the case of Spotify, their success was characterized by customer-driven product innovations in revenue streams. They were able to find a new way of capturing value from previously unprofitable markets by employing a “freemium” model. Though the service is free, there are incentives for users to subscribe to the premium service, which in turn drives revenues. Spotify are true pioneers in employing this business model, boasting a staggering 46% conversion rate.
With this in mind, many early-stage founders choose to mimic these patterns and make minor tweaks to gain a leg up on their competition.
Exploring New Business Models
What if you’re not confident your product can compete employing an established business model? In this instance, you could choose to invent new business models that fit their needs. This process revolves around two main activities: the design phase and the testing phase. Each of these can be broken down further to help guide you.
While each phase is meant to address different aspects of a business model, they both meet in the middle, at which point you can decide whether to repeat the process or launch with your new business model.
Pivoting Existing Business Models
Now, suppose your business is already up and running but you’ve recognized your business model isn’t delivering the results you anticipated. In this instance, you may choose to pivot to another business model on the fly. This is based on the same building blocks, but additionally applies recognizable “shift patterns” to identify solutions.
Netflix, for example, shifted from a low-tech (shipping DVDs to customers) to a high-tech pattern (streaming content online). In doing so, they didn’t drastically change their business model — it still fit the Profit Formula Disruption Model. By employing a shift pattern, however, they were able to alter their value proposition.
All three of these strategies give you options, and that’s what is key to realizing how to unlock your product’s potential.
Unlocking the Potential of Your Product
Finding the right business model isn’t the be-all, end-all for success, though. Aspiring founders often find that even when their “product” is viable, they can’t find a way to reach their “market.” Raffaela Rein (founder of WildWildVentures and one of Forbes’ Top 50 Women in Tech) is a firm believer that well-designed products need to be marketed effectively to make an impact.
In the early stages of CareerFoundry, an online school for digital careers that she founded, she was having trouble convincing her audience of the product’s value despite knowing it addressed a relevant problem. She brought in a conversion specialist to help identify the true motivation of students (including potential students who weren’t yet committed) through interviews and feedback. Only then were they able to understand the needs of their target audience, tailor their messaging accordingly, and achieve market penetration.
Her experience — as well as that of Phil Libin and Yves Pigneur — illustrates that achieving product market fit is a process. It will take time, and you will likely have to adapt and adjust until you get it right. But by asking the right questions, applying business model frameworks, and effectively targeting your audience, you can find product-market fit.
Go future-proof with TOA Founders Klub
Klub brings the coveted founders, investors, and futurists you know from the conference stage to your own home. The cohort-based program offers you a chance to learn from experienced mentors in an intimate environment, connect with like-minded individuals, and develop new skills through collaboration. Whether you are looking to validate your idea, launch or build out your prototype, polish your investor pitch, find a co-founder, or join forces with someone else: it’s time to meet other top-tier entrepreneurial minds and learn from some of the most accomplished founders and investors in Europe! Sign up here!