Do large organizations need to worry about product market fit? 

We all know product market fit is everything when you are a startup.

Without it you can’t really have a successful company.  It’s a matter of survival.   

But does it apply to large companies as well?

After all, mature organizations, by the very definition have already achieved product market fit.  It is why they are where they are.  

So if there is no sense of urgency, like the startups.  Does it really matter? Or is it just one of those nice silicon valley jargons that go nowhere.

To help us figure out what is product market fit in large organizations, why they need it, and how do you go about achieving it, I interviewed Andre Yee.  

Andre Yee has over 20 years of experience successfully building products at both large and small companies.  He is currently the Chief Product Officer at Foundry (an IDG company).

Prior to that, Andre was the CEO of Triblio (which was acquired by Foundry), SVP Product Development for Eloqua (exit to Oracle), and CEO of NFR Security (exit to Checkpoint Software).  He is an author of two books – Mastering Java, Integrating Your E-business – as well numerous articles on technology.

What follows below is a condensed and lightly edited version of our interview.

Andre it is good to have you as our guest.  I know you and I have chatted quite a bit and I am actually excited about the topic we are going to talk about.

If it is ok with you, let’s start with a basic question….in your experience, what is product market fit?

Andre Yee:  Mustafa thanks for having me.  I have been looking forward to this as well.  Especially after all our other conversations (smiling).

Now everyone has a different definition.  But for me, it is when the market has strongly indicated demand for the product that you’ve developed.

The key word here is demand.  Not features.  

Can I pick on that for a minute?  What do you mean by demand?  There are so many types of demand?

AY:  There are different indicators of demand.   For example, most of us would probably consider sales bookings to be a primary indicator of demand.  Makes sense, doesn’t it?   But while getting early sales traction can be very encouraging, it isn’t always the best indicator of market demand.

In my opinion the best indication of a good product market fit is usage – and I learnt this the hard way.  

Here’s an example from my experience

When I first started Triblio, the original idea was really around a SaaS product that would help B2B marketers curate and share content via social media media channels

Initially, I thought we had found product market fit because we had successfully sold subscriptions to 10 customers pretty quickly.   After all, sales is an indication of demand, right?  But the problem we faced is that even after the sale, the users were not using it consistently.  There was very little adoption. So yes, we sold something but we realized that we had not found product market fit, because no one was really using it.  We ended up pivoting to account based marketing.

What I learnt, and this was one of the most important lessons for me is that getting someone to cut a check was a lot easier than getting them to use the product.  Getting someone to buy is about your selling ability.  And at the beginning of your startup journey, you’re typically selling to people you know so closing deals is about the strength of your relational network.  

On the other hand, people are busy and their time is valuable.  If you don’t give them a reason to keep coming back to use your product, they won’t.  So getting them to use the product consistently – that’s the real test of product market fit. 

I love that example.  And you are absolutely right of course.  It is all about usage and adoption.  They have always been my leading indicator.  Revenue and sales are always a lagging indicator.  And never a good measure of product market fit.

So let’s dig a little deeper.  Is product market fit only for startups?  Or does it matter for larger organizations as well?

AY:   I think Marc Andressen has said that product market fit is the only thing that matters for a startup.  You need to get it right, otherwise you don’t have a company.

I couldn’t agree more.  However, I believe it is important not just for start ups, but for any size company that is building a product.  For a startup, finding product market fit is existential – it’s about survival.  if you don’t find it, you won’t survive.  

With a larger company – it’s about growth.  Most larger, mature companies have found some form of product market fit with a core product.   However, to grow beyond the initial product offering, they need to develop add-on products to further capitalize on the existing market or new product line for an adjacent market.   If they don’t successfully do this, they will eventually stagnate and become vulnerable to competition.

Completely agree.  It is absolutely essential.  Which then leads to the question…how come large companies don’t put that much emphasis on it.  You rarely hear product market fit when they are building products, or even part of their strategy?

AY:  Great question.

I think there are a couple of reasons.  First is just terminology.  Since the phrase is typically associated with start-up culture.  It never actually made it to the large organizations.  Sure people know about it, but it is not part of their lexicon.

Second, for large companies, getting product market fit right  is not an existential threat.  They have to deliver the right features for the customers.  But will it make or break the company?  Probably not – at least not in the near future.  

Third is that the acceptable growth profile for a startup is very different from that of a larger company.  If a startup goes from 0-10M ARR in 4 years – that’s considered to be a raving success.  But in a larger company, building out a product line that gets to 10M ARR in 4 years isn’t particularly compelling , especially when you throw in the investment required to get there.   The end result is that larger companies either won’t make that investment or they give up halfway through.  

How do you apply this concept to a large organization?  Apply the same sense of urgency, that frankly is not there in these types of organizations?

AY:  Yeah I have thought about this quite a bit.  

Let’s take the current product organization I am leading at Foundry.  The company has been around for 50 years so it’s not a new company..

What I have found is that finding product market fit is both different and challenging in a few notable ways.   

First, is that a large organization has more of everything.  More time, more resources, more margin, more room to make errors.  And you would think that this is an advantage – but it isn’t..  Having more of everything doesn’t focus your attention on product market fit in the way a startup would..  For instance, startups have to be ruthless about prioritizing what is worth doing and what isn’t.  A large, mature company doesn’t.   

The way to counter this is to introduce what I call “constructive scarcity”.  This means constructively but reasonably limiting time and resources to create the right mindset for delivering on product.  What I know is that work will always expand to fill the allotted time and that often leads to product features that are secondary rather than essential.

For example, at Foundry, a product plan would typically be very extensive – . It would  incorporate most of the desired features gathered by committee and executed over 18 months or more.  The trouble with this approach is simply this –  I’ve never seen a 2 year project that doesn’t turn into a 3 year project.   

When I came into Foundry – I applied the concept of constructive scarcity by creating smaller execution teams and giving them authority to execute.  I also  introduced the idea of time boxing – forcing us to define an incomplete but market viable product that we can release in 6-9 months.   By doing this, I forced the team to think about what we absolutely need to do right now, rather than later.  

I like the idea of shrinking time and resources for our teams.  I think that is when they are the most creative.  What was your second technique?

AE:  The second issue for larger mature companies is the curse of knowledge – they know too much!

Most mature organizations have already found product market fit and they have an existing customer base.  So they assume that they know their customers and markets very well.  They are less likely to do customer discovery from first principles.  That leads to all kinds of mistakes because you end up making a lot of assumptions based on old or irrelevant knowledge.  

If you want product market fit, you need to do zero base customer discovery – cast aside your preexisting assumptions and seek out new knowledge of what the customers want today, not what they wanted 5 years ago.  Explore what customer needs might be for this new market opportunity, instead of assuming what’s needed based on prior knowledge.

So to get around that, I’ve begun to implement a process of customer discovery oriented around identifying the “job to be done” by the particular product .   And through active discovery and feedback, we will hopefully become better at building the right product for the market.

By the way this is easier said than done.  Teaching discovery is not easy.

Agree.  I spend more time talking about the why and how of discovery than any other product topic?  How do you address the third issue?

AY:  The third issue around the growth profile of growing a new business from scratch versus the expectations of a larger business .   This is a hard one to tackle because it isn’t really about product – it’s about the organization.

Company founders understand what it looks like to germinate a business from nothing.  Large company operators typically do not because they spend all their time thinking about scale, not new business creation.    

Company founders know that you need to do “non scalable things” (per Paul Graham) in order to urgently discover product market fit.   Large company operators tend to think about scale and optimizations before they need to so they end up never getting to product market fit.

There’s no easy remedy – it’s really about culture.   One way larger companies tackle this is via acquisitions for the entrepreneurial talent and then creating the right framework for the individuals in those companies to thrive.   I believe that’s what we’ve tried to do at Foundry.

I really like your three approaches.  Because you are absolutely right.  I am curious, for product leaders who are trying to implement a more product market fit discipline.  Any words of advice or recommendations?  

AY:  I hope this doesn’t sound too flippant but my advice is – fall in love with the problem, not the solution.  I read that quote somewhere during my entrepreneurial journey at Triblio and it has absolutely resonated with me.   Especially for product oriented founders, we’re always asking “what’s possible” instead of asking “what’s needed”.  Really digging into and enjoying the process of unpacking the problem is the key for us. 

If you fall in love with the problem – the solution becomes apparent to you  – and discovering product market fit becomes a lot easier.

Andre, this has been great.  I don’t know about you but I have really enjoyed our conversations both on and off the interview.  There is so much more that we can talk about.  Would you be interested in coming back as a guest, for a follow up interview?
AY:  Mustafa, this has been great as well.  Thank you for inviting me.  And yes I would love to come back.