Leadership Forbes

The Three Laws Of Disruption


Neil Kane, Contributor

June 17, 2014

Marc Andreessen in his seminal blog post from 2007, “The Only Thing That Matters,” described the importance of product-market fit as being deterministic of whether startups succeed or fail. According to Andreessen, “Product-market fit means being in a good market with a product that can satisfy that market.” He goes on to dissect the importance of good teams, good products and good markets, but he argues that product-market fit is the thing that matters the most. He ends by saying, “What else could it be?”

It is self-evident that if you have a successful product with rapidly growing sales, then you have found product-market fit (PMF). This is not a new insight. But how you get to PMF and how you make choices that lead toward PMF are not as clear cut. Silicon Valley-based innovation consultants Chris Sorensen and Matt Brocchini have built a framework to quantify product-market fit, “Q-PMF,” which is a measure of fit between what a customer wants and what the product provides. The better the fit, the higher the market share, and the more loyal and valuable are the customers. You can see more details at www.q-pmf.com.

Market economies demand constant innovation to ensure sustainable success. To stay competitive a company must achieve and maintain a higher PMF than its competitors. The challenge is that since both the competition and market preferences are always evolving, PMF is a dynamic quality that is constantly changing.

“The rate of innovation is increasing, and now anyone can create a disruptive innovation that literally changes the world—often very quickly and out of nowhere,” says Sorensen.

To put a spotlight on the significance of PMF as the key to sustainable innovation, Sorensen and Brocchini have codified their Three Laws of Disruption:

  • 1st Law:   Disruption comes to us all.
  • 2nd Law:  All disruption is caused by changes in Product-Market Fit.
  • 3rd Law:   There are only three methods to change Product-Market Fit
    • Change the product so that it is a better fit with the target market
    • Change the target market so that it is a better fit with the product
    • Change people’s preferences so that they value your product more.

As a VC once said to me, “I’ve never seen a technology company fail because of the technology.” The National Science Foundation conducted a longitudinal study of companies that received SBIR (Small Business Innovation Research) grants over a period of many years and they discovered that the most common cause of failure was due to companies building products that no one really wanted—a classic failure to find PMF.

If you believe, as I do, that the highest financial rewards among early-stage companies go to those that are the most disruptive, and if disruption is primarily driven by higher PMF as Sorensen and Brocchini assert, then the startup imperative must be to get to the highest PMF as quickly and as efficiently as possible.

We know PMF is paramount. But how do you get there? How do you create PMF?

Early in my career when I was a sales rep for IBM, we called this talking to the customer. Sales training is all about uncovering needs of your target customer base, and then reflecting the features and functions of your product in terms of how they meet those needs. My manager used to say that if I was at my desk, I couldn’t possibly be doing my job because I was supposed to be with my customers. Face time it is called.

To me, the best tools for reaching high PMF are embodied in the Lean Startup Principles (explained in detail in The Startup Owner’s Manual by Steve Blank and Bob Dorf). Their Customer Discovery Model is a critical step in understanding customer needs which is at the heart of reaching high PMF.

I was a mentor in the first cohort of the National Science Foundation’s Innovation Corps. The class was taught at Stanford by Steve Blank, so his thumbprints and lexicon are all over the curriculum. I wrote about the experience here. My manager’s demand at IBM to get away from my desk is exactly the same as Blank’s famous admonition to “Get out the building.”

“Many companies base their competitive strategy on adding more ‘bells and whistles,’ features in the long tail of the Customer Value Model, that do little to improve overall satisfaction. Disruptive innovators must have a deeper understanding about what is really important to each of their customer segments and why,” says Sorensen.

Whether you are a startup or established company managing existing products, do you understand your product-market fit?

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