Growth Insights for CEOs

Product > Market Alignment: The True Sign of a Startup Unicorn?

Posted by Adrian van Haaften



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For those of us knee-deep in the startup world, we’re inundated by Unicorn noise – first their rise and more recently their fall (or, at least their right-sizing).

Any number of factors have played into this trajectory: from FOMO venture capital activity that drove unsustainable valuations, to startup growth hacking techniques that indicate initial hyper-scaling, but often run out of steam - exposing the startup’s gap between product and promise.

This last point – the product gap – is worth digging into. As someone who has spent 15+ years running or advising startups, one of the biggest disconnects I’ve identified with struggling startups is misalignment of product to market.

Don’t get me wrong, I’ve met a lot of brilliant entrepreneurs who have built some incredibly innovative products. But where things go South is when they pursue a go to market strategy that is largely built around the principal of “if we build it, they will come”.

Being in love with your own product is not a bad thing – actually, it’s a necessity, since a CEO and management team will face so much adversity in their startup journey that if they didn’t love what they created, they’d run for the hills – or the safety of a Fortune 1000 gig - well before they’d reach a point of market traction, let alone domination. 

But not doing homework on your markets, or even worse, being oblivious to them, is ultimately a death knell for a startup.

As Much as Things Change, the More They Stay the Same 

Technology innovation has revolutionized virtually anything we can imagine, but what hasn’t changed is that the market still determines the commercial fate of these technologies. The startup hype machine, however, often works at a volume that masks a fundamental shortcoming: that the product fails to find - and resonate with - a sustainable, scalable audience, because the market was not consulted in its development. 

How Market Alignment can go Sideways - Quickly

Market misalignment frequently starts at the onset, when startup founders often make anecdotal assumptions about market opportunity, need or pain and build a product to address this perceived opportunity. Attempts at market validation don’t happen until after product launch and it generally involves polling their first customers – those passionate early adopters who are rarely indicative of the broader market – for feedback.

Secondly, for many startups, a go to market strategy is little more than a slide on an investor deck. Many tech-talented founders and startup CEOs have achieved career success in areas other than marketing, so the process of bringing a product to market is not a core skill and is left to a marketing team assembled concurrent with – and tragically sometimes after - a product’s launch.

Also, there is a tendency to hire tactical marketers first, since their cost impact is less and effort is quantifiable (i.e. leads, social media mentions, web site traffic). Yes, it is absolutely critical to hack, test and learn in order to scale, but what gets short-changed is a strategically-critical due diligence effort on product > market fit: a forest vs. trees view that aligns both and allows the organization to build a product roadmap and go to market strategy that has the best possible opportunity to achieve sustainable traction.

Understanding your target audience(s) allows startups to build marketing and sales teams, position product, build a roadmap, create content, and pursue channels and strategic partnerships that resonate with the addressable market and achieves what I call the “head nod” – that subconscious acknowledgement from your prospective customer that you “get” them. It is only then that barriers to audience engagement and market domination truly start coming down.

This gap is not unique to early stage startups, by the way. In my experience, the majority of company pivots I tackle at mid-stage companies are due to this lack of product > market alignment. This is a never-ending, ongoing process and a critical one, as turning a small freighter is a lot tougher than a nimble speedboat.

So how do you align your Product with the Market?

For very early stage startups, it’s about going deep and understanding your target audiences before that first line of code is written. Be careful with assumptions and make bets that are supported by market understanding. Look at competitors, big and small. Bring marketers into the process early. Market test and nail your positioning. Love your product, but not at the detriment of missing market cues.

For startups who have launched product and are seeing early adopter traction, congratulations. Step back, be skeptical and smart about what happens next. Look at what you’re learning through a big-picture lens: are these early users indicative of the broader market, will there be enough of them to scale and if so, how do we build a go to market plan to find, educate and engage them – and at what cost? Establish clear success metrics. Invest in marketing automation, online content and a demand generation process. Continually look outward. Add senior marketing leadership to steer this effort and assemble a team that knows how to reach and convert your identified target audience.

For mature startups where growth has slowed, or may be in decline, all is not lost. You have a ton of market insight to leverage. Start with your diamonds – the audience segments where you’ve had the most success and who you understand well. Is there an opportunity to further focus, penetrate more deeply, cross-sell, up-sell and take additional share? Are there other market segments that look and act similarly, where you can duplicate what you’ve learned? Also, take the opportunity to re-validate your product promise versus new competitors, as well as against your continually evolving target customer need. What resonated with them two years ago may no longer. It might also be time to re-think your sales channel strategy to best reach these markets.

The Key Take-Away

Whatever stage your startup is in, continually validating and adjusting product > market fit is a critical, high-value effort and can be a leading indicator for long-term success. A company that establishes two-way conversations with their customers, listens and doesn’t just sell, aligns its product roadmap with evolving and emerging needs of its markets is best positioned to be that startup who achieves – and surpasses – a hard-earned unicorn valuation.

Author

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Adrian van Haaften is a Partner & CMO at Chief Outsiders Inc., based in San Francisco, CA. Adrian helps technology companies develop and scale global go to market strategy and architects business growth as an interim / fractional CMO, strategic workshop facilitator and startup management team coach. Learn more at http://www.chiefoutsiders.com/contact-adrian-van-haaften. Adrian can be reached at avanhaaften@chiefoutsiders.com or 415-347-6443.

Topics: Product Strategy, Go-to-Market Strategy