Product Market Fit - A Deeper Truth
Product Market Fit - A Deeper Truth
Commentary on a short shloka by Naval Ravikant
https://x.com/naval/status/1794574861987434883
Here’s a set of tweets, seven in total, that neatly define what product-market fit is for an early stage founder. As with all the work of Naval Ravikant, it is pithy but packed with insights, worth reflecting on. Like a good shloka (a hymn) it has layers of meaning.
Let’s unpack some of the ideas behind product-market-fit as described in this shloka.
A product is a theory of how to solve a problem
Typically, the most common way of thinking about a product is to view it as a utility, a tool in a toolbox. This is the perspective of the job-to-be-done theory popularized by Clayton Christensen in which the product is “hired” by a user to get a job done.
This verse defines a product very differently from this utility view. Here a product is NOT defined as a set of capabilities or a utility. Of course, a product can be all of these, yet in this formulation, the product is called a theory. And what is this theory good for? To solve a problem.
So the product is defined in terms of an aim, its purpose, And the purpose is to solve a customer problem. How does a product solve a problem? Instead of defining its capabilities, a product is defined as a theory, a set of hypotheses, and assumptions that will solve a problem if implemented. This is a powerful way to conceive a product.
A theory of product includes not just a set of features, capabilities, architecture, user experience, data model, and supporting implementation, but ALL of these things combined as a way to solve a problem.
Once deployed, the product solves the problem according to the theory embedded within it.
In fact, this is an Aristotelian view of an entity. A product has a unique form and function directed at a final cause, which is to solve a problem. Its form and function embodies the theory of how it solves the problem, encompassing all the elements and their arrangements that go into achieving its purpose.
Another way to think about a product as a theory of how to solve a problem is by considering the view of W. Brian Arthur, a complexity theorist and economist. In his book, The Nature of Technology, he defines a technology product as a way of encapsulating a phenomenon in a new configuration for a commercial purpose. According to Brian Arthur, the phenomena captured in the product can be of three different types: digital (such as an algorithm), physical (as in chips and sensors), or social (such as sharing messages). This perspective aligns with the vision of a product as a theory for solving a problem.
In summary, the first verse establishes the foundation for product-market fit: the primacy of the problem and the role of the product in solving that problem.
Marketing is a unique explanation of a solution
If a product, with its unique theory of addressing and solving a problem, is the first foundation of PMF, the second foundation is how exactly the solution creates customer value.
Typically, solution explanations focus on the capabilities of a product, with marketers spending a lot of energy discussing these features, use cases and so forth. Sometimes, they might emphasize the multitude of benefits that a product unlocks. However, in most cases, marketing can be off the mark, inadequate, or not credible.
According to this verse, what is needed is much simpler and harder: a unique explanation of how the solution solves the problem.
Such an explanation must be unique, if the product is to be seen as a better alternative to existing solutions or alternatives.
Once again, consider what this verse is not emphasizing. It is not emphasizing the typical market considerations, like the large addressable market (TAM) or a technology-led opportunity, such as genAI in a domain. Instead, it focuses on whether the solution to address the problem can be explained in a unique way. This uniqueness can stem from two sources: either from the new theory of the product (e.g. a new phenomenon your product captures) or from a unique insight into the problem that competitive products and their inferior theories don’t address. Today, most AI startups suffer from solution explanations that are not different from their AI competitors.
In summary, the second verse establishes the second important aspect of product-market fit: the need to have a solution with an explainable difference against alternatives.
A founder is uniquely qualified to build a company.
Some founders start with the ability to build a product, others from their experience of a customer problem. A rare few may have a deep tech-based vision (a unique explanation). What makes a founder uniquely qualified to build a company?
When the founder has the right mix of these three elements: a clear view of the problem, a unique theory of the product that solves the problem, and an ability to explain the uniqueness of the solution.
Not all of these are needed at inception. Which of these are important to have from the start, and which may be acquired during the product-market-fit process varies by each situation. But the founder must build these capabilities on their own or bring them together within their team until they have fine tuned their instincts across each of these three areas. Over time, this requires the founder to build their judgment across each of these areas.
In summary, the third verse establishes the uniqueness of the founder in building a one-of–kind company.
Good products are hard to vary.
What does it mean that a good product is “hard to vary”? Wouldn’t a product that is hard to vary be fragile? To understand this, we need to understand the idea of “hard to vary” explanation in science.
A “hard to vary” explanation is a powerful concept articulated by the physicist David Deutsch and influenced by science philosopher Karl Popper. An explanation that is hard to vary loses its coherence and explanatory power if any of its elements is altered.
Consider the theory of evolution by natural selection. This theory is hard to vary because its explanatory power relies on specific mechanisms (variation, inheritance, and selection). Altering these core components would lead to a fundamentally different and less coherent explanation of biological diversity.
Naval applies this concept to product, marketing and founders. A good theory of product should be hard to vary. If major elements of your product can be modified arbitrarily without affecting how the problem is solved, then your product is not a good fit for solving the problem. That is, your product should be designed precisely to solve the core customer problem elegantly.
Good marketing is hard to vary.
Similarly, good marketing should be hard to vary. Your explanation of how your solution works should be cogent, rational and clearly linked from your product theory (how your product works) to the problem resolution. Too much irrelevant detail of features or too many tall claims (“10X ROI”) weaken the story. A “hard is vary” explanation is also hard to copy by others by simply using the same words or claims.
Good founders are hard to vary.
Each company is built to solve a hard customer problem with a unique theory of product. A “hard to vary” founder brings their unique talent to building a company, based on their judgements on problem space, product theory and its explanatory power. Therefore a good founder is hard to replace, since their judgment can not be replaced especially during inception and growth stages of a company. If founders were fungible, you would not be able to build a good company.
Founder, product, market, fit.
When done right, the founder, the product and the market fit together in a coherent relationship. The Product-Market-Fit (PMF) emerges when the founder builds a one-of-a-kind company based on their talent, anchored on a new product theory they build to solve a hard customer problem with a unique explanation in the market.
This view of PMF is not counter to conventional PMF views, such as finding repeatable customer growth in an early market niche. In fact, it underpins these views with philosophy of scientific explanations.