Why Most Companies Fail At Moving Up or Down Market — Brian Balfour

As you can see, no company (that I know of) has ever dominated all three tiers of the market (however, LinkedIn and Slack might be the closest).  

The reason for that, again, is the four Fits. All four Fits are like the pieces of a puzzle. Plenty of enterprise companies have tried to move down market by making small changes to their pricing or product. But, to properly attack any new tier of the market requires locking in all four Fits, which means potentially changing all four elements and building new expertise. 

The reverse also happens. Plenty of startups try to attack all three tiers of the market with the same product/channel/model. But it doesn’t work. 

Attacking all three tiers will pull your product in different directions, require you to build expertise in multiple channels at once, communicate to three different types of customers at once, etc. It’s better to focus on one tier of the market. 

If that goes well, then over the long term it’s possible that you’ll get the opportunity to attack another. Mailchimp is now just moving up to the mid-market with their automation features, and it has been 10+ years.

You Can’t Think About the Fits in Isolation

Startups are commonly instructed to just focus on product market fit in the early days. This leads to teams ignoring the other fits. While I agree in the earliest phases you focus on proving Market Product Fit, that does not mean you can ignore the others.    

Why can’t you just focus on Market Product Fit? Because as we know from Product Channel Fit, products are built for channels. That means that as you lay out your Product hypotheses, you need to include your channel hypotheses as well.  

Why can’t you just focus on Market Product Fit + Product Channel Fit? Because as we know from Channel Model Fit your model hypotheses influence your channel hypotheses.  

Get the point? All of the fits influence each other. Your hypotheses for each work together to build an ecosystem. You need to have hypotheses for all components at once. Don’t think about them in silos. 

This doesn’t mean that you try to prove all of the hypotheses at once. There is a difference between formulating a hypothesis, and proving a hypothesis.  

In the world of startups with constrained resources, proving them all at once is impossible. You spend the majority of the earliest phases proving Market Product Fit, but you need to do that in context of having hypotheses for the other fits at the same time. 

You Have to Revisit All of the Fits on an Ongoing Basis

In my post about Product Channel Fit I told a story about Pinterest:

In late 2011 Pinterest hit an inflection point and their growth started to take off. One of the reasons were they hit product channel fit. The channel was viral sharing to Facebook’s feed through their API. But around end of 2012 Facebook started killing off the API’s that enabled this channel. Many reported on Pinterest’s slowing growth.

This is an example of when you have Product Channel Fit, but it breaks due to a channel getting killed off. Many companies were also effected by Facebook killing off this channel. Pinterest was one of the few that transitioned successfully. They ended up transitioning to a UGC SEO channel which has driven their growth ever since.

Part of that transition over the long term was that Pinterest also changed their product focus from a social product to more of a personal utility. Once again, you have to mold the product to the channel. You can’t think about them in silos.

Pinterest is a perfect example of why you have to constantly revisit the fits on an ongoing basis. The fits are always doing one of two things:

1. Evolving – Your market, product, channel and model are always evolving and changing.

Sometimes this evolution happens because of your own changes — moving into new markets — and sometimes it’s because of the changes of others (i.e. channels).

2. Breaking – An element gets killed off. Typically this happens with the channel, as was the case with Pinterest. 

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