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Defining product-market fit in EdTech

Defining product-market fit in EdTech

What is product market fit? How do you know if you have it?

These are the important questions that many early-stage founders are wrestling with. 90% of startups fail, and 30% fail within their first two years. Often this is because they don’t find product-market fit. Something that, for reasons I’ll go into below, is often harder in edtech.

There’s lots of advice out there. But some of it is conflicting and little of it is really practical for those at the beginning of the journey. Particularly, in how it relates to education.

A short history of product-market fit

Product-market fit was originally coined by Marc Andreessen in his article The Only Thing That Matters. He described it — very broadly — as “being in a good market with a product that can satisfy that market”.

He contended that the market always wins:

“In a great market — a market with lots of potential customers — the market pulls the product out of the startup… Conversely, in a terrible market, you can have the best product in the world and an absolutely killer team and it doesn’t matter — you’re going to fail.”

Many have built on this concept. Notably, Eric Ries in The Lean Startup who talked about finding the viral engine of growth through a build-measure-learn feedback loop and established the concept of Minimum Viable Products.

This was subsequently brought to life by Dan Olsen in the Lean Product Playbookand many have subsequently cited the steps he proposes:

  • Determine your audience
  • Identify underserved needs
  • Define your value proposition
  • Specify the minimum feature set
  • Create a minimum viable product
  • Test it with users

He also updated the definition of product-market fit to be more specific: “meeting the underserved needs of target customers better than the competition (or the alternative)”. He suggests that the key measure of product-market fit is retention.

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Dan Olsen’s visual representation of how to get to product-market fit

More recently, the founder of the super-hot cohort-based learning marketplace Maven and edtech behemoth Udemy, Gagen Biyani wrote a great thesis on the need to focus first on Minimum Viable Tests. He suggested that the much cited MVP wasn’t minimal enough.

“If you build an MVP, you start to think about the 20 features you might build to make people happy in a market, which takes your eye off the one specific insight that the customer actually cares about.”

In terms of understanding if you have it, GrowthHackers’ Sean Ellis is generally considered the reference point for how to measure product-market fit in user satisfaction terms.

The ‘40% rule’ proposes that if 40% or more people answer “very disappointed” to the question “How would you feel if you could no longer use our product?” then you (probably) have product-market fit. Although some have contended that this is the best way to validate it, not to help you find it.

This approach has been built upon by SuperHuman’s Ralph Vohra who provides a great process for others to follow.

Lenny Rachitsky, Silicon Valley PM veteran and author of the brilliant influential Lenny’s newsletter, has also suggested that “Nothing matters more than retention. But, there are other indicators you should pay attention to along the way.”

He proposes the following important components based on canvasing a range of expert opinions:

  • Make a product that people want
  • Make a profit delivering this product to people at scale
  • Find and keep these people, sustainably

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Lenny’s definition of product-market fit

Intercom have also explored the topic and agree that you need to consider monetisation and finding users sustainably. Their founder Des Traynor says it’s when you have:

“A load of similar people, with roughly the same problem, who are using your product in roughly the same way, willing to spend money to get the job done, and who you can reach through one primary marketing channel.”

He adds that the key is customer understanding, segmentation and ruthless measuring and prioritisation.

Their Group Product Manager Greg Davis has also tried to debunk some of the myths that exist and says that finding a niche market and then growing and iterating (counter to Marc Andreesen’s big market proposal), having an opinion (a point of distinction) and remembering that product-market fit is not a mote and something you can do once, are also crucial.

This last point is perhaps the most important point:

Product-market fit is not a mythical moment of enlightenment where you’re done and can stop worrying. It’s something that you need to continuously work at as the market evolves around you and as you grow as a company. You may have product-market fit and then lose it again.

Lenny again:

“Once you find product-market fit, it’s not static — goal posts will change over time, and that’s okay. Retaining product-market fit requires constant iteration. Product-market fit is a spectrum, as opposed to something you definitely have or don’t.”

Finally, in general, there is agreement that it is unwise to grow until you have it.

PMF, education and the future of work

So how does all this apply in our specific context?

Much of the literature out there suggests that product-market fit and how to measure it is different for every company. Another important point to bear in mind when applying it to your own context. But there are some common themes in education that are worth noting that we have factored in.

In education, the audience and needs are complex. There are often multiple audiences that you need to understand and the relationship between them. This includes at a fundamental level the learner. Typically there is a teacher. Often there are peers or a cohort. Sometimes there is a parent. Or a manager or an HR team. Or a school or university. There are funders and regulators… These audiences, needs and the relationship between them need to be understood.

The ultimate beneficiary — the learner — is often not the person that pays for it. Jamie Brooker from We Are Human has written a great piece on why edtech products often forget the learner — and learning — because of this.

Sometimes, there are expectations that it should be provided for free as a benefit to society (see MOOCs) and it often carries an artificial price tag not driven by the market but instead by regulation and outdated assumptions about signals of quality (see degrees).

Two sided marketplaces are complicated (more from Lenny on this). In education and the future of work there are sometimes multiple sides. For example, learners, educators and employers. This also complicates how to find your audience and your route to market and who pays. And many of the stakeholders involved are slow moving and complex organisations.

Metrics and retention as perhaps one of the most important measures of product-market fit is also complex. Learning is about more than simply consumption, although engagement is important.

Learning isn’t a constant in most people’s lives, even if you believe it should be. It often is sought in moments of transition, transformation and sudden need. Therefore measures like daily active users are often not appropriate.

Learning also takes time. Courses normally take weeks, months or years. There are often long loops and lagging indicators that make it hard to build-measure-learn quickly and this might require proxies or building shorter form or unbundled versions of the higher value product.

All markets, industries and verticals have their own complexities. However, education is perhaps one of the most complicated.

But it’s this complexity that is what makes it particularly interesting and exciting. And these facets we should factor into our definition.

My definition

Taking the above into account, our definition for Product-market fit for edtech and the future of work is where you have:

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Here’s the checklist:

  1. A clearly defined set of symbiotic underserved audiences: you have a defined set of personas or archetypes of the people you are targeting. This should not be ‘everyone’, even if accessibility is an important part of your goal, and not just the learner if other users are core to the product’s success
  2. Where their needs and relationships are well understood: you know what ‘job’ they are trying to do. Where, when and why they do it, what they would do if your product didn’t exist and what you’re competing with. You also understand what they expect from one another and the dynamics of the ‘marketplace’ if there are multiple audiences involved e.g. learners, educators, employers
  3. Met by a viable product with a distinctive pedagogy: you know through qualitative and quantitative data that your product meets their needs and delivers outcomes better than the alternatives, plus stands out on something other than price. You have something that your users evangelise about
  4. That retains learners when they need it: you understand what core action is the right measure of retention and what are realistic expectations for this metric. You should know where the constraints and risks exist around this that you need to design for
  5. Where there is a stakeholder who is willing to pay: you have a proven business model that will make your company sustainable. A free product that will require the user to pay further down the line doesn’t prove product-market fit. It may not necessarily be the end user or learner that pays (but if not, you need to pay more attention to point 2)
  6. An opportunity to grow the audiences at a sustainable pace: you know what ‘channels’ and routes-to-market exist that are both cost-effective (it doesn’t cost more to acquire a customer than you make from them) and where your partners will be responsive enough to enable you to scale the business effectively (or there’s enough of them that speed is not an issue)

These are the components that you need to get confident about as an early-stage edtech and future of work founder. And doing so is really hard: I know, I’ve done it and not always successfully.

It’s this definition that has informed the curriculum for my course.

Further reading

Some of the most influential articles on the topic.

Defining product-market fit

Measuring product-market fit

Playbooks for product-market fit

Podcasts