Olean

In the late 1960s, researchers at Procter & Gamble set out to help premature babies gain weight more quickly.

Their solution was a “super fat” called Olestra.

Because of its unusually large molecular structure, it was calorie-dense and should have theoretically lead to rapid weight gain. In practice, however, the structure’s size prevented it from being absorbed by the body at all.

What didn’t work for premature infants looked like a breakthrough for overweight adults.

As Americans consumed more snack foods and obesity rates climbed, Olestra suddenly appeared to solve the opposite problem.

It delivered the taste and texture of fat without the calories due to its lack of absorption.

P&G rebranded Olestra as Olean and received FDA approval to use it in snack foods.

On paper, it appeared to be a home run. They had a novel, defensible solution to an obvious problem in a well-defined market.

In reality it was a solution the market couldn’t stomach.

Because Olean wasn’t absorbed by the body, many consumers experienced gastrointestinal distress and loose stools after eating it. The product was approved by the FDA in 1996, but sales quickly collapsed.

By 2000, P&G had sold the business. Olean all but disappeared from shelves years later.

The Problem-Market Fit Trap

Olean was ultimately a solution looking for a problem. Both problems were surely valid and would pass the FI₂R₂ST framework I use to identify problems worth solving.

The trap is the assumption that a compelling problem within a well defined market guarantees product adoption.

Every year, numerous well-funded companies run by smart, driven people fail even though they had correctly identified a real problem in a well-defined market.

They assume that once the problem is obvious, adoption is inevitable.

Inevitability is only true with unlimited time and resources.

Production adoption is a tricky thing and can be derailed by any number of unforeseen and unexpected reasons.

The cliché, “It always takes twice as long and costs twice as much” is so for a reason.

Possibly the biggest risk is founders becoming fixated on their solution in spite of what the market is telling them through its lack of adoption.

How to Avoid the Trap

The only reliable way to avoid the trap is fast and relentless customer-centric product iteration.

The best starting point is to solve one specific problem for one specific customer through a Minimum Viable Product (MVP) or no product at all.

The goal is to quickly develop a deep understanding of your customer’s needs and iterate based on real usage and feedback.

You’re probably thinking, “How do I solve their problem with a limited product or no product at all?”

Ironically, providing a limited product or no product is a great test to the severity of the problem. The bigger the problem, the less finished the solution needs to be.

DoorDash is the perfect example.

The DoorDash founders built a basic landing page but handled restaurant orders and deliveries themselves all before building the automated platform.

How You Know You’re Getting Close

Product–market fit is measurable and can reveal signs before you receive your first dollar.

Qualitative Signals

Enthusiastic feedback

If early users give you positive or negative feedback it is a great sign. It means they care about your solution and its potential to solve their problem. Silence is death.

Word-of-mouth growth

When people like something they tell their friends. Unsolicited referrals is a potentially strong signal that you haven’t just solved a one-off problem for an individual but one for a community.

Demand outpaces supply

Struggling to keep up with almost any part of the customer journey, including purchases, services, new feature requests, etc. can be valid signal.

Usage despite flaws

No product or service is ever perfect. If your customers continue to use yours even when it’s “broken”, you are on the right track.

Quantitative Signals

Retention and Usage

Getting customers or users is hard. Keeping them is just as difficult. Continued, habitual usage or recurring purchases is a great sign that you have product-market fit.

Growth

Growth is an obvious signal but one that must be taken in context with others. Rapid growth accompanied by high churn is as unsustainable as growth from excessive marketing spend.

CAC versus LTV

If CAC or customer acquisition costs greatly exceeds the LTV or life-time value of a customer, then your growth signal for product-market fit is a false one.

NPS

NPS or Net Promoter Scores is a single question metric to rate the likelihood of customers recommending your company, product or service. The metric is on a 1-to-10 scale with respondents divided into “promoters”, “passives” and “detractors” to derive a net score. An NPS of 9 or 10 is a very strong signal of product-market fit.

40% test

Similar to NPS, the 40% test is a one question survey. Instead of wanting to know if a user would recommend a product, the 40% test asks users if they would be very, somewhat, or not disappointed if your product disappeared.

If 40% or more of your users respond that they would be very disappointed if your product disappeared, it is a strong indicator of product-market fit.

The Next Step

My own video game startup had strong problem–market validation.

Major social media influencers were on our cap table.

We had contracts with retail giants like Amazon, Walmart, and Target.

The business still failed.

Ironically, those relationships delayed our ability to reach customers.

Building a feature complete version of the game prevented us from shipping an early, stripped-down version necessary to gain real player feedback.

We were polishing instead of learning.

By the time we reached end users and received feedback we could build upon, we had already burned too much time and money.

The lesson is simple but not always easy.

Get your product or service into the hands of your end customer as fast as possible.

Because if you don’t learn quickly and improve your product, you’ll run out of money before the market rewards you for being right about the problem.

My goal with The Leap is to provide you each Saturday with the knowledge, tools and lessons learned to help you get started and keep going toward building your future. 

Whether you are making the leap to startups, solo-entrepreneurship, freelancing, side hustles or other creative ventures, the tools and strategies to succeed in each are similar.