Tuesday, June 4, 2013

Bunts vs Home Runs: Market vs Product Oriented

During a game, a baseball coach will survey the field: taking into consideration facts such as which bases are loaded, the current inning, the score and how good his hitters are. She'll use this to decided if it's time to go for a bunt or swing for a home run.

When working towards product / market fit, you generally start with either a product or a market. It's important to know the difference because one is a bunt and the other is a swing for a home run.

The Bunt: Less Risk, Less Reward

When being market orientated: a particular type of customer is observed and hypotheses for their behaviors are created. The goal is to search for causality in their behavior and then to create products which make that behavior easier or better.

A market orientated approach is safer because you already know that a profitable product can be made because customers are already trying to solve their problems in some way; there's a job to be done and you think you can convince customers to hire your product to do it. The catch is, you and your competitors have access to the same information - because the information is contained in the market. What determines how successful you are comes down to how effective you are at observing, creating hypothesis, identifying causality and then delivering the product.

Market orientated is safer, but you're less likely to hit the jackpot.

The Home Run: More Risk, More Reward

When being product orientated: you start with a product concept, usually brought about through a technological insight. Then, using pivots and the occasional product tweak, you find the market which is willing to pay for this product.

What makes the product orientated approach risky is that the market has not been identified yet - it's not known how much money can be made, if any. It's also risky in that it's not known how long it will take, if ever, to hit product / market fit.

The upside is that if you're right, if your product is disruptive and you can execute successfully, you'll be first to market and will reap the rewards.

Swing or Bunt?

Your play largely comes down to risk tolerance. If your organization is happy with a bunt, then you'll have to be happy with average returns. If you want a home run, you have to be comfortable with more risk. Startups are more comfortable with risk so convincing others to swing for home run with you isn't a problem.  If larger organizations want a home run, they need to be more comfortable with risk first.