
Product ＞ Strategy ＞ Business Model  - turingbook
http://www.avc.com/a_vc/2013/06/product-strategy-business-model.html
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aviswanathan
I think the article is great, but I'm not sure about a few particular industry
segments. For example, in SaaS, it often may make sense to actually charge for
software up-front before even having product-market fit to see if there's even
any viability in making it a business in addition to experimenting with
pricing. Often times, the drop-off experienced in going from a completely
freemium product to a priced one is fatal and gives you inaccurate data about
the market's reception to your product.

In consumer web, the product -> strategy -> business model approach makes
complete sense, but I'm unsure if it carries over to most things in B2B.

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orthecreedence
Typical, a VC telling you not to worry about making money. The funny thing is
that VCs don't care if a business makes money, only if other VCs will pour
millions of dollars into it. A company with a real business model is less
valuable to them because it eventually won't need further investment, and more
importantly, won't need a tech giant to buy it. Most SV companies are just
huge (legal) pump and dump schemes. If a company is capable of standing on its
own feet without perpetually breastfeeding off investors, then the chances of
an exit go down, and the chances of an investor seeing his/her money again in
the short term are greatly reduced.

I think business model, strategy, and product are _all equally important_. You
can make a lot of money by making an awesome product and getting a large exit
without ever seeing a cent of revenue, but to me sustainable growth based on a
real business model is much more rewarding. Maybe I'm just old fashioned, but
the more abstract "value" is, the closer your economy comes to crashing as
you're essentially creating value out of nothing.

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fredwilson
as the VC you are ascribing that to, let me correct you. i care a lot about
making money. i just think there is a time and place for everything. you can
get the "make money" stage too quickly and it hurts more than helps.

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callmeed
_> > Once you find product market fit and start thinking about business model,
I suggest you take a step back and work with your team (and investors) to
develop a crisp and well formed strategy for your business._

"and investors"? This is what annoys me about the VC world. They talk like
this but, from what I can tell few VCs will invest in you unless you have
product market fit _already_.

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il
You don't need funding to get to product-market fit. The optimal strategy is
to bootstrap to fit and raise money to scale and build the business.

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callmeed
I'm aware, I'm just pointing out how Fred is implying you already have
investors when you find product market fit.

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fredwilson
how so?

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callmeed
Appears to be right there in the excerpt I quoted. You find product market fit
and then work on strategy with your team and (already existing) investors.

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paul_f
This article and concept makes no sense.

"moving to business model before finding product market fit can be the worst
thing for your business" What??

Product-market fit is a fundamental part of the business model. Determining
who your customers are, and why they would buy from you, is what you do when
discovering your business model. You cannot separate it out. BTW strategy is
such a vague concept that I don't know how it is even in the discussion.

Guessing, building an MVP first, throwing it against the wall to see if it
sticks, before having a concept of what your business consists of, is what
is/was broken about the startup culture. And, please stop this "but Twitter
did it" nonsense. Unless "getting lucky" IS your strategy.

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cglee
The product/market fit isn't the business model. The product/market fit is
first seeing if there's any demand whatsoever of whatever you're selling. The
strategy is how you position yourself within the market. The business model is
how you plan on scaling the business in a systematic way.

You don't want to think about the business model before you have
product/market fit. We could just be arguing semantics here, but I think the
general advice is sound.

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qeorge
Dropbox' strategy is becoming the permanent storage for all of our data. But
its business model (charging by GBs) discourages the user from using Dropbox
for all of their files. For many users, the business model necessarily limits
their assimilation of the product.

Flickr wants to be the place where people discover and share amazing photos.
But they charge their most engaged users extra money for storage, discouraging
them from adding the very content which makes the product valuable to new
users.

Metered billing is like a usage tax. Taxes discourage behaviors. Don't
discourage your users from taking the very actions which make your product
valuable.

Thoughtful post Fred, thank you.

~~~
espinchi
What strategy do you think these services could follow in order to keep users
engaged while making money?

I can't come up with a good answer to this myself.

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adrianhoward
It's odd - but I don't really conceptualise working on these as separate
things any more.

While product-market fit might be the kernel, strategy & business model come
along for the ride. They all co-evolve together. In many cases the p-m fit,
strategy and business model are so intertwined that it just makes no sense to
develop one before the other. Tweaks to the product affect our BM, tweaks to
the BM affect how we think about the product, those tweaks to the product may
drive the strategy in a different direction, and so on.

I guess the hidden context here is that this is sound advice for certain kinds
of B2C startups that are leaning towards, or capable of, VC scale investment.
There you're not really leaving the business model to last. You have an
initial business model of "get investment", and then you can transition to
something more sustainable. Absolutely nailing that pm fit and strategic
vision without the distraction of trying to produce a viable business model
from the start probably makes sense.

For the average bootstrapper or new product team - not so much. Because
without some sort of income stream earlier on product development cannot
continue.

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tzury
Here is my version:

    
    
        Customers > Product > Founders > VC

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daemon13
I've been into strategy for 15+ years.

In my humble opinion this Product > Strategy > Business Model is suitable for
the current bunch of feature start-ups that aspire to be acquired by big cos.

If you want to do it right, then it is the other way around.

1\. You check the market you want to compete/be in.

2\. Then you understand which business models work and which don't and why.
You choose several to start with.

3\. Then you define your strategy, i.e. What do I need to do to disrupt
current market leaders?

4\. Then you develop product(s) that fit your strategy and business models.

So if you want to do smth serious the right sequence is Market > Business
Models > Strategy > Product(s)

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auctiontheory
Figuring out your product before you've started on your strategy and business
model is the classic technical entrepreneur's mistake. I've done it myself.
The only possible reason I can see to do this is that from the VC's point of
view, it might shift more risk onto the entrepreneur.

More effective, not to mention lower risk (for the entrepreneur) is the
lean/MVC model described in _Running Lean_ and elsewhere.

Fail early, not after you've spent years perfecting a product that doesn't
have a profitable market.

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vinceguidry
How does one get to product? My business knowledge mostly consists of selling
myself (to employers) and services (to clients). Building a product seems
significantly harder.

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pedalpete
I think that may be a character thing Vince, and I don't in any way mean that
as a negative. I'm a product guy, not a salesman. I think-up then create
products (mostly websites and apps). I do it for clients, and often for
myself. To me, building product is the easy part. I hate selling myself to
employers or clients (though love selling my products).

When you say 'How does one get to product?' do you mean how do you build a
product? Or how do you discover a market? Or how do you come up with ideas? If
you can elaborate, maybe I or others on HN can help you out.

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vinceguidry
Well, a statement like Product > Strategy > Business Model and rationale
behind it seems to incorporate a sort of 'hacker-level' understanding of
business that I would have liked to see extended. Ramit Sethi's freelancing
course had that same appeal, that you could reliably build a money-making
enterprise the same way you might build a bridge.

When building product, how would you boil the steps down? Do you start with
ideas? Or by building tools? How do you know when you're done and it's time to
move on to Strategy? What's the minimum number of things a Product has to have
before you can call it a Product? As a programmer, I tend to focus on personal
skills, but skills != product. Every time I start to think about product, I
either get bogged down trying to make the wrong things perfect because I don't
know which steps are most important.

Conceptually, I might understand the basics. But turning those basics into a
workable product seems overly complex.

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kdavis
The logic here seems flawed.

Say, for example, that my "product" is to transfer $1000 to your bank account
for every page you view on my site.

Undoubtedly the market will love this "product". However, whatever the
strategy, the business model has to get more than $1000 per page view. This
seems impossible.

The point being, you can't simply create a product that no conceivable
business model can support.

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pedalpete
I'm struggling to really understand what Fred is saying when he talks about
'strategy'. He mentions Amazon, but can somebody give the example where
Amazon's strategy was distinct from it's business model? I assume he's talking
the early days before AWS was a major part of their business.

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eliajf
He replied to a comment: "strategy is figuring out what part of the market the
company wants to play in, how it goes to market, and how it differentiates
itself in the market it is about what you are going to do and importantly what
you are not going to do."

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badclient
How do you achieve product market fit without validating your business model?

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vladd
product-market fit = building something a market wants

business model = how to sell it higher than production costs

One way to see if the market wants what you've built is to charge for it, but
there are other ways, especially in consumer web.

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davj
This post should be prefaced with the fact that this model of thinking may
only apply to venture-backed consumer Internet companies...

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ronilan
Very well articulated. The order of things is also the order of precedence.

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ozataman
Seems to me like a somewhat empty bag of words. My general interpretation is
"walk before you run"; I don't see the need for working hard to find a rule
that applies everywhere. The obvious point is that you probably need to have
something substantial (market wants your product, fans clamoring on HN, you
have a few initial clients, you make some money.. _something_ ) before
thinking bigger.

If we have to impose a timeline, though, I would say that _all_ 3 elements
(market fit, strategy, biz model) have to be considered _together_ , all the
time in the leaders' heads (and officially recognized once in a while). Please
remember that there is only a single digit (or so) number of Twitter-like
stories in the world. Just think of the numerous times that kind of linear
thinking (forget about biz. model - let's just pour money into this thing for
a long time, or, let's build this cool product without a strategy although I
don't even know what cool means without a strategy) approach has failed. In
those rare cases, you probably still think about the biz model, as in "it
doesn't yet exist but will exist likely in one of X forms once we reach status
Y".

I might have a different definition of strategy, but you need _some_ kind of
strategy, which at a high level might even just mean "approach", to be able to
do anything, including validating an initial market fit. Even starting small,
testing/iterating and seeking market fit and later switching gears itself is a
form of high level strategy. A ship without a direction gets nowhere, even if
you're a small ship in a really-well charted sea.

Unless, of course, he means by product-market fit "an idea for a
product/service that the market wants", which would be just about the first
thing to do in any business, as championed by the likes of the book "Four
Steps to the Epiphany". I suspect those bootstrapping (to at least some
degree) would likely know this from deeper in their hearts than others who've
had an easier time with plenty of funding upfront. Everything else by
definition has the workings of a strategy, whether you admit it or not. If
you're not explicit about it though, you're just letting the waves take you
places you hope will be good.

Edit: The issue I take is that the article puts strategy into a step in the
timeline or process, whereas I believe it needs to be everywhere, all the
time. You can't have product-market fit without strategy AND/ORD you can't
build a solid, sustainable business without thinking about strategy/market-
needs/biz model and probably more at the same time, holistically throughout
your existence. It's not just that "don't forget about strategy before biz
model!!". Jumping to biz model without having a strategy is impossible - it
just means your strategy implicitly is to "grab the money in the best way you
see possible right now", without charting a longer term objective.

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fredwilson
as the person who wrote the "empty bag of words", i'd like to say that i agree
that a business needs to have strategy at its core. but product strategy and
business strategy are two different things. get the product right first, then
figure out the business strategy, then business model. and twitter isn't the
only business i've invested in. i've been doing this for 27 years and have
invested in hundreds of startups. i used twitter as an example but my message
was based on the totality of the experience, not just one company

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turingbook
I translated informally into Chinese: <http://geek.csdn.net/news/detail/1290>

