2. Understanding the First Steps Towards Product-Market Fit and Solution Fit

Introduction

Product-Market Fit (PMF) is one of the most important milestones for any product or business. Achieving it means the product is not only solving a real problem but is also gaining traction, growing in popularity, and generating revenue. However, before reaching PMF, it is essential to start with Problem-Solution Fit, where you ensure that the solution you are building actually addresses a genuine pain point.

In this document, we will explore the critical first steps toward achieving Product-Market Fit and Solution Fit, with real-life examples from O Boticário and Nubank. We will discuss the importance of understanding the user, validating assumptions, and testing hypotheses, and we’ll share practical insights from the experiences of professionals who have gone through this process.

Step 1: Understand the User

Before diving into solution development, the most crucial step is understanding the needs, motivations, and pain points of your users. Often, product teams assume they know what the user wants, but without validation, these assumptions can lead to failure. The key here is empathy and deep research into user behavior.

Techniques for Understanding Users:

1. Desk Research: Start with gathering all existing information about your users.
2. Empathy Mapping: Create a visual map of what the users see, feel, and experience in their journey.
3. Interviews: Conduct direct interviews to identify the core issues that users face.

Example from O Boticário:
Bianca Santa Cruz, a product manager at O Boticário, started by addressing a problem where sales representatives (revendedores) were requesting more physical catalogs to distribute. However, instead of simply delivering more catalogs, the team began investigating the true pain point behind the request. This involved empathizing with the sales representatives by observing their environment and interviewing them about their struggles and their customers' behaviors. By collecting insights directly from the users, they discovered that the issue was not just about having more catalogs, but about limited reach, difficulty in managing stock information, and poor personalization options.

Step 2: Validate Hypotheses

The second key step is forming hypotheses about what might solve the users’ problems and then testing these ideas. Hypotheses should be testable, measurable, and based on research. Importantly, you should test your ideas with the right audience—those who are your target users, not just colleagues or friends who may provide biased feedback.

Best Practices for Hypothesis Validation:

1. Define a clear hypothesis: A statement that you can validate through experiments (e.g., "Users will prefer a digital catalog over a physical one because it offers more flexibility").
2. Set measurable outcomes: Identify key metrics that will indicate whether the hypothesis is valid or not (e.g., engagement with the digital catalog).
3. Run controlled tests: Test with diverse users, focusing on the target audience for more accurate results.
4. Test in small, isolated variables: This prevents confusion over which factors influenced the outcome.

Example from Nubank:
Rawley Lopes, who worked on the launch of Nubank's business account (PJ account), knew there was market demand for such a product. Before building the account features, they interviewed Nubank's customers to validate the hypothesis that small business owners needed a free, easy-to-use business account. They discovered the most pressing need was for a low-cost, no-fee account for receiving payments. Based on this insight, they focused their product development on that core need.

Step 3: Focus on Strategy and Alignment

Before jumping into solution building, it’s essential that your product or feature aligns with the company’s broader strategy. Product teams should not work in isolation; instead, they need to ensure their efforts are contributing to the long-term goals of the business.

How to Ensure Strategic Alignment:

• Connect to company goals: Ensure the product solves a problem that contributes to company KPIs, such as revenue, growth, or sustainability.
• Collaborate with other teams: Work with stakeholders across different departments (e.g., marketing, sales, customer support) to ensure there’s alignment on what success looks like.
• Consider the broader market: Understand where your product fits into the larger market landscape and how it can position itself against competitors.

Example from O Boticário:
At O Boticário, the solution to the sales representatives' need for more catalogs had to align with the company's sustainability goals. Reducing the printing of physical catalogs was a strategic priority for the company, as it aligned with environmental objectives. Furthermore, understanding more about their end customers (those who purchased from the sales representatives) was vital for improving overall sales performance. These strategic insights shaped how they approached building a more sustainable, digital solution for their catalog system.

Step 4: Learn from User Behavior and Iterate

Once you have a working hypothesis and initial validation, the next step is building a minimum viable product (MVP) or prototype and testing it with users. The feedback loop is critical: launch, collect data, analyze the results, and iterate based on what you learn.

Key Points for Continuous Learning:

1. Prototype quickly: Create a simple version of the product that can be tested early with users.
2. Collect user feedback: Use quantitative and qualitative data to understand how users interact with the product.
3. Iterate based on feedback: Improve the product by continuously refining it according to user insights and behavior.

Example from Nubank:
In the case of Nubank's business account, the team launched a simple MVP that allowed customers to open a PJ account and receive payments. As users began interacting with the product, they collected feedback on the account features and continuously improved the product. This iterative process helped Nubank eventually reach Product-Market Fit in the PJ space, addressing core customer needs while optimizing the product experience.

Conclusion

The path to Product-Market Fit and Solution Fit starts with a deep understanding of user needs, validating hypotheses through testing, ensuring strategic alignment, and iterating based on real user feedback. These steps help product teams build solutions that not only address real pain points but also align with business goals and scale successfully in the market.

Understanding where to begin and how to approach problem-solving through the lens of real customer needs is critical for anyone involved in product management or business development.