Achieving product-market fit in software startups –

theories and practices

Dr. Anh Nguyen DucSoftware Innovation Lab, IDI

Norwegian University of Science and Technology

Keynote @International Conference on Computing and Information Sciences (ICCIS2016)

Agenda

• Norway – NTNU – Myself

• Evolution of computing

• Startups – concepts and challenges

• Theories and practices on achieving product market fit

• Take away lessons

Department of Computer and Information Science

Source: https://www.ntnu.edu/idi/research/

My research profile

• Design metrics and defect prediction• Component based Requirement

Engineering• Coordination in Socio Technical system• Software Startup

The evolution of computing

1950-1960s 1970s 1980s 1990s 2000s 2010s

First computer Mainframe-based Client-server Internet-

based Social computing

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The evolution of computing

Source: https://www.interaction-design.org/literature/book/the-encyclopedia-of-human-computer-interaction-2nd-ed/socio-technical-system-design

Source: http://digest.dx3canada.com/2015/08/05/gartner-hype-cycle-2015-preview-predictions/

“maturity, adoption and business application of specific technologies”

Gartner’s Hype Cycle

Socio-Technical Gap

Product-Market Fit

Product-Market Fit

Customer and Market

Match

Constraint

Startup Companies are unique

… a newly emerged, fast-growing business that aims to meet a market demand by developing or offering an

innovative product, process, service…

Source: Sutton, Stanley M. "The role of process in a software start-up." IEEE Software 17.4 (2000): 33-39.

in US and Europe combined for startup companies in private investments

~570 Billion USD

Source: Pitchbook.com

Why should we care?

“A startup is a temporaryorganization formed to search

for a repeatable and scalable business model.”

- Steve Blank

“A startup is a temporaryorganization formed to search

for a repeatable and scalable business model.”

- Steve Blank

Ok. This is a definition but what do the startupsstrive for?

Market pull

Technology push

vs.

19

What are the key challenges software startups are

dealing with?

SURVEY – APPROACH

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• 90 countries around the world

– United States 52,60%

– Canada 7,94%

– United Kingdom 6,71%

– Israel 5,30%

– India 4,50%

• Cover different market sectors (predominately in the consumer market, such as mobile and Internet, i.e. 64,40%).

• Young and small in size

SURVEY – RESULT

21

0 200 400 600 800 1000 1200

Reaching the Break-even Point

Staying Focused and Disciplined

Targeting a Niche Market

Defining Minimum Viable Product

Managing Multiple Tasks

Delivering Customer Value

Building Entrepreneurial Teams

Acquiring Initial Funding

Acquiring First Paying Customers

Thriving in Technology Uncertainty

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List of top 10 key challenges of early-stage software startups

Source: Wang et al. (2016). Key Challenges in Software Startups Across Life Cycle Stages, XP 2016, Springer LNBIP

The Lean Startup

Main idea:manage startup as a series of conrolled experiments

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Minimum Viable Product …just enough features to gather

validated learning about the product

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How are Minimum Viable Products (MVPs) were built

in reality?

Norwegian startups

Common types of MVP

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Common types of MVP

Four dimensions of MVPS

Product market fit is achieved by a successful MVP.

What is next ?

Source: Bajwa et al. (2016). “Failures” to be Celebrated: An Analysis of Major Pivots of Software Startups, Journal of Empirical Software Engineering

Software

Startups

Before Pivot(s) After Pivot(s)

Android Operating system for cameras Operating system for smartphone

(mobile handsets)

Flickr Neverending: a massive multiplayer

online role-playing game

Sharing photos online

Groupon thepoint.com: Social goods fund

raising site based on tipping point

Group buying site working on same

tipping point

Instagram Burbn: Location based service Photo sharing app having different

filtration criteria

Paypal Confinity: help Palm Pilot users

exchange money electronically

Online monetary exchanges

Pinterest Window shopping using mobile Collection of favourite items, and

sharing it with friends

Twitter Odeo: Personal podcasting service A microblogging platform

YouTube Video dating platform Sharing videos online

All startups change directions

The Hunter Gatherer Model

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A Greenfield Startup Model

Source: Giardino, C. et al. (2016). Software development in startup companies: The greenfield startup model, IEEE Transactions on Software Engineering, 42(6).

• 13 cases (5 US, 8 EU, 1 NZL)

• Grounded Theory Method

• The model is formed by 128 sub-categories,

• clustered in 35 groups,

• and finally in 7 categories

Summary: Key Takeaways

• Customer value drives the invention and adoption of technology

• Software startups often fail due to both technological and market issues

• Product-market fit changes over time

• It is critical to have a light-weight, cheap and fast way of experimenting MVPs

• Much further studies needed to understand and support software startups

Customer Product Fit

Market Product Fit

Growth

First paying customer

First active users

Defining MVP

Initial funding

Delivering user value

Reaching break even point

Technical Debt

Growing teams

Targeting niche market

Transforming organization

Acknowledgement

• Department of Computer and Information Science, NTNU

• Software Startup Research Network

• Muml AS

Thank You!You can reach me at anhn@idi.ntnu.no