CSSE 490:

Fundamentals of Product Management

Week 2: TAM, MVP, and Product/Market Fit

Agenda

• Review your problems!
• Discuss markets and TAM
• MVPs and RATs
• Discuss product/market fit

Total Addressable Market

TAM can be in users or dollars

Or another meaningful metric of success

Airbnb

You’re trying to size something unknown

Use known facts as proxies

Important facts to know

• Populations (global, continental, country), including growth/decline
• Economics (GDP, market caps, revenue)
• Demographics (age, gender)
• Occupational info (industry, salary)
• Technological (car/plane/transit usage, cell phone/internet penetration)
• Whatever domain specific knowledge your problem requires

Where do you find this information?

• Honestly, just Google it
• Most of it comes from governments
• Industry specific information will come from industry analysts
• E.g. # of cranes around the world, or shipping containers in ports, or cars in parking lots
• Gartner, Forrester, IDC, etc. exist for technology; many others in other areas
• Analysts perform market sizing and sampling of a small % of the population

Guesstimation!

• What is the population of Australia?
• What is the market cap of AT&T?
• What % of Vietnamese have smartphones?
• What is the most popular job in the US and how many people have that title?

​

bit.ly/2kCU70h

What is the population of Australia?

What is the market cap of AT&T?

Smartphone penetration in Vietnam

Most popular US profession

Always, always, always verify sources

Cognitive Bias

Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations.

Which is more probable?

1. Linda is a bank teller
2. Linda is a bank teller and is active in the feminist movement

​

Cognitive Bias: Substitution / Conjunction Fallacy

Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations.

Which is more probable?

• Linda is a bank teller
• Linda is a bank teller and is active in the feminist movement

​

Use known facts as catching features

Let’s size some markets!

Un(der) banked Americans

• 25% of Americans are un(der) banked → 20-25M households
• Median household income in the US is $60k
• Though un(der) banked folks are likely in lower income quintiles (1Q is 16k, 2Q is 33k)
• Payroll happens 26 times per year
• Assume a $500 check (remember taxes!)
• 1% fee on $500 = $5
• $5/check * 26 checks * 20M households = 2.6B/year

Product Lifecycle

Adoption curves

In the early stages, think small

You want a small % of your TAM to not be able to live without your product

It’s good to have a polarizing product

Minimum Viable Product

Pick a market segment

Ship quickly

Get feedback

Iterate

When can’t you MVP?

• Hardware
• Regulated industries (e.g. finance, healthcare)

Love the problem, not the solution

Pivot on the solution, not on the problem

howdelayedissfo.com

Whisky exchange platform

• Reach out to passionate consumers (Instagram, r/whisky)
• Send empty bottles in pre-paid boxes, ask them to share
• Keep track of samples in Excel spreadsheet (want/have)
• Have initial customers write reviews mentioning the platform
• Gather feedback (satisfaction, usage, or other metrics)

Riskiest Assumption Tests

RATs are the most atomic unit

• Don’t require a working product
• Sequentially test the riskiest assumptions
• Great for seeing if regulatory or other hurdles will sink a product
• Use the “five why’s” to dive deeply into assumptions

Whisky exchange platform

• Two main risks:
• Consumers are worried about the provenance of samples (authentic, un-doctored)
• Governmental regulations: payment, shipping of alcohol (especially across state lines)
• #2 is the riskiest: we’ll never be able to test #1 if #2 doesn’t work
• Try shipping samples between founders/friends in the same state, and across states
• Try shipping sealed vs unsealed containers. Include a video of the sample bottle being filled (w/unique serial number).

Launch it!

How to get the word out

• Product Hunt/Hacker News (eventually, other press)
• Tweet about it
• Tell all your friends
• Cold email people (mention it on GitHub issues, etc.)

Long term, you want *others* telling people about it

Product/Market Fit

“When you’ve made something people want”

Paul Graham

“When people tell their friends”

Sam Altman

Until you have P/M fit, nothing else matters

Growth

• Focusing on business model, hiring sales/marketing/etc.
• Revenue might not necessarily be the most important metric, but demonstrating the ability to become profitable if you switch from growth to profit is necessary
• MVPs for features, not for the entire product

Maturity

• Smartphones are in this stage now
• 5.5B phones on the planet, controlled by two dominant players (Apple and Google)
• Platform players make limited technological advances (see cameras, AI platforms)
• Majority of advances come from moats (services built to lock folks in to the platforms)

Let’s talk about Firebase

• Started as Envolve, a chat plugin in 2010
• Alpha: Sept 2011
• Beta: April 2012
• Added security rules, auth in late 2013
• Added web hosting in 2014
• Re-launched as a whole platform in mid 2016

For next week

• Read “How Superhuman Created an Engine to find Product/Market Fit”
• Market size your problems from last week (TAM in users and dollars)
• For each problem list “riskiest” assumption, come up with two tests
• Provide an MVP for each problem