Re-Defining Product-Market Fit

Every Thanksgiving, Harvard Business School gives away free pies to faculty and staff. It’s kind of a big deal.

Eager administrators and professors, myself included, form lines out the door and down the sidewalk in front of the Chao Center on campus. Quantities are limited, so you risk missing out if you aren’t timely (and you might as well not show up to Thanksgiving dinner). Given it’s late November in Boston, the temperature is anywhere from cold to really cold, often with a mix of wind, rain, sleet, or snow. Regardless, people always line up and wait for their pies. Every year.

Now I have a question for you:

Does HBS have “product-market fit” with their pies?

The most common definition of PMF leaves plenty of room for interpretation:

The pies clearly satisfy the market—a highly educated, relatively high net-worth market at that. Yes, the pies are free, but how many Unicorns have been built on free products?

Intuitively, we know that Harvard’s pies don’t have product-market fit in the startup sense. But why? What are the real requirements for PMF?

Over the years, I have developed a more comprehensive definition for Product-Market Fit. It’s called the HUNCH Framework:

H — Hair on Fire Customer Value Proposition

U — Usage High 

N — Net Promoter Score

C — Churn Low

H — High LTV:CAC Ratio

In the era of Zero Interest Rate Policy (ZIRP), many startup founders and investors bet on building big user bases by any means necessary — that often meant giving away their products for free.

Today, founders need to be more practical. Investors are saying, “Show me the money!” Revenue, and more importantly, profit, are back in vogue. This is a very good thing.

The HBS pies are clearly missing a vital piece of the HUNCH framework: a High LTV:CAC Ratio. Their ratio is in fact negative because the school is giving away the pies for free.

(There are other issues with the Thanksgiving Pie business model, namely their market only consists of a couple hundred people.)

Startup founders should aim to satisfy each part of the HUNCH Framework to feel confident in their Product-Market Fit. There are also levels of PMF, as defined by First Round Capital:

Defining your startup as “pre-PMF” or “post-PMF” papers over the fact that Product-Market Fit is an ongoing process. PMF is a barometer, not a destination. Don’t stop experimenting to improve your PMF… ever. There is always room to get better.

Finding Product-Market Fit in the Age of AI

Startups must find strong product-market fit before running out of time and resources. My new book, The Experimentation Machine, gives you a framework for using AI to accelerate your search for PMF. Learn how to:

• Run rapid experiments using AI

• Build faster MVPs with fewer resources

• Scale without growing headcount

• Become a "10x Founder"

I also provide benchmarks for the HUNCH Framework at each level of PMF.

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Thank you again for the outpouring of support. Happy building!

Best,

Jeff