How Markets Create Successful Products?

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Photo by Birger Strahl on Unsplash

Charles Darwin, who was a natural scientist, proposed the theory of biological evolution based on natural selection in 1859. According to him, evolution is the factor of changing generations and the emergence of new species over time that have a common ancestor.

Of course, during Darwin’s lifetime, there was no knowledge about genes, but he was able to recognize that many traits of living organisms are inherited. That is, they are passed from parents to children. The mechanism that Darwin proposed for the realization of evolution is natural selection.

What is natural selection?

Because resources are limited in nature, all living organisms compete for natural resources, and those who can survive are those who fit better to their environment. Being more fit with the environment means the possibility of better access to resources and higher chance of survival. And survival means having the opportunity to reproduce. Reproduction also means the survival of genes and the transfer of genes that create adaptive features to the next generation.

Genetic mutations that increase the adaptability of a species are transmitted to the next generation through reproduction. Therefore, the new generation has a higher chance of survival and reproduction.

For example, the lengthening of giraffes’ necks over the generations has made them able to feed on the upper leaves of trees that other animals could not reach in difficult conditions. This greater access to such resource has helped giraffes to survive and reproduce more and to pass this feature on to the next generation.

Natural selection depends on the environment

According to natural selection, the desirable characteristics are those that cause the survival and reproduction of more species with those characteristics than other species in a certain environment.

Features that are desirable in one environment may even be harmful in another environment. For example, in the giraffe scenario, the long neck was not because they were more evolved. Rather, it is because they have a heritable trait that allows them to survive and reproduce more in that particular environment. But in a different environment, for example, where grass plants are available at low levels, the necks of animals are not longer.

In short, those species of organisms that are more fit to the environment get better resources and have a higher chance of survival.

Natural selection in innovation projects and startup

In the world of startups and technological innovations, there are many similarities with this model.

In such an environment, there are many unknowns and uncertainty is very high. Access to resources, including low cost venture capital, skilled human resources, effective educational resources, social capital, access to markets, etc, is not available to everyone, and only the best startups have the chance to use these resources and thus survive and grow.

A large number of ideas, innovation projects and startup teams, although they may seem promising in terms of the initial idea or team capabilities, sooner or later die due to lack of access to the various required resources. But those who have been able to adapt better to the environment and conditions will survive.

One of the main environmental factors of startups is the market, and therefore their adaptation to the market is an important condition for their survival, which is discussed in lean startup methodology and product market fit.

In this way, startups improve their product development cycles based on validated learnings as a result of testing their business hypotheses.

Of course, this is not a one-time task and it is repeated continuously until a product with a higher fitness with the needs of the customer and the market is made.

The higher the speed of these iterations and the less time and money spent on it, and the greater the amount of learning from the market, the higher the chance of product and business compatibility with the market. This concept is also effective in SME’s because it allows organizations to test new ideas in a fast and cost-effective way.

In fact, Lean Startup enables a kind of “natural selection” for innovative ideas and projects, allowing only the best (fittest) to survive and evolve.

Many people may think they have good ideas, but these people have a series of assumptions in their minds, based on which the idea seems very good. But often, these assumptions are not valid in the real world or are not important enough for anyone to care.

In order to be able to test our assumptions and hypotheses with low cost and high speed, we use the evolutionary method and continuous improvement (a.k.a. KAIZEN) as follows:

1. We make a MVP of the idea with low cost.

2. Then we give it to target audiences and customers to use.

3. Then, we learn a whole new thing from their words and opinions and the model of using the product prototype, which can reject or confirm our mental assumptions.

1. Again, based on this feedback, we make a better version of the product and give it to customers.

We repeat the above steps until our product is most fit to the market.

If in these iterations we realize that we were wrong and our assumptions are invalidated, this is where we can change our strategy and take a step back to find the root cause of the problem or choose another path for our business.

Of course, it is possible that the different paths that are chosen will lead to a dead end. In this case, if mental power or financial resources are exhausted, it will not be possible to continue the work and the startup will fail.

But if the product and its business grow, evolve, and improve, it’s likely that something great is in the making.

This method, which is a type of intelligent trial and error, is similar to natural selection.

Of course, it’s not just startups that make mistakes, nature also makes mistakes. For example, if nature creates a species of giraffe that cannot start walking and running within one hour after birth, based on natural selection, nature will make sure the baby giraffe will not survive. It is either hunted or left behind by it’s mother.

In innovation projects, if a wrong product is made that is incompatible with the environment (market), it will definitely not survive.

Fail Fast, Succeed Faster

When it is said to “fail fast” on the way to product-market fit, it means to let the environment (the market) teach you what (product features and attributes) are market-fit by natural selection, and what do not work. In this way, we can create a product that fits the market well.

Survival is actually for those features or products that best fit the environment (market).

Markets create successful startups

Emile Chartier known as Alain, a 19th century philosopher and journalist from France, in a book in 1908, raised the issue that the design of boats and ships is a kind of natural selection:

“Every boat is copied from another boat… Let’s reason as follows in the manner of Darwin. It is clear that a very badly made boat will end up at the bottom after one or two voyages, and thus never be copied… One could then say, with complete rigor, that it is the sea herself who fashions the boats, choosing those which function and destroying the others.”

Accordingly, it is the markets that create success products and, as a result, successful startups.

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The Innovation Factory by Soheil Abbasi

Soheil is an experienced innovation director with 12+ years of startup acceleration & open innovation, chief Innovation officer at The Innovation Factory.