Steve Blank explains the importance of product-market fit; it's essential to determine whether you have it or not as quickly and inexpensively as possible.

Video Transcript: Value Propositions and Product-Market Fit

On Day One in a Horizon Three activity, or a startup that is something new, all you have is a series of untested hypotheses. That is, it’s a fancy word for saying that your business model on day one is mostly guesses. Maybe you have some facts about what the core technology is, or maybe you actually own and know these customer segments, but everything else is just kind of guessing. And it turns out that the first two things that you really want to nail down is, you know, what product am I building for what customers, and what customers want this product.

And that combination of product and customer is called product / market fit, and those are two out of the nine boxes in the business model canvas. And again, in a large company you actually might have a set of hypotheses or guesses who they are and what features they are. But it’s not till you get outside the building and actually both talk to those customers, and build them — what are called minimal viable products, that is iterative and incremental prototypes— will you actually be sure. But the first thing to nail down is, do we have a product / market fit correct.