A Purpose-Driven Case Study: Product-Market Fit
ⓒ Euro-Peeing Team, Climate-KIC Journey 2018. Used with permission.
Elsewhere I’ve written about how important it is for purpose-driven entrepreneurs, in particular, to focus on finding a Product-Market Fit. In other words, creating a product/service that actually meets the needs of your prospective customers or users. So, let’s make this a bit more tangible by diving into a case study from my own experience.
At The Journey, the world’s biggest climate change summer school for graduates and young professionals, I’ve coached 80 young people to develop business ideas that tackle environmental problems. (These ideas generally don’t go on to become start-ups, though some do. Instead, they’re practical exercises in how to think through how a climate start-up might be designed.)
We start The Journey by asking all participants to form small groups around climate problems they want to solve. Below, here’s how one group found their way to a Product-Market Fit.
A quick note before we jump in, though:
I’ll walk you through the process at quite a high level. In reality, this was far less clean-cut than this overview makes out: there were all kinds of discarded ideas, rabbit holes, difficult decisions, and pivot points that I’ve omitted for the sake of brevity. When you’re in the thick of this, it feels far more chaotic and a lot less linear!
All this happened in the space of just over two weeks. In the real world, of course, this would be a much more complex process. However, it does go to show what you can achieve in just sixteen days!
So: let’s get started. This is one of my favourite ideas that emerged from The Journey: Euro-Peeing.
Product-Market Fit: One Group’s Process
1. Targeting a climate problem
The group of four began by forming around their shared interest in a very broad climate problem: environmental damage caused by commercial fertilizer.
They began by researching this field to make sure they really understood their problem in context. For example: learning the most common ingredients used in commercial fertilizer, how these ingredients are sourced, main distribution networks, current techniques to apply fertilizer, main causes and effects of environmental damage, key stakeholders in the industry, etc.
2. Narrowing the focus area
The team decided to focus on a subset of this larger problem: nitrogen. Not only can nitrogen-based fertilizer be damaging to the ecosystem when it’s mismanaged, but the nitrogen itself depends partly on fossil fuels to be manufactured.
As a result, they chose to focus on the sourcing of this nitrogen in commercial fertilizer. They wondered if they could pioneer a more circular economy where nitrogen from an existing source could be used instead.
(Note: this ties into my previous post, where I write about how purpose-driven entrepreneurs generally work as part of a system, where lots of different interventions are needed to create large-scale change. For example, someone else might pioneer a less damaging method of applying the fertilizer; someone else might invent a fertilizer with different ingredients altogether. There are often lots of complementary ways to approach the same problem, some more impactful than others.)
3. Brainstorming
After brainstorming potential sources of existing nitrogen, the team chose one initial focus area: what if they could capture the nitrogen that occurs naturally in human urine, and repurpose it into fertilizer? This nitrogen is currently flushed away, it’s ubiquitous, and it’s free!
ⓒ Euro-Peeing Team, Climate-KIC Journey 2018. Used with permission.
4. Investigating
However, how might this translate into reality?
This was a very technical idea, so a lot of ground had to be covered to work out whether it was even doable.
For example, the group had to do a lot of research in terms of how to actually go about collecting the urine, and the various health and safety considerations that would need to be followed. They learned that the urine couldn’t be too diluted or mixed with anything else, so the regular sewage system couldn’t work. The urine would also need to be collected in large enough quantities that it was cost-efficient. What’s more: once this urine was captured, the nitrogen itself would need to be filtered out and sterilised before it could be converted into a state that was usable in fertilizer.
Lots of experts had to be consulted.
On paper, the team learned that the idea did seem feasible — at least for the purposes of their project.
5. Searching for a Product-Market Fit
The next parts of their process happened in tandem: weaving back and forth between learning about prospective customers’ problems, and brainstorming products that might address these.
Interviewing prospective customers
There was already a potential buyer: commercial fertilizer manufacturers who relied on nitrogen to make their product. But how about a supplier? In other words, was there a market that already relied on discarding undiluted urine in large quantities? And if so, how would they frame the biggest problems they faced?
The team began exploring the major stakeholders in sanitation, and interviewing people from these sectors. They learned that one big sanitation need was that faced by festival organisers in Europe. This industry already relies on chemical toilets to collect human waste from thousands of people in a short period of time, and it needs to dispose of this waste safely and as cheaply as possible.
So, what kind of solution did festivals currently look for? Based on interviews, the team learned that:
The sanitary solution needed to be cost-effective, easy-to-use, sanitary, and not smelly
It needed to be a full-service solution: hands-off for the festivals to install and maintain
It wasn’t crucial that it was eco-friendly (sanitation was more important), however:
Festivals were facing pressure from zero waste and environmental groups to minimise their waste and carbon footprint, so this was a nice-to-have if the above criteria were met
ⓒ Euro-Peeing Team, Climate-KIC Journey 2018. Used with permission.
Designing prototypes
As they learned more about the technology and their potential customers’ needs, the team designed a number of prototypes for portable toilets used at festivals. This would let them to collect a lot of undiluted urine in a short timeframe, while also addressing the festivals’ needs mentioned above.
While the team wanted to serve both sexes, their design process indicated that it was easier to focus just on males. That meant that their toilet became a urinal. This urinal attached to a portable storage and filtration system. All the infrastructure could be driven in and out of the festivals on trucks.
Festival organisers, when given briefs about the prototype, were positive. As long as these urinals were clean, affordable, and hands-off, they thought that the brand — emerging as ‘Euro-peeing’ — could be a great value-add for them in their own customers’ eyes, many of whom were climate-conscious and were demanding greener festival practices.
Interviewing all prospective customers and users
The team created a Business Model Canvas with two paying customers, and a non-paying user. For this model to work, all of these stakeholders would need to see the Euro-peeing product as solving a problem that they were experiencing.
Paying Customers:
Festival Organisers (who would rent the Euro-peeing urinals)
Fertilizer Manufacturers (who would buy the nitrogen gathered from the urine)
Users:
Male Festival-goers (who would urinate into the Euro-peeing urinal)
That meant that it wasn’t enough that the festival organisers were on board. The festival-goers needed to be, as well. What if they didn’t like the design of the Euro-peeing urine, or didn’t like the idea of their urine being used for fertilizer?
And what about the fertilizer manufacturers? Could the cost of this repurposed nitrogen compete with that of existing nitrogen sources? Were there any taboos that could make this unappealing to them?
The team needed to understand, and interview, these potential stakeholders, too.
ⓒ Euro-Peeing Team, Climate-KIC Journey 2018. Used with permission.
Iterating the prototype
The feedback from all these potential customers and users was key in shaping the design of the Euro-peeing urinal. The team also worked hard on ways to make the technology more cost-effective for both the festivals and the fertilizer manufacturers.
Once they had designed their prototype, the next step would be to manufacture a small number and supply them to a few European festivals as a beta run. This was a lower-cost way of testing some of their assumptions in the real world, and continuing to adjust the design while in conversation with their customers.
ⓒ Euro-Peeing Team, Climate-KIC Journey 2018. Used with permission.
Estimating market size
In The Journey, we didn’t advocate both the ‘top down’ and ‘bottom up’ approaches to estimating market size (though now I’ve done ThePowerMBA, we will in future).
For the sake of illustration here, let’s run through a very high-level example, focusing solely on the portable toilet rental market (i.e., not the fertilizer market).
Top-down:
Taking the ‘top down’ approach, the team could start by researching the bigger picture, and then narrowing down to what was feasible for them.
For example, it might look like this:
The Total Addressable Market (TAM) = the value of the portable toilet rental market globally.
The Serviceable Addressable Market (SAM) = the value of that market portion taken up by European festivals.
The Serviceable Obtainable Market (SOM) = the % of festivals that the team could realistically convert as clients, given the team’s connections, distribution channels, existing competition, and available resources.
Bottom-up:
With the ‘bottom up’ approach, the team could look at some of their existing metrics and extrapolate upwards. For example, if they could have held sales calls with five festival organisers per week, and on average one in 10 of these converted to a client, how much of the market could they realistically capture at this stage?
The team could then combine the findings from both approaches, to give them a sense of what might be possible.
This, in turn, informed their estimation of their climate impact: how much CO2 they could potentially save through their solution.
ⓒ Euro-Peeing Team, Climate-KIC Journey 2018. Used with permission.
Key Takeaways:
The team’s Product-Market Fit wasn’t found instantly. It emerged over time, through repeated conversations with potential customers and users, ongoing research, and multiple iterations of the product. (Had it been taken forwards as an actual start-up, many more of the assumptions would need to have been tested in more robust ways.)
Even if it was a watertight business model on paper, and even if the urinal’s technology could solve an enormous environmental problem, that would all be irrelevant if nobody would use or rent their product. The idea alone wasn’t enough. They had to test, test, test, test, to find a Product-Market Fit, and create impact.