The Product-Market Channel Fit Framework: How Box Creates High-Growth Products

September 7, 2021

Finding product-market fit is an obsession startup founders, product managers, and C-suite executives share.

In the PMARCA guide to startups, Marc Andreessen defines product-market fit as being in a good market with a product that can satisfy that market. In other words, it’s the sweet spot where the product satisfies customer needs.

You can tell you’re a long way from finding product-market fit when customers keep ditching you for competitors and new users aren’t signing up. On the flip side, when customers keep coming back for more of your product and their success stories inspire others to choose you over competitors over and over again, you’ve found market fit.

A laser-focus on customer needs is how Box, a secure cloud content management service, grew from a $1.7B IPO Valuation to a whooping $4.084B.

Today, the cloud content company is trusted by 100K+ of the world’s leading organizations, including AstraZeneca, Intuit, and Broadcom. The product makes it easy for remote and hybrid teams to collaborate securely from anywhere and integrate their tech stacks across 1,500+ best-of-breed apps to boost productivity. Users can do their best possible work while being secure and compliant.

To achieve this result, Box followed a repeatable step-by-step process that PMs can apply to build and ship products people love.

In Episode 6 of the People-Driven Products podcast, Alok Ojha, Box’s VP of Products (Enterprise, Security, and Compliance), dives deep into the company’s product development process before and after achieving product-market fit. Alok has extensive experience launching products in the enterprise software industry. He has served at leading enterprise SaaS companies like Proofpoint and RSA, as well as startups like CloudPassage and Syncplicity.

In this article, we will break down the step-by-step approach to discovering product ideas, launching new products, identifying product-market fit, and iterating successful products. Alok shares how his team launched Box’s fastest-growing product, Box Shield. He also shares the critical qualities successful product managers should have.

Box Shield: A Product-Market Fit Case Study

Throughout Alok’s career, he observed that cybersecurity companies were obsessed with solving data leakage issues but didn’t care much about the end-user experience.

“One of the fascinating ironies of content security is that, as fast as technology evolves, the industry is still trying to solve modern challenges with a mindset that’s 10+ years old,” Alok said. “My goal is to change that. Just because something has always been that way doesn’t mean we can’t improve it.”

Alok’s desire to build customer-centric products led him to seek out new opportunities. In 2017, Alok joined Box to build best-in-class security products and still focus on end-user experience. After he joined the company, Box's IT team discovered a data leakage problem. Alok and the team interviewed hundreds of customers about security issues to identify common pain points customers shared.

After going over the research data and analyzing user behavior patterns, the team discovered common problems these customers shared.

First, there was the issue of data leakage from existing security tools. These tools either detected leakage too late or not at all. At the same time, the existing solutions impeded user productivity. In other words, they weren’t user-friendly, and it caused users to find innovative ways around the tool, which worsened the data leakage issue.

Since Alok and his team cared about creating a frictionless experience, they swung into action to eliminate the leakage for good. In 2019, they launched Box Shield, the fastest-growing product in the company’s history:

According to Aaron Levie, co-founder, and CEO of Box, growing demand for Shield continues to accelerate the adoption of Box’s bundled Suite offerings, contributing greatly to the 2021 fiscal year revenue of $771 million.

“Shield’s vision is to deliver frictionless security to help our customers prevent leakage of sensitive information and detect content-centric threats,” Alok says. Box creates a frictionless user experience using these four principles:

With Box Shield, Alok and his team go beyond solving the leakage problem to creating a seamless experience that keeps users coming back for more.

The tool inspires user productivity as they don’t have to worry about having their data ending up in the wrong hands. “PMs should listen to their customers, understand their goals, and empower them to achieve their goals by creating a frictionless user experience,” Alok says, “That’s an effective way to build trust, inspire loyalty, and create better products that have outperforms competitors.”

You can gather meaningful, in-the-moment user insights by using an all-in-one product research platform to know what your customers are thinking, choose what problems to prioritize, and create products that people love.

Create your free account to capture meaningful, in-the-moment user insights with Sprig

Product Market Channel (PMC) Fit Framework: Box’s High Growth Strategy

Even though Shield’s reputation as the fastest-growing product in the company’s history is proof that the company achieved product-market fit, Alok argues that finding product-market fit alone is not enough.

Brain Balfour, former VP of Growth at Hubspot, backs up Alok’s claim, saying, “Product-market fit is not the only thing that matters. There are plenty of companies that have all the product-market fit signals but still struggle to grow, and definitely don’t reach a $100M+ product.”

In other words, adding new, exciting features to your products alone won’t result in consistent growth. Rather, the growth would be hockey-sticky like this:

Neither will achieving product-market fit alone help you sustain growth long-term. Sure, the NPS score can feel good, and even the retention and organic growth may be steady. But it might not suffice in the long run if you don’t realize that product-market fit goes beyond the product and the market. It includes a third, equally critical component: channels.

Alok calls this framework, the product-market channel fit:

Each part of the framework plays a critical role in determining a product’s growth. If you are a mathematical geek, Alok says, you can look at the framework as a function of three variables: market, product, and channel.

The market is king, Alok says. It neither cares about the product or the channel. Your customers only care about their problem and how to make it go away, whether or not your product is the solution. Neither do they care about the channel you use to reach them. Andy Rachleff, President and CEO of Wealthfront, shares Alok’s philosophy. “The #1 company-killer is the lack of market,” he says. “Market matters most. When a great team meets a lousy market, the market wins. Additionally, when a lousy team meets a great market, the market wins. When a great team meets a great market, something special happens.”

The channel, on the other hand, has to care about your target market. It doesn’t care about your product and its amazing features. PMs need to understand that the product has to cater to the market as well as the channel, Alok says. If you pick the right channel—the one where your “market” hangs out—you can reach them easily.

Product Market Channel (PMC) Fit: Three Levels of Optimization

There are three optimization levels to the PMC Framework: product, market, and channel. You're essentially looking for customer-problem fit, solution-channel fit, and channel-market fit. These are critical when it comes to building the product the right way. Let’s explore each one in detail:

Step 1: Market Optimization

Alok defines market optimization as a set of activities that PMs can perform, and the outcome lets them know whether or not they understand their target market.

The activities in this area are:

1. Problem Discovery:

Here, you carry out in-person customer interviews. It gives a human face and touch to your brand. According to Alok, the human touch is critical because listening when your customers share their pain points is important, especially early in the product development process. You’ll hear their pain points first-hand and truly understand their feelings. And you can develop a hypothesis based on your insights from those conversations.

To validate the hypothesis, you have to conduct a survey. A survey, Alok says, shouldn’t be done all the time. Sometimes, depending on the product, you can develop a cheap prototype. For a web-centric product, for instance, a prototype is a quick fix. You can measure how people are responding and resonating with the prototype.

2. Discover Customers and Test For Market Attractiveness:

Most PMs tend to neglect this stage of the process, Alok says.

Customer discovery involves checking to see if there is a problem that multiple customers care about and grouping them accordingly. If a group of customers is big enough, then you have an attractive market for that problem.

Here’s how you test for market attractiveness:

  • Is there a problem?
  • Are there enough customers who care about the problem?
  • Is the problem big enough for us to actually consider?

The outcome of the market optimization process is customer-problem fit. That means you have a consistent problem and enough customers who care about seeing that problem go away.

Step 2: Product Optimization

At this point, you identify the right user through conversations and user testing. Then you build and validate the product to ensure it is hitting the customer’s pain points.

Alok’s rule of thumb is that if a customer shares three pain points, your product has to solve at least one. The number one pain point can sometimes be so complex and expensive to build that you shouldn’t prioritize it right away. As long as your product solves one of those problems, it’s okay, Alok says.

Another thing you need at this point is validation. As a product manager, you are the first salesperson, Alok says. Validate that you can sell the product, that you can pitch it to investors and anyone else, that it resonates with the target market, and that people will buy it right after beta.

Another thing you need at this point is validation. As a product manager, you are the first salesperson, Alok says. Validate that you can sell the product, that you can pitch it to investors and anyone else, that it resonates with the target market, and that people will buy it right after beta.

The outcome to look out for in this step is two-fold:

  • Problem-solution fit to validate that the product is usable and better than the alternatives in the market. This metric helped the Box team when they were building Shield, according to Alok.
  • Solution-channel fit to ensure you can sell it through the organization’s available channels.

Step 3: Channel Optimization

In this stage, PMs measure success using key metrics like repeat sales. You look out for “channel-market fit” to ensure you can sell it through the organization’s available channels. You can do this by asking these questions:

  • Can non-founding team members sell the product?
  • Can anybody besides me or my counterpart in marketing sell the product?
  • Can salespeople now sell it separately?
  • Is the customer acquisition strategy working?
  • Are those in the pipeline closing and converting with a good ratio?

Regarding pricing, Alok recommends that PMs align with the existing pricing model tiers and structure and see how people respond unless the business model of the company is changing.

In the enterprise space, one of the key pricing lessons Alok shared is that people buy against the budget. “It doesn't really matter what pricing chair you have,” he says, “A person will fit the right tier to the right discount against the budget. That's just a fact of life.”

His advice?

Don’t worry much about the pricing. See how things are landing and then figure out what based on some initial sales data. The outcome, in this case, is that you now should have the channel market fit. This means that you have repeatable sales, your ARR is growing, and your net retention is at 110% or higher.

Conclusion

Alok's roadmap from ideation to product launch is both comprehensive and replicable.  His three key components are product discovery, customer discovery, and market attractiveness. Box Shields’s success is proof that the company is obsessed with solving customer problems and delivering an excellent user experience.

PMs need to remember that product-market fit is not a destination, but a journey. You can get some impressive figures now, however, if you don't keep up, you might lose the fit, and your product will lose relevance. The market continues to evolve. So always keep adding, Alok says.

Ultimately, customer insights are the most important element in achieving product-market fit. Without these insights, it’s impossible to know what your customer thinks, how they feel, and how they make decisions.

You can gather meaningful, in-the-moment user insights by using an all-in-one product research platform to know what your customers are thinking, choose what problems to prioritize, and create products that people love.

Create your free account to capture meaningful, in-the-moment user insights with Sprig












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