Why Minimum Viable Product (MVP) for Startups? An Ultimate Guide
Fig : In the cupcake model minimum viable product, product teams start with a smaller yet complete product that is far more desirable. It has the appeal of a complete cake, taste, icing and filling, etc., but its production costs are much lower.
Minimum Viable Product
Eric Ries, a Silicon Valley entrepreneur and author of the book The Lean Startup, famously quoted, “A minimum viable product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort”.
In layman’s terms, a Minimum Viable Product (MVP) can be defined as the basic product that helps entrepreneurs start the process of learning as quickly as possible. This may not necessarily be the simple most/smallest possible product but it is the fastest possible way to start gaining insights on building a viable business with least amount of effort. An MVP is mostly a basic product version, however, as per the above definition, an MVP can be anything from landing pages, Kickstarter campaigns or even explainer videos or blogs.
Why a Minimum Viable Product?
The Lean Startup Methodology directs the entrepreneurs to focus on releasing a product in the context of the ‘build-measure-learn‘ feedback loop. The initial step is finding out the real world problem you are trying to solve, this involves learning present scenarios and proposing a solution. The ideas harvested can be used to build a Minimum Viable Product which is no way a perfect product, but imitates the ultimate functionality of the product.
Once the MVP is organized it can be used to measure and learn about the idea, its feasibility, market acceptance, financial implications, and more by demonstrating a cause and effect scenario. The ideas created from the learning can be used to iterate on the MVP to develop a better product. This kind of learning which is based on trying out an idea and validating its effect is called Validated learning. This is repeated until considerable insights are gained and a complete product is released.
A Minimum Viable Product (MVP) is a fast, and safe way of testing a product in contrast to conventional methods of product development which includes a lot of pre-discussions, a large budget, and resource utilization.
It all started as an MVP
The idea of DropBox MVP evolved from the real world problem of file sharing. DropBox founder Drew Houston often used to forget his USB drives while he was a student at MIT. The existing file sharing services of the time were too unreliable which made him think to develop a new product for his own use. The idea was simple. Install DropBox in your computer, create an account and upload files into it and the same will be replicated across all your connected devices. He did realize the potential for such a concept and that it could help a lot of other people, and he wanted to develop it into a product.
Developing a product investing a long time and ending up with a product nobody wanted was a huge risk on the cards. However, demonstrating such a product with a prototype was not technically feasible and also involved high costs and expert technology. This made him use the simple idea of putting up an explainer video on the website. He made a 3-minute explainer video on how the product worked, which received a lot of positive feedbacks. The video posted on Hacker News went viral and the beta list jumped from 5000 to 75000 overnight.
The data received was really helpful and the idea was conceptualized to make the final product. DropBox earned multiple VC investments in the coming years and a registered user base of 500 million as of March 2016.
Founders Brian Chesky and Joe Gebbia wanted to start their own business but was unable to put themselves in the high rent of their San Francisco apartment. The idea for Airbnb MVP (AirBed & Breakfast then) was based on the initial assessment that people are willing to share bed space in other homes rather than a hotel. It was put into test during the design conference in town.
They made a website and posted pictures of their living room. They provided cheap accommodation, bed, and breakfast and the first three guests were conference attendees who couldn’t find a hotel room. The interaction with the guests provided valuable insights on what the customers want. During the initial stages, the company targeted high profile events where lodging was scarce. The company raised funds selling special edition breakfast cereals and ultimately attracted VC investments.
In the year 1998, co-founder Nick Swinmurn was walking around a mall in order to buy a pair of shoes. However, he could not find one pair of his choice after spending one hour in the mall. He saw the need and the bigger opportunity of selling shoes online, people could easily match up their preferences and buy shoes of their choice. The assumption of the MVP that people would buy shoes from an online store were to be tested.
Instead of investing in infrastructure and inventory, Swinmurn took pictures of shoes from shoe stores and displayed it on his website. When someone ordered the shoe, he would come and purchase it from the store and send it to the customer.
This kind of Minimum Viable Product is called Wizard of Oz or man-behind-the-curtain which fakes full functionality of the product until the same is achieved. The Wizard of Oz MVP offers useful customer interaction, insights and opportunities to test many assumptions.
In the year 2009, the company was acquired by e-commerce giant Amazon for a reported $1.2 billion. Today Zappos sell more than 50,000 varieties of shoes accounting for 80% of overall sales and other products such as clothing, handbags, eyewear, watches, and kids’ merchandise accounting to 20% of sales.
There are other successful MVP stories which made it great. Buffer – used a landing page as MVP to gauge consumer insights, and Pebble e-paper watch – used Kickstarter page as their MVP, are a few to name.
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