Minimum Viable Product: max­i­miz­ing potential while min­i­miz­ing risk

Many start-ups spend years de­vel­op­ing a product idea, working out a marketing strategy and investing a lot of money in pro­duc­tion. Then they present the finished product to potential customers. However, if the target group rejects the idea, the new company will quickly disappear, since it cannot recoup its in­vest­ment without revenue. Those who invested every­thing they had in it will then be on the brink of ruin. So clever founders take a different path. They start with a Minimum Viable Product (MVP).

What is an MVP? It is a product which is func­tion­al, no more, no less. This sounds quite sim­plis­tic at first, but there is solid theory behind it. Frank Robinson, the CEO of SyncDev In­cor­po­rat­ed, coined and defined the term "Minimum Viable Product" for the first time in the early 2000s. This concept spread through­out the start-up community through books such as The Lean Start-up by Eric Ries. The Minimum Viable Product is a key concept in the lean start-up phi­los­o­phy. The following will explain how an MVP can help you get the most out of your product idea with minimal risk.

You can use a Minimum Viable Product to learn whether there is a basic interest in the product and what the target group wants from the product without spending a lot of money de­vel­op­ing it. The basic idea is to avoid investing a lot of time and money in a product without knowing whether customers will be in­ter­est­ed in it. Instead, you develop a product which only has the most important functions. These functions need to work perfectly. Ad­di­tion­al features and design elements are not necessary. The first de­vel­op­ment stage of a product is not about gen­er­at­ing a lot of revenue. Rather, you use an MVP to learn from your customers and ideally answer the following questions:

• What are the basic needs of your target group?
• Does the product idea fill a gap in the market, or does it not interest the target group?
• What extra features do potential customers feel are missing?
• Can the existing core concept be further developed, or does it need to be modified in order to be suc­cess­ful?

The MVP was initially mainly used in software de­vel­op­ment teams. For agile software de­vel­op­ment using Kanban or Scrum, they rely on the build-measure-learn feedback loop. This is a feedback loop based on building, measuring and learning in which customer needs are taken into account in the early stages of product de­vel­op­ment.

Initially, there is an MVP which early adopters are the first to use. As a developer, you should inform them in advance that it is a rudi­men­ta­ry yet func­tion­al product. You should also ask for feedback. It can provide valuable insight. Then focus on making small, gradual changes. If your product has added value and you work together with your testers in de­vel­op­ing it, your potential customer base will grow with every added im­prove­ment. By working together with consumers, you will know what your customers want even before of­fi­cial­ly launching the product.

The Minimum Viable Product is used in the early stages of product de­vel­op­ment and takes customer feedback into account. However, it is more than a prototype, since its key features need to work. It is also more than just a stage of the process. It is what results from the proper ap­pli­ca­tion of feedback loops.

Henrik Kniberg explained how this approach is often mis­in­ter­pret­ed or im­prop­er­ly applied using a quick sketch. The sketch below il­lus­trates a de­vel­op­ment process in which the MVP approach was im­ple­ment­ed in­cor­rect­ly. Each symbol, from left to right, stands for an im­prove­ment made to a product being launched on the market. The smileys un­der­neath the sketch represent customer reactions. The finished product is a car. The developer is supposed to meet certain customer needs with the vehicle.

According to Kniberg, the un­der­ly­ing desire is “I want to get from point A to point B quickly and safely.”

The il­lus­tra­tion of a product launch without an MVP is similar to the first example shown of a product de­vel­op­ment process. Only the end of the chain has a usable product. Pre-launch marketing efforts are intended to generate customer interest. As the launch date draws closer, the marketing team tries to drum up even more interest. The product team hopes to have satisfied customers. However, if the product does not meet the ex­pec­ta­tions set by its marketing, there will likely be a negative customer reaction.

The mis­un­der­stood concept of a Minimum Viable Product is different from launching a product without an MVP in that the de­vel­op­ers for the latter want to sell the very first wheel to customers. However, this does not satisfy the customers’ needs as they are looking for a means of trans­porta­tion. The sub­se­quent two product launches also do not solve the problem, as they still do not offer a working vehicle. Obviously, they also did not take customer feedback. If they had, the second version (the one with just the vehicle un­der­car­riage) probably would have had at least a seat or a means of propul­sion. Ul­ti­mate­ly, they do produce a finished product. However, the happy smiley below it is more likely to represent the op­ti­mistic ex­pec­ta­tions of the de­vel­op­ers rather than the reality. This is because, as a start-up without regular customers, they would not have provided the target group with even a mod­er­ate­ly sat­is­fac­to­ry product at its initial launch. Usually, customers will not stick around for a company’s fourth attempt to see whether or not it will launch a usable product. Instead, they will give up on the company.

In this scenario, you have an idea for a product. You deploy a product with minimal de­vel­op­ment and man­u­fac­tur­ing costs. Some early adopters and a select group of test customers will then provide you with feedback. You use this feedback to help adjust and further develop the product. In the il­lus­tra­tion, there is a scooter. What can we learn from the feedback related to this change to the product?

• The customers accepted the basic idea (i.e. a means of trans­porta­tion with wheels).
• Some of them felt unsafe on the skate­board.
• Some had dif­fi­cul­ty with steering and braking.
• By adding a basic handlebar with a handbrake, you improve the safety, comfort and stability of your product.

In the sub­se­quent de­vel­op­ment stages, you improve your product’s design. Customers can travel faster and with less effort on a bicycle than on a skate­board, since they pedal and transfer this energy to the wheels via the gears. The mo­tor­cy­cle is even faster and more com­fort­able, as the riders them­selves no longer have to use any of their own energy to ac­cel­er­ate. A new feature is added to increase comfort: the seat.

The feedback loop supports the basic idea that "customers want to travel quickly and safely”. This is why you improve the product’s propul­sion in every new version. The vehicle’s speed does not rely on how many wheels it has. The mo­tor­cy­cle satisfies the basic idea–it is fast and com­fort­able. The smiley un­der­neath it rep­re­sents satisfied users. Thanks to your test customers, you have iden­ti­fied ad­di­tion­al unique selling points. After all, anyone who wants to impress the market as a company needs to deliver more than just a working product.

In the il­lus­tra­tion, the last image you see is a car. The green car (in the il­lus­tra­tion showing the incorrect approach) meets customer needs for speed and safety. It also offers enough space to seat several people. The pink car (in the il­lus­tra­tion for the correct approach) meets the same criteria.

Not all dif­fer­ences could be rep­re­sent­ed in the il­lus­tra­tion: Your customers wanted more speed. That means you have to make sure to have an aero­dy­nam­ic design and install a tur­bocharg­er. Your feedback shows that your customers want more space and increased safety, but they do not want to lose out on the feeling of freedom that they get when on a mo­tor­cy­cle. So, you stabilize the vehicle by giving it four wheels. Ad­di­tion­al­ly, a car provides more space for pas­sen­gers or luggage than a mo­tor­cy­cle. Customers can leave the top down to enjoy the summer weather. Since a product’s esthetics and in­di­vid­ual design is important to your regular customers, you launch a product with a selection of several different finishes and high-quality fittings. The result:

• Test customers have developed a re­la­tion­ship with the brand.
• Customer feedback provides data which you can use to develop new ideas for the product.
• The insight gained from this data can help you decide whether to keep or discard a basic idea.
• People want something new but not so different from what they know that it seems strange.
• Therefore, making many small changes through­out the de­vel­op­ment process increases customers’ will­ing­ness to embrace in­no­va­tions in the sub­se­quent it­er­a­tions.
• The Minimum Viable Product requires fewer resources. Making smaller changes is less fi­nan­cial­ly risky. Customers are more likely to accept gradual increases in price than large spikes.

The Minimum Viable Product is a part of agile product de­vel­op­ment. During the de­vel­op­ment process, the product is con­stant­ly being evaluated. Agile product de­vel­op­ment is known for having a change­able process, which means that the de­vel­op­ment team can change course at any time. This usually involves small changes. Agile product de­vel­op­ment is defined by the following char­ac­ter­is­tics:

• It is iterative, so it is con­stant­ly repeating itself.
• It is in­cre­men­tal, so it changes little by little.
• It saves time and resources through short de­vel­op­ment stages.
• It makes it possible to get immediate feedback.

The Build-Measure-Learn concept with a feedback loop is not only used by start-ups. Large companies also use agile project man­age­ment to reduce the risks involved in resource-intensive projects. Ul­ti­mate­ly, these ap­proach­es are only selected because large companies usually have an existing customer base and a well-known brand name. Unlike start-ups, they have an edge in terms of resources and customer loyalty. It is important for start-ups to design a Minimum Viable Product which meets current standards because consumers are expecting a product which at the very least can perform its basic function well.

The meaning and use of the term “Minimum Viable Product" have changed over time. Since the main goal is to create a product which appeals to the customer with minimal effort, this concept may not be ap­plic­a­ble in all cases (because if there is strong com­pe­ti­tion, the customer may not be satisfied with just basic functions). As a result, some man­age­ment experts are now talking about the minimum awesome product or the minimum lovable product.

Maslow’s Hierarchy of Needs can show which needs a Minimum Viable Product has to satisfy. For a customer to buy a product, it must satisfy a need. First of all, the customer must feel that something is missing. When a person’s basic human needs (e.g. food, sleep and safety) are satisfied, they tend to long for more (e.g. recog­ni­tion or luxuries). What we require from products and services can be rep­re­sent­ed in a hierarchy of needs.

According to the old de­f­i­n­i­tion, the Minimum Viable Product only needed to satisfy the customers’ basic needs so that their feedback could be used to test their product idea. Advocates for this approach like to cite the streaming service Spotify as an example.

The Swedish company was founded in 2006 during the heyday of music piracy. Back then, many users were down­load­ing music illegally, often from virus-infected websites. Long loading times further reduced people’s enjoyment of music. Spotify found a way to stream music, thereby reducing download times. The theory is that people do not nec­es­sar­i­ly have to own music phys­i­cal­ly as long as they can listen to it on the internet. Spotify’s website looked very empty in 2008. Its website only provided a download link for the beta version of the Spotify player and explained how the service worked. Over time, the service grew and offered more and more features.

Advocates for the Minimum Viable Product approach often fail to mention a few things when talking about this example.

• In 2006, internet services and data transfer rates were not as advanced as they are today. Even down­load­ing simple images often took several minutes.
• Spotify was a pioneer in streaming, so there was prac­ti­cal­ly no com­pe­ti­tion.
• In addition, many consumers found streaming to be much more con­ve­nient than down­load­ing illegally which sometimes took hours. Spotify was also cheaper than official music download platforms which charged one to two dollars for a single song.
• Spotify expanded its library on its own and improved its algorithm for music selection.
• The service’s operators (a team of six) quickly and ef­fec­tive­ly responded to error messages and questions.

As this example shows, a Minimum Viable Product is not nec­es­sar­i­ly the product that can be produced and launched with the least possible effort. Before you act on your product idea, you need to analyze the market situation.

• Is there a gap to fill in the market or is it over-saturated?
• What strate­gies do market leaders in this sector use to stay on top? Do they force out newcomers using similar offers, do they buy them out or do they actually outshine their com­peti­tors with their in­no­va­tions?
• Does the product satisfy a niche need or a general need?
• What are the most popular products in the target market and why? (Esthetic appeal, price, ease of use and functions)
• What functions do customers normally/at the very least expect? (e.g. simple login using existing services, such as Google and Facebook being used to log into gaming websites, or having an anti-lock braking system and air con­di­tion­ing in a car)

Certain rules apply in es­tab­lished markets. If you want to be suc­cess­ful in these markets in the long term, you need to un­der­stand the rules. Even dis­rup­tive business models are ul­ti­mate­ly bound by these rules.

The Minimum Viable Product should always be con­sid­ered a part of the agile de­vel­op­ment process. While it is important to work out exactly how you are going to design your product so that you can answer questions about your product idea later, you should also offer customers something which promises to provide an in­no­v­a­tive solution. Back in 2006, music-loving early adopters of Spotify found its simple website to be perfectly ac­cept­able. Nowadays, it would very likely disappear as we have streaming services run by AI with dynamic websites and mobile downloads. Ex­pec­ta­tions have gone up. How to inspire early adopters:

• Use (in­flu­encer) posts on social media to generate desire.
• By having a user-friendly design, your MVP will receive positive reviews on consumer websites. This in turn generates interest among new consumers.
• Shine a spotlight on your project idea.
• Having a good design makes it more at­trac­tive.

As with the classic hierarchy of needs, the needs related to a product also fall into a hierarchy. Therefore, you should put most of your energy into these aspects:

• Func­tion­al­i­ty
• Re­li­a­bil­i­ty
• User-friend­li­ness

If you advertise your product as being im­pres­sive and in­no­v­a­tive when it really only has the basic expected functions (il­lus­trat­ed in the pyramid on the left in the image above), you will likely be ridiculed by your initial testers and customers.

The hierarchy of needs on the right uses the purple marking to show how you should weigh the various needs related to the Minimum Viable Product. If all ex­pec­ta­tions and needs are satisfied (but not exceeded), it is referred to as a minimum awesome product. In the Build-Measure-Learn process, the purple area in the hierarchy of needs will ideally increase with each iteration.

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