Great business ideas are rarely born out of the blue. They are brainchildren of entrepreneurs who know their craft. Airbnb, Uber, or Dropbox - they all started as simple MVPs. They were testedand iterated in a cost effective manner before they developed into fully-fledged lucrative products.
Your startup success hinges on your MVP process. The stakes are high, so buckle up.
An MVP, or a minimum viable product, is the most basic version of your product. It has only those features that are the most useful from the user's perspective.
The goal of building a minimum viable product is to attract early adopters and validate a business idea.
3 main business benefits of building an MVP
By building a minimum viable product first, you're not only able to avoid a number of mistakes that are costly and hard to recover from. An MVP built based on the best practices also guarantees you:
Create a product that is truly user-centric
Gain market differentiation
Benefit from the first-mover advantage.
Let me explain:
1. Building an MVP is cost-effective
Learning is an essential part of the MVP-building process. In the process, you do user research and collect user feedback. The insights you gain make valuable input that you'll rely on throughout the whole product design and development process - at the MVP building stage and beyond.
It helps you choose the right features to include in the MVP version of your product and lets you make more informed choices when you scale the product in the post MVP development stage.
2. You gain user centricity and market differentiation
Creating an MVP is an iterative process. As you progress, you prototype, test, and act on user feedback. By committing to garnering user insights and acting on them, you put the user in the centre of the process.
The more you focus on your users, instead of frantically looking for advantage over your market rivals, the better your chances of achieving market differentiation and substantial market share.
The user insights you collect secure your position in the market. They let you reap the benefits of the first-mover advantage without worrying about the fast followers that lack the knowledge and the long-term perspective you have.
3. (Crowd) funding opportunities open up
The insights into the user needs have a monetary value. Some of Kickstarter's success stories prove that uncovering valuable insights into your users' context and meeting their needs in an unexpected way can jump-start your project.
Find a compelling way to tell their story, and you'll be able to launch your product faster. You'll also start building a loyal user base even before the product rolls out.
“In 2019, the failure rate of startups was around 90%. 21.5% of them fail in the first year and 30% in the second year.”
The top 3 reasons for the flop are:
1. Running out of money
2. Failing to target the right market
3. The lack of research
If you think of it, all these three reasons boil down to the lack of knowledge you get from the research:
Running out of budget may result from poor planning. But oftentimes, the reason is failing to generate revenue because of no value proposition and the lack of product-market fit. Both are linked to insufficient understanding of the target group due to no or little research.
So, how to build a minimum viable product to succeed?
Your first step should be discovery stage research: uncover and validate insights into your target group and make sure you have a deep understanding of the problem you want to solve.
1. Define your product personas
What is a product persona?
A product persona is a profile of your typical user. The way you construct a persona will largely depend on the type of app you're developing. In most cases, the descriptions of personas include:
Employment and the size of their company, company role and where they are in their ecosystem, their daily responsibilities (or jobs-to-be-done)
Users' pain points and gains (unexpected advantages of using a solution)
Their level of experience with technology.
Founders often go through the motions of creating personas. But you don't want to simply tick this step off. How you'll approach personas creation will decide on the success of your venture.
To be reliable, personas shouldn’t be a result of pure guesswork. They need to be a blend of real potential users. Only by understanding their specific needs and their realia, you'll be able to solve the specific problems they face. Moreover, having insights into their motivations, dreams, and ambitions will let you empathize with them and will unlock creative solutions.
How to uncover those insights? Start by running a survey in which you collect both quantitative and qualitative data. Quantitative data will help you see behavior patterns, while qualitative, open-ended questions will uncover first insights into the personas’ behavior.
By running a survey, you’ll have the opportunity to select and invite the right people for interviews. You need them. Knowing anecdotes about the personas or having quotes from them will make it easier for you to write user stories and adopt a user perspective when designing user journeys.
So, allocate enough time to do both quantitative research and qualitative research.
While the survey is running, you can focus on doing some more prep work:
2. Do market research
Analyze your direct competitors. You want to do that, not to copy solutions or focus too much on competing against them. What you're looking for is understanding how the personas' needs are met by the competition and to what degree.
You can also investigate the sentiments around your competition. Do it by adapting a product-market fit survey to your needs. Instead of asking: "How would you feel if you could no longer use our product?", ask: "How would you feel if you could no longer use XYZ's product?"
This way, you'll hear what their customers think of them straight from the horse's mouth.
3. Come up with the unique value proposition of your MVP.
What is a unique value proposition? A unique value proposition (UVP) is the core value you offer to your customers, differentiating you from other players.
Here is the UVP template by Strategyzer:
When looking for what your UVP should be, you list the personas' jobs, pains, and gains and decide which are the most lucrative from the business perspective.
Once you’ve understood the personas’ realia and decided which of their needs are valid from the business point of view, you’re ready to move on.
When you start working with the canvas, it's perfectly O.K. to rely on your intuition only. But do not stop there! Jot down a couple of hypotheses on sticky notes and put them on the canvas. Then run a customer discovery survey to test your assumptions.
4. Generate hypotheses to test
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with the experiment, it's wrong.” - Richard Feynman
A hypothesis is an educated guess that you need to validate with data before you invest real money in implementing the idea.
How do you create an effective hypothesis?
A good hypothesis has 3 qualities:
It can be tested.
It focuses on one thing at a time.
Let's assume you design an app for dentists.
Your Value Proposition Canvas says that one of the pain points dentists have is planning their medical inventory supply. They'd prefer to focus on treating patients rather than waste time doing this mundane job.
You've assumed that being able to easily control the supply and coordinate it with the patient data system would be a valuable gain for them. That's your assumption only - a guess that you need to verify to rely on it.
Here are some hypotheses that you could formulate in this case scenario:
"We believe that dentists with their own medical practice would like to have more time for patients."
"We believe that dentists with their medical practices are looking for solutions that would help them manage the inventory."
"We believe that dentists who run their medical practices are willing to pay $100 a month for a system that facilitates inventory management."
All those hypotheses are testable.
They have sufficient precision level: Your target group is dentists who run their own practice.
In the case of the last hypothesis, you specify the amount of money. And, they all focus on only one unknown to verify. Ideal.
All you need to do now is to specify:
How you're going to verify these assumptions.
What metrics you're going to adopt.
What the success criteria are.
5. Run a customer discovery survey
One of the hypotheses validation techniques is running a customer discovery survey. Such a survey lets you go deeper into the jobs, pains, and gains from the Value Proposition Canvas so that you can prove, or disprove, your guesses based on data.
In our dentist app example, a discovery survey verifying the hypotheses would include questions like:
"How much time do you spend on managing appointments?"
"When was the last time you overstocked?" / "When was the last time you had a problem with the medical supply necessary to finish treatment?"
"What impact did it have?"
You'd also need to gauge if the problem is pressing.
Sending out a customer discovery survey is a great way to gather aggregate data to probe the scale of the problem.
Survey answers are declaratory in nature and the feedback they provide doesn't offer strong evidence. Yet, quick and easy to set up, they are useful tools to reduce the uncertainty levels that tend to be high in the early stages of development.
Running a survey doesn't take a lot of time and can save you losing months of heading in the wrong direction (if you pursued false assumptions).
A customer discovery survey should help you validate your initial guesses about the jobs, pains, and gains; uncover new interesting areas to address with your design.
Now that you've done customer discovery and listed the jobs, pains, and gains you can potentially address, you need to select those you're going to build your MVP around.
To do this, you can base on your intuition or follow Alex Osterwarlder's advice to have users vote on which ones to include. In other words run another survey.
6. Run a Unique Value Proposition Survey
The idea behind a UVP survey is simple: Have potential users point at the jobs, pains, and gains most vital to them and provide them an opportunity to comment.
The survey is simple yet powerful. It skyrockets your chances of building innovative products that users actually use and need.
And it allows you to do so quicker and more cost-effectively as you save time developing the product. The right direction at the start means not only a good concept and successful final product but also fewer iterations and more efficient development.
Surveys are an excellent research tool - quick and easy to use, capable of collecting large amounts of data. They are an integral part of a researcher's toolkit.
When working on new projects, they are not enough, though. To know you're heading in the right direction so that you can further invest or acquire funding, you may want to top the survey feedback with more evidence.
1. Create a landing page promoting your MVP’s value proposition
A great way to check the validity of your MVP's value proposition is to create and promote a landing page.
If it's the first time you hear of it, the idea may raise your brow. But, running a mock campaign promoting a product before the actual development process is becoming a standard practice. It's perfectly feasible unless you're an institution with rigid internal regulations.
The company still exists on Kickstarter, having collected over $20 mln as of this day.
There's no better proof of an MVP's product-market fit than having so many early adopters backing up the project financially or pre-ordering the product.
Explainer videos can also be used in your marketing campaigns:
Combined with a landing page and a signup form, they're ways to validate your ideas, find research participants, and build your first user base.
3 ways to measure the success of your MVP strategy
The number of paid customers and a monthly revenue are the ultimate ways of gauging your product's financial success. These two metrics are probably the first ones that come to mind. They are telling, but they're not very actionable, though.
To make sure the MVP you've built is doing well, I recommend you:
2. Keep an eye on the number of daily and monthly active users
The number of signups you have is some indication of success. However, it is the number of active users that is important. By monitoring it, you'll be able to assess a still more vital metric - product engagement.
3. Measure product engagement
Engagement is the lifeblood of your MVP. To be able to tell to what extent the users are using your product, you need to come up with an engagement model and learn to score it:
First, based on the MVP's value proposition, come up with a list of events that need to occur in the product to say it's being used according to plan.
These events could be:
A screenshot taken
A message sent
A catalog created and shared
Once you're clear about how active users should use the product, develop an engagement scoring system: Decide on the weight of each of the events and assign scores.
The engagement score is not only a tangible way to assess the success of your product. It'll also help you detect power users, who are most satisfied with your product and identify future research participants.
You can also use the scores to identify potential detractors before they detract.
7 mistakes to avoid while developing a minimum viable product
The most frequent mistakes entrepreneurs make include:
1. Skipping the learning phase or doing insufficient quantitative and qualitative research
As already mentioned, this may cause a fiasco of the project. Not doing enough research may lead to focusing on the wrong personas or solving fictitious problems. Ultimately, it results in no product-market fit.
2. Not testing the critical hypotheses
When deciding on an MVP you need to be skeptical of your convictions. By assuming that you know what things are, you risk failing to test assumptions critical to the entire project. You end up spending weeks verifying hypotheses that are based on falsehood!
3. Not prototyping and failing to collect user feedback and not iterating based on new insights
Testing the prototypes with future users is an excellent way to see the product in action before splurging money. Prototype testing with users is crucial, especially when developing new products. Developing an MVP is cost-effective, but most of the time, it's not cheap. You'll avoid wasting money on a poor MVP idea if you test even low-fidelity prototypes first.
4. Not iterating
The product design process is iterative by nature. If you don't see the need to iterate, you should stop. There's a chance that you weren't objective when running the test, or your research was biased. It looks like your project is a water-fall one in disguise.
5. Failing to have a won’t-have features list
Your list of features to implement should have several categories: must-haves, should-haves, could-haves, and won't-haves, where must-haves tie closely to your value proposition and won't-haves are on the other side of the spectrum.
Not being able to select features you definitely won't include in your project is a warning sign. It may suggest that you don't have a good idea or are unclear about the core value proposition. Consider going back to the personas research.
6. Not allocating budget to the go-to-market phase
Sometimes, inexperienced entrepreneurs focus so much on the challenge of honing the business idea and building the MVP that they overlook certain important aspects of launching a new product. They fail to include the costs of taking the product to market and maintaining it in their plan.
You also need to allow for things not going according to plan and the fact that you may need to wait for satisfactory ROI. Bear in mind that you'll need an initial kick-off budget before you see a return.
7. Failing to test branding before the launch
Even though rebranding is always an option, building a strong brand is integral to every good go-to-market strategy.
Strong brands make strong connections with customers. They tap into their imagination and aspirations and simply stick. They help you monetize your product with higher pricing tags.
Testing an MVP is an excellent opportunity to collect feedback on your brand. You can either talk to the experiment participants or send out a survey and collect larger amounts of data.
If you need to test your brand's name, use this template:
NET PROMOTER, NPS, AND THE NPS-RELATED EMOTICONS ARE REGISTERED U.S. TRADEMARKS, AND NET PROMOTER SCORE AND NET PROMOTER SYSTEM ARE SERVICE MARKS, OF BAIN & COMPANY, INC., SATMETRIX SYSTEMS, INC. AND FRED REICHHELD.