Building new products and services is a risky endeavor. It’s hard to know whether your idea will take off. Deciding on what features to add is challenging as well since you lack user feedback. Whether you’ve secured a major funding round or merely invest your time, it’s stressful thinking when — and if — those efforts will eventually pay off.
The fact that over 70% of startups fail because of premature scaling doesn’t make the lives of entrepreneurs any easier. In fact, validating a business model takes two to three times longer than founders expect, while almost half of innovations fail due to prolonged development time.
Fortunately, there’s a way out of this deadlock. Instead of investing your time and money into building a fully-fledged product, you can first develop a Minimum Viable Product (MVP). The American entrepreneur Eric Ries defines MVP as “the version of a new product that allows a team to collect the maximum amount of validated learning about customers with the least amount of effort.”
A Minimum Viable Product helps you test assumptions, explore the market, and talk to customers before fully committing to the project. To help you master this development strategy and apply it to day-to-day projects, we’ll explore its benefits and challenges, how to build an MVP, and examples of how some of today’s tech giants grew out of successful MVPs.
DIFFERENT TYPES OF MINIMUM VIABLE PRODUCTS AND THEIR BENEFITS
There are multiple approaches to creating an MVP, primarily driven by the nature of the product, the goals for the process, and the resources available. What differentiates the types is their level of actual functionally versus what is simulated or left to the imagination.
A Functional Minimum Viable Product
Far from being a loosely defined prototype, a functional MVP is an actual working product with a carefully-selected minimal set of features. In application development, a functional MVP can be a simplified version of a mobile or web app that users can experience directly. The goal is to observe real user interactions instead of running surveys or asking the target audience how it would behave if your product were complete.
Feedback from early adopters helps you test business, marketing, operational, and engineering assumptions. As you use this feedback to refine initial features, your MVP will grow into a fully-fledged product that tackles customer pain points.
A Non-functional Minimum Viable Product
Some companies opt for a “no-product MVP” approach that allows an idea to be tested and validated without building an actual product or doing the coding. The first way to do this is through “idea visualization” where media such as images and videos are used to demonstrate the form and functionality of the would-be product. From there, entrepreneurs would use marketing campaigns to test whether their theory or product concept will gain any traction. This can involve starting a product presale before it’s actually built — think Kickstarter campaigns. If people give money for a product that’s yet to be produced, then that’s a promising sign.
Another form of non-functional Minimum Viable Product is the “product mock-up MVP”. It involves companies building a limited set of the features of their future product. But instead of developing fully automated solutions, they use manual labor to replicate core functionalities and deliver a close-to-genuine user experience. This can involve a series of physical mockups that are manually manipulated through user interaction. If user feedback looks promising, then the company moves forward with building automated functionalities.
Choosing an Approach
Generally speaking, Functional Minimum Viable Products require more investment but provide a more accurate impression of whether or not a product will be successful. They also provide a head start on the development process. Non-functional MVPs can be a lower-cost alternative to help assess market interest and jumpstart the design process. The two types also aren’t mutually exclusive — transitioning from a non-functional MVP to a functional one may make sense depending on your product.
Regardless of which approach you take, there are many benefits of building an MVP. You’ll be able to validate your assumptions with early users and avoid costly mistakes. Also, early adopters may grow into a profitable user base. Their feedback will help you test and find the best marketing approaches that can inform your future outreach strategies. Depending on how well your MVP performs, its success can attract investors willing to support your business endeavors.
STEPS INVOLVED IN BUILDING AN MVP
Building a Minimum Viable Products starts with recognizing that although your product idea might be great, it’s wise to do market research and check whether someone actually needs your solution. One way to go about that is by analyzing users’ needs. Run surveys and talk to people to identify real-life problems your product or service could solve. Also, analyze what your competitors do as that will help you to not only understand their strengths and weaknesses but also find ways of differentiating your solution.
Once you gather the initial data, define your target audience. Make it as specific as possible. Also, spend time building your buyer personas and defining their characteristics such as age, profession, education level, hobbies, goals, and earnings. Failure to do market research and define the target audience can be disastrous as 42% of startups list ‘lack of market need’ as the topmost reason for their collapse.
The next stage of the MVP development process involves refining the core value proposition of your product. Why would customers buy your product, what value do you offer to them, and what is your competitive advantage are just some of the questions you should ponder. Answering them allows you to express your idea more effectively.
Now that you’ve honed in on your target audience and have a clear value proposition, it’s time to define the user flow. The first step is to decide on your product’s primary goal. Then, outline the steps required to reach that goal. Say, for example, that you’re building an online shop whose primary goal is selling shoes. The user flow would comprise steps such as ‘find shoes’, ‘buy shoes’, ‘manage orders’, and ‘receive orders’. Work on simplifying processes and making them as user-friendly as possible. Once the user flow is defined, it’s time to work on features.
At this stage, list all the features you want to build for each MVP stage. Then, categorize them based on their priority, from high to medium to low. Asking questions such as ‘which features users want versus which features they actually need’ or ‘what’s the single most important action users should accomplish’ will help you identify core features. Other ‘nice-to-have’ features can be considered only when the market validates your idea.
With key functionalities defined, it’s time to build your MVP. Your goal should be to release the product in the shortest time possible to test assumptions that underlie your idea. Keep in mind, though, that although an MVP has a minimum set of features, it still must fulfill your customers’ needs.
Once your product is released, try to collect as much feedback from users as possible. They’re the ones who can tell what’s lacking and what’s redundant in your product, guiding you to make crucial changes. As you perfect your MVP, consider adding new features to test their impact. This process can be repeated indefinitely as long as the user feedback is positive. But if initial reactions are unfavorable, then you might consider pivoting to a different solution or by making significant changes.
MISTAKES TO AVOID WHEN BUILDING AN MVP
Building an MVP might sound like a straightforward process with defined steps. In practice, however, there are many challenges to overcome and mistakes to avoid.
Some entrepreneurs might find it hard to strip away the features they believe make their solutions special. Nonetheless, it’s critical to resist the urge to build almost a complete product. Stick to the core features defined in the previous steps. Make a good impression on your audience and only then invest time and money into building a fully-fledged product or service.
Knowing what customers need is important for defining the key features your product should offer. Competitor analysis is equally valuable as it reveals how innovative you are compared to other companies. Unfortunately, overconfidence in an idea often prompts some teams to skip market research or ignore its results. Doing so comes at a steep cost as the product might fail to meet the needs and expectations of the market.
Even if you’re aware of mistakes that you need to avoid, your MVP can still fail if the team working on it lacks the required skills or isn’t aligned with your goals. Whether you build the MVP yourself or outsource it, make sure that the people working on it can execute your vision efficiently.
Lastly, the primary purpose of an MVP is to collect user feedback and improve the final product. Some entrepreneurs might get too attached to their solutions and ignore the data that tells them which features should be removed. This can lead to further investments in functionalities that add no value.
HOW TO KNOW IF AN MVP IS A SUCCESS
Avoiding mistakes is an important task, but how do you know if your MVP is a success that deserves further investment? Determining this requires collecting feedback from various sources and looking into different metrics, including:
Traffic – a great way to predict the success of an MVP. Diving into monthly traffic, sources of traffic, and location of users can reveal additional insights.
Customer feedback – whether through surveys or some other channels, collecting and analyzing customer feedback is essential for learning how your product performs.
Engagement – the intensity of user engagement, revealed through metrics like app downloads and social media interactions signal the value of your MVP.
Sign-ups – the number of people that sign-up to be notified of your product launch is a great way to gauge market interest.
Active users – app downloads or sign-ups are important metrics but the percentage of users that remain active is an especially significant indicator.
Client acquisition cost – knowing how much it cost to get a paying customer allows you to optimize sales and marketing efforts.
Paying users – the number of people that believe your solution is worth paying for shows your chances of reaching profitability.
Client lifetime value – how much time a user spends using your product before leaving can help you refine pricing options.
Churn rate – a high number of people who stopped using your product might indicate the existence of bugs and inefficiencies that create problems.
EXAMPLES OF SUCCESSFUL MVPS
Many of today’s major tech companies started as an MVP. Facebook, for instance, was initially an MVP that connected students at schools and colleges and helped them stay in touch and organize events. The product eventually expanded beyond this core functionality and entered the mainstream market. With over 2.7 billion monthly active users, Facebook is now the world’s largest social network.
Amazon is currently worth around $1.7 trillion, trailing only Apple. But the tech behemoth was initially only an MVP focused on selling books online and challenging the dominance of the likes of Barnes & Noble. As Amazon gathered user feedback and continuously tested new features, its sway over the online retail market grew, enabling the company to enter new sectors and transform into the giant conglomerate it is today.
Airbnb was initially devised by its founders, Joe Gebbia and Brian Chesky, as merely a website with a couple of photos to help those coming to San Francisco find affordable accommodation in local apartments. The simple online system grew in popularity quickly. The founders successfully validated their MVP and went on to build a multi-billion-dollar company that’s one of the major players in the hospitality industry.
HOW TO EMBRACE THE “MVP” MENTALITY?
It may seem that building an MVP is primarily relevant for startups in their early days of operations. But this product development strategy is useful for small and large companies alike, as everyone should test their ideas before investing significant time and money. Even large corporations with established products can use the MVPs when developing new features. A stripped-down version of a feature can be tested by a selected group of users and their feedback can help the team to improve and then release the official version.
The logic of MVPs extends beyond product development. Various aspects of running a business involve constantly testing your assumptions through the smallest possible experiments and using the results to course correct. From marketing to design to writing, the practice of ‘trial-and-error’ is vital for any creative endeavor. Going back to the drawing board over and over again and being willing to adapt is what enables companies to rise above the competition.
START SMALL TO GROW BIG
Every business undertaking is filled with risks and rewards. To increase the chances of your idea succeeding, it’s vital that you let customers guide your actions. To that end, building an MVP remains one of the most useful moves as it allows you to release the product to market quickly, test a business idea, and learn about user preferences.
Developing an MVP doesn’t have to be complicated either. From market research and user flow to the core features and customer feedback, the list of steps to consider is limited. This enables you to focus your attention on issues that matter. Instead of investing vast sums of money into risky initiatives, an MVP development strategy minimizes this risk and educates you on how to confidently move forward.
Many tech giants were once laser-focused MVPs. Their success shows the power of testing, changing, and improving a product before eventually hitting the sweet spot and growing into a global powerhouse.
We hope this guide will help you further improve your product development practices and we look forward to reading about your experiences in the comment section below.
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