The main reason why startups fail is a misunderstanding of market needs. Of course, it doesn't make sense to create a product nobody wants. But very often the idea of a new product seems great only in our minds (until we implement it).
Therefore, it is very important to test the product to understand if it satisfies people's needs.
For example, when we worked on the design of TextMagic, a customer experience platform, we analyzed users' feedback after creating each prototype. It helped us develop new ideas and understand what improvements we should make (read the case study).
But what if the budget is limited and you can't afford to test every small piece of the product? Moreover, the second reason for startup failure statistics is running out of budget.
The best solution to this situation would be to designing an MVP.
In this article, you will learn what is an MVP, what are its main types, and how to build a minimum viable product to validate your idea and spend minimum resources.
What is MVP
A minimum viable product (MVP) is a test version of a product or service with a minimum set of functions that brings value to the end consumer.
MVPs are created to test hypotheses about the conceived product and check if it will be valuable and in-demand in the market.
The results you get from testing the minimum viable product and feedback from the target audience help to understand whether it is worth continue developing the project. MVP also helps to decide what changes to make to the strategy and what features are working well.
Many successful companies serve as proof of the usefulness of MVP product development. For example, Daniel Ek and Martin Lorentzon launched a small service in 2006 with one function - music streaming. Today, their product, Spotify has a $ 50 billion market valuation, has partnerships with big recording studios, and has a 50 million active audience.
In 2008, when renting a hotel or accommodation while traveling was a big problem, two enthusiasts found an unusual way to solve this issue and decided to rent out their apartment by fax. In fact, this was also an MVP, which main function was to test. The experiment showed that the product will be in demand, and today Airbnb is one of the largest sites for finding short-term rental housing.
Types of MVP
There are many different approaches to create an MVP, let's talk about the most popular ones.
Do you remember how in the popular cartoon The Flintstones father created the illusion of moving by car (there was no fuel, he was just running inside of a vehicle)? Flinstone's approach (also known as The Wizard of OZ MVP) provides the imitation of the product functions, although those functions are technically not implemented. MVP aims to test a hypothesis, to prove the viability of the chosen business development model.
Initially, this approach had many critics. Nick Swinmurn, the founder of the online store Zappos, proved the consistency of this method. He created a website and posted photos of different shoe models. When Nick received his first orders, he went to the store and bought the pair he needed and sent it to the customer. This way Swinmurn checked the viability of the idea of selling shoes via the Internet, while initially he did not spend money on renting a warehouse and purchasing products, but only imitating their availability. The market value of Zappos reached $2 billion in 2015.
This methodology is suitable for online services, the ultimate goal of which is to automate solving problems of the target audience. At the initial stages of implementation, you manually provide the service.
For example, you want to provide a financial accounting service. To test if this idea will be in demand, first you make some financial plans for clients manually through Excel. This way you can see if people are willing to pay you and how much are they willing to spend. As well, you can check what features are the most important for your audience and need to be implemented first.
This model was used in the late 90s by Chuck Templeton, the founder of OpenTable, the service for online reservations. He did not immediately invest thousands of dollars in the technical implementation of the service, but booked tables in restaurants for other people manually. So Chuck checked the viability of the idea, understood how much users are ready to pay, and learned his audience.
Use the piecemeal MVP method when it is possible to test and implement the idea without developing unique software. To use this type of MVP you collect already existing services and tools and combine them in a single interface. It allows you to save money and time you would spend on developing your own technology.
An example here would be Groupon, an online coupon provider. In the beginning, it was a WordPress site where all user interactions were done via email. Only after receiving feedback and financial results they developed social features, full-fledged email distribution, automation, and finally a popular mobile application.
Single featured MVP
This type of minimum viable product is used when there is a product with a minimum set of functions (usually one feature). We've already mentioned Spotify that used this type of MVP.
The release of a product with only one feature allows your customers to clearly understand what problem they may solve with your service. As a result, you will clearly identify your target audience, get feedback, and then start testing the product.
When and why you need to develop an MVP
Start developing a minimum viable product at the introductory stage of the product life cycle. The idea of the product can only seem great in theory, so there is no need to risk and invest a lot of money in development. MVP development allows you to spend less and get all the needed data to test your idea.
After the release of the minimum shippable product, you will determine the demand and understand whether you are developing the project in the right direction or not.
But the greatest thing about MVP is collecting valuable information from early adopters. It is the end consumer who will tell about the correct implementation of the project. Use the collected data to plan future upgrades and prioritize which features to implement first.
How to make an MVP
Now, as we've discussed some theory let's talk about the practical part - creating an MVP. To get a good result, break down the work into steps to build an MVP, outline goals for the team in general, and tasks for each member in particular. But first of all, make sure your team understands the general principles of work and product creation.
Preparatory stage: define the basic principles of creating an MVP
Hold a general meeting of the team that will participate in the development of the MVP. Figure out whether all team members understand what are you going to do and why. Discuss the vision of the MVP, put it all together, and build the first rough plan for further work.
During the general meeting, discuss the following issues:
- How to spend minimum resources? Remember you should create an MVP with minimum time, money, and effort. Figure out how to spend less, but still effectively test your business idea. As a rule, a discussion of this issue helps to select the MVP functionality to implement at the initial stage of new product development.
- How to interact with users? One of the main goals of creating an MVP is testing hypotheses, determining the demand and relevance of the product. Feedback from the first users of the product helps to reach this goal. In order not to miss any important information, think about how you will interact with the target audience: reviews, surveys, direct interviews, etc.
- How to make the first sales of a product? The first sales of the product will provide the means to continue further development and show if someone is interested in your product. You can also consider organizing fundraising (pre-sale) on a crowdfunding platform, like Kickstarter, for example.
- How to promote a product? Plan the advertising campaign and the channels you will use for it. The main tool here is usually Google Adwords. Then choose social networks, (Facebook, Instagram, etc) create official pages there, and launch targeting. Social networks are also great channels for collecting feedback.
Develop a selling landing page: describe the product, tell about its features and benefits for the client, give users the opportunity to choose between the paid and free versions of the product.
In this team meeting, try to involve as many specialists as possible to consider the idea and testing options from different points of view.
Stage one: define the problem the MVP will solve
After defining the basic principles of MVP, answer the question: "What problem does the product solve?"
Describe its value in a few sentences. It will be useful for you and your team, and in the future, it will help in creating a unique value proposition, landing page, and advertising campaign.
Stage two: define the target audience
A common mistake aspiring entrepreneurs tend to make is that they believe their product solves the problem of a wide audience. Instead, you should focus on a specific target audience.
Create a user persona, a customer who will definitely buy your product. Describe their gender, age, social status, income level, needs, habits, and even the devices they prefer to use. Define what common problems they have and want to solve.
Don't hurry! It is better to spend a few more hours to define the target audience than spend the entire advertising budget and get the minimum conversion.
Creating the user persona gives an understanding of whom you are going to sell the product to. This information will help in organizing an advertising campaign.
Stage three: research the main competitors
It is challenging to develop a completely unique product or idea. If you have not come face to face with a similar proposition it doesn't guarantee that you haven't got competitors.
You should spend a lot of time learning the market. You are lucky if the idea is still unique. (in this case, we recommend to read about the Blue ocean strategy ).
If you managed to identify some rivals then do the following:
- Collect as much information as possible about the main competitors. Analyze your top three competitors: study the history of development, check what products they offer, learn their unique value proposition, and evaluate if you can offer something better.
- Study the position of competitors' companies in the market. Determine their strategies, sales volumes, and calculate profitability. This way you will understand how successful they are and what you can do to beat the competition (and most importantly, how much resources will you have to spend).
- Learn how those companies present themselves. Find the information that competitors publish about their activities, check out their official websites, presentations, annual reports, ads campaigns, etc. It can give new ideas for your product development.
- Learn what other channels say about your competitors. Check news, videos, reviews, interviews, ratings, etc. that present some information about your rivals. It will help you better understand the chosen industry and learn more about the situation on the market.
To know better how to behave in a highly competitive market place read Red Ocean Strategy: How to Overcome Competition.
Stage four: create a user journey map
It's super important to design a usable and easy-to-navigate application. To understand if your product provides a good user experience test it yourself. If you have some troubles while using the service, then the consumer will definitely not be able to figure out how your product can help them.
To avoid such a problem, when creating the minimum viable product, build a customer journey map. It will show what the user does when interacting with the product. You must understand what content, design, and interface the audience expects to see.
As well, do not forget to make edits to the user journey map after receiving feedback from the first customers. Feedbacks will show you what is working well and what is inconvenient and is better to change. Based on this information, adjust the map so that end-users get what they want.
Stage five: define the features
At this stage, you must define the functionality of the MVP, or in other words, plan the scale of the minimum viable product.
First, define a few basic features, those without which the project cannot exist. This is the wireframe or the smallest usable version of the product.
Next, think of other features you want your product to possess and prioritize them. Define which functions are essential and need to be implemented at once, and which you can add later in the process of project development.
It is better to set function priorities together with the team. Discussions and disputes will lead to the determination of the optimal scale of the minimum viable product.
Stage six: develop and test the MVP
You are almost there! You have a great idea, you've defined tasks, goals, and scope then it's time to develop the MVP and test it.
Test your MVP in two steps. Firstly, when the MVP is ready let your team use the product for several days. If everything is okay give access to the product to the first users. Let them test it for 7-14 days.
Then gather feedback, statistics, behavior analytics, and analyze the entire data set. You will see what features to improve, what functionality to remove, and what to add.
Testing the product will help you come up with an optimal first version that you can bring to market and continue improving.
This was the last out of seven steps of the minimum viable product development process. Let's once again recall each of them:
- Define the basic principles of creating an MVP
- Define the problem the MVP will solve
- Define the target audience
- Research the main competitors
- Create a user journey map
- Define the features
- Develop and test the MVP
After completing seven stages, you will get a good minimum viable product that can grow into the first version of a full-fledged project. Do not be afraid to make changes during the MVP development process. The sequence of steps we provided in this article is not a strict rule, but only an example with the help of which you can build your own, unique product.
To learn more about a minimum viable product check Minimum Viable Product Examples.