Minimum Viable Product
A ‘Minimum Viable Product’ or MVP is a business tool to reduce the inherent uncertainty with introducing new products in unknown market spaces. It is based on the age-old business practice that one must balance the level of investment with appropriate risk – that as one reduces business risk, one can gradually increase the level of investment.
MVP’s reduce, not necessarily replace, the reliance on upfront market research to define a given product’s maximum value – An MVP presupposes that reasonable certainty can only come after a series of feedback loops, thus launching with partial value (as far as capturing the total intended market), witnessing actual customer behavior, and iteratively and incrementally completing a value proposition to gain greater loyalty and more customer segments – in other words, initial launches are ‘unfinished symphonies’ meant to be completed (if ever) only after hard-evidence is collected for what customers really want.
Let’s take a look at the most common definitions of an MVP by its leading proponents.
According to Frank Robinson, who came up with the term MVP as far back as 2001, an “MVP is that unique product that maximizes return on risk for both the vendor and the customer”. Frank was one of the first proponents of ‘synchronous’ development, i.e. developing your product and customers in lockstep, not asynchronously. To Frank, an MVP must strike the right balance of having enough features to win customers and stay ahead of competition while not falling into the trap of an over-loaded, excessively feature rich contraption that cannot make its return on investment. Frank also speaks about an MVP as a state of mind – a reminder that product teams should think big for the long term, but small for the short term.
If Frank Robinson deserves credit for introducing the term ‘MVP’ into the business lexicon, Eric Ries deserves credit for making it popular, especially within the ‘Lean Startup’ community, both at startups and large corporations. To Eric, 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. Frank emphasizes an MVP as a proper way to maximize return on investment, Eric emphasizes an MVP as a proper way to maximize learning from customers – to Eric, an MVP is first and foremost an experiment and learning should be part of the investment return, not simply the financial gains. It’s not simply about “If you are going to fail, fast fast and fail cheap’, it’s, “If you are going to fail, at least learn something!”
As Frank Robinson’s work was inspired by Nobel Prize winning Professor William Sharpe and his ‘Sharpe Ratio’ (Return on Investment vs. Risk), likewise was Eric Ries’ Lean Startup premise inspired by Steve Blank’s pioneering work on Customer Development, what he self-describes as the art of knowing ‘what not to ship’ to customers. To Steve, a Minimum Viable Product is “the smallest possible group of features that will work as a stand-alone product while still solving at least the ‘core’ problem and demonstrating the product’s value”. Steve also emphasizes the learning value of the Minimum Viable Product as opposed to ROI. As a student of the technology-diffusion-curve theory himself, Steve is specific in saying that the MVP should be targeting the path-of-least resistance customers, the early-vangelists or innovator segments, not the majority segments. This guarantees faster time to market by solving the smallest or least complicated problem the customer is wiling to ‘pay’ for with his or her time and money.
Rule of Three
Putting these three definitions together, we can summarize an MVP as being:
- A tool to manage risk and maximize return on investment for new products
- A tool to maximize learning from customers in high-uncertainty markets
- A tool to accelerate time-to-market by targeting the least demanding customers first
The MVP concept is NOT confined to digital products
Contrary to popular belief, an MVP strategy works equally as well across digital domains, services and hardware products – depending on how one defines an MVP. Starting with a basic, essential version of a product or service that still solves a problem for some portion of the targeted customers is a universal concept across all industries. It puts the burden of proof on real-evidence not supposition. What changes from industry to industry is the degree to which product teams can apply agile development and manage the ‘build-test-learn’ iteration loop to make continuous changes. Obviously, there are different lead times for various components of a product or service but that shouldn’t be an excuse to start guessing what customers want vs. managing the risk appropriately.
The MVP concept is for real products, not feigns
As previously noted by Ash Maurya, in the Lean Startup community, anything that allows the product team to go around the build-test-learn loop is torpidly labeled as an MVP. This includes rough sketches, prototypes, landing pages, concierge tests (manual service simulations), demos, etc.
I fully agree that an MVP is primarily a learning tool. However, I’d disagree with the ‘anything goes’ definition. To me, the MVP terminology should be reserved for real products – it’s easy to see why if you literally break down the term M.V.P.
Minimum: This is vague and will always be vague. But it makes two points
- Keep it simple as it’s hard to learn about root causality of human behavior (especially willingness to pay) with too many moving variables
- Keep it simple as it will allow you to launch faster and learn from real transactions vs. pure simulations
Note: Minimum does not mean crappy. It means less than theoretically possible.
Viable: This is the critical part, in that viable means desirable above and beyond its costs
- Viable means desirable by someone vis-a-vis its direct and indirect transactional costs (Viable means you’ve proven a value-proposition)
- Viable means that the value-proposition is accepted by enough, well characterized customers where the experiment becomes statistically meaningful
Note: Viable does not simply mean desirable – that’s easy. It means a fair exchange of value.
Product: This is also important; in that product is something that provides value for the purchaser/user, not just the company running the experiment
- A Product is something that has utility, provides an actual function (It can’t be something that merely creates an illusion of utility)
- A Product is something akin to giving vs. lending …it should be ‘given’ to users (in exchange for some value) to keep, not something on ‘loan’ that can be taken back (as opposed to a test, e.g. demo, pilot, or smoke test with users as guinea pigs)
Note: This applies to products and services. For products, it incorporates the entire customer experience and vendor promises, not just the actual physical product, e.g. the bundle of services and products consumed including warranties, pre and after market customer service, etc.
I’ve been guilty myself of using the term ‘lo-fi’ MVP and ‘hi-fi’ MVP to differentiate MVP’s that are pre and post launch – easier to use the terms that already exist for things pre-launch and reserve the MVP term for what it truly is, a bona fide launch.
An MVP can and often should be launched through a non-viable business model
The purpose of an MVP is to prove the proverbial ‘product/market’ fit, not the fully scalable business model. As the product/market fit equation is de-risked, one should then invest time and resources in scaling the business model to achieve maximum profitability – Most of the high-risk cost of a venture isn’t necessarily the product development cost – it can often be the production, distribution and marketing functions that consume the bulk of the investment. By definition, the MVP may not even be targeting enough customers to make a profitable venture but establishing a needed, strategic beachhead at the tip of a much larger market. Of course, in a lot of situations, the business model itself, and not the product, is the innovation – e.g. Nespresso, Uber, Dollar Shave Club – this does not mean that all the support backend functions be fully automated at launch.. that would be akin to following the infamous Webvan strategy of built it and they will come. A great value-proposition is usually the mother of business model invention to fuel greater scaling… The Ford Model T’s popularity beckoned the introduction of the assembly line at Highland Park (to further reduce its price and increase its reach), not the other way around.
- The ‘MVP’ is one of the most powerful business concepts in the field of new product development and innovation
- It’s helpful to establish a common language around ‘MVP’, lest it mean different things for different people, lessening its effectiveness as a communications tool
- Discuss MVP’s in the light of other supporting concepts such as staged-risk, customer development, agile development and business model innovation
- Don’t be dogmatic and bureaucratic about the use of MVP’s – if the venture isn’t necessarily risky or has been de-risked by other means (other than your gut feeling), put more behind the minimum and scale faster