According to Failory, nine out of 10 startups fail, and two out of 10 fail within their first year. Thus, a method or approach to innovation that a startup uses is absolutely critical. A well-established method is the lean startup methodology developed by Eric Ries. How does a minimum viable product (MVP) stage dovetail with the lean startup approach? Can it boost a new business’s chance of survival and success?
Table of contents
What is a startup & why should it be lean?
For a definition of a startup, let’s go to Investopedia.
…a company in the first stages of operations. Startups are founded by one or more entrepreneurs who want to develop a product or service for which they believe there is demand. These companies generally start with high costs and limited revenue, which is why they look for capital from a variety of sources such as venture capitalists.
The combination of small size and the need for financing makes any startup extremely vulnerable, and getting the final product as close to right as possible the first time becomes decisive. Doing so is potentially the difference between success and failure. The nature of a startup means that waste must be avoided, operations must be lean. Hence, the development of the lean startup approach, as laid out in Eric Ries’ 2008 book, “The Lean Startup”. Ries recommended approach flows from five key principles:
- Entrepreneurs are everywhere – The goal of creating a new product and bringing it to market is highly entrepreneurial.
- Entrepreneurship is management – Being entrepreneurial isn’t about following a set formula; it must respond to circumstances, seek out and use feedback, and adapt to changing priorities, which requires good management.
- Validated learning – Being a (successful) startup is not about gambling, going all in on your brilliant product idea, and trusting Lady Luck. Instead, a startup operation uses data. A startup entrepreneur uses experimentation to seek out and analyze data and information; especially inviting and listening to feedback from users of the product in development.
- Innovation accounting – How do you measure and use your data? Startups focus on metrics that measure engagement with users and customers, test the assumptions you’re making about the product and the value users will attach to it, and the product’s net present value, or NPV.
- The Build-Measure-Learn cycle – This is a basic lean startup approach to testing and development:
- Build a simple version of the product (maybe with just one feature or function), then test that product version with potential users.
- Measure and analyze the resulting feedback and data.
- Apply what you have learned to the next stage of development.
The emphasis here is on early and frequent testing of product versions, using user-sourced feedback and data, and implementing the results in the next round of development. Thus, building a minimum viable product is a perfect fit for startups applying the lean startup approach.
Startup challenges
The Startup Loans Company (part of the British Business Bank) lists 10 key challenges for any startup:
- Failure to plan,
- Lack of demand for the product,
- Ineffective marketing,
- In-house knowledge and skills gaps,
- Poor financial management,
- Raising finance,
- Hiring the right people,
- Leadership,
- Time management,
- Poor health due to overworking.
Many if not all of these challenges can be reduced by having a clear process, involving users and other stakeholders as early as possible, and not wasting development time on anything that won’t engage the customer. All of which is enabled to one extent or another by using an MVP stage.
The benefits of an MVP stage in your startup process
First, let’s quickly address the 10 startup challenges mentioned above. How can an MVP stage help?
1. Good planning
An MVP (and the lean startup approach as a whole) means planning your product carefully and taking as few leaps of faith or unproven steps as possible.
2. High demand for the product
Using an MVP to engage with users and customers early in the development process is part of confirming the demand for your product (or discovering that users want something different and pivoting your vision and business).
3. Effective marketing
The information provided by testing an MVP with users gives an insight into what users really want, and is therefore a sound foundation for your product’s future marketing.
4. Knowledge and skills
When you focus on producing a working version of the product (as opposed to more ‘blue sky thinking’ about the business) the knowledge and skills you need become crystal-clear. You can either develop and nurture the knowledge and skills in-house or outsource them.
5. Good financial management
The ‘minimum’ in minimum viable product includes keeping development costs as low as possible.
6. Raising finance
An MVP can act as confirmation of your original product vision, and is a working model of what you aim to produce. An MVP can be the center of a very persuasive pitch to potential investors.
7. Hiring the right people
Again, the practical focus that comes from working on an MVP makes it very clear who you need to collaborate with. That collaboration may be in the form of hiring people with the right knowledge and skills or partnering with the right outside service provider.
8. Leadership
Good leadership relies on a strong vision of what you aim to achieve. You can align the goals of your MVP with that vision, giving it a clear focus and making it easier for people to understand and commit to.
9. Time management
The key to good time management is to not be distracted. Again, an MVP stage gives your development efforts a clear focus. When the lean startup approach’s build-measure-learn cycle is combined with an agile framework such as Scrum, you minimize the time wasted.
10. Good health
Maybe we can’t claim that MVPs improve your health… but being an efficient way of working (again, especially when combined with Scrum or another agile methodology) the focus that comes from developing an MVP means the hours you work are at least productive.
How else can an MVP stage benefit your lean startup operation?
An MVP is a rich source of validated learning. When you use MVP development stages to test your product’s core functionalities with real users, you are building the core value proposition of your business. An MVP either confirms that your development plan is going in the right direction, or indicates a better direction – whichever way you go, the decision is evidence-based.
If you need to build your product on a minimal budget and with the minimum possible effort, then an MVP development stage is your strategy of choice. Working with MVPs is the fastest way to beat your competitors.
The MVP stage, step by step
Producing an MVP carries significant benefits. To realize those benefits in full, it’s important to focus on both the ‘M’ and the ‘V’. How will you impress users and potential investors, or measure and guide the development process if your MVP does too little. For a good balance of minimalism and viability, it’s important to acknowledge the different steps in the MVP stage of development:
Step 1: Market research
Your initial product idea may be revolutionary, but does the market want it? Market research can answer this fundamental question; tell you who you’re building the product for, and what problem you’re solving for them. Market research can also tell you what the potential competition is like; what other products are out there.
Step 2: Understand the value to users
An MVP may be minimal, but it has to offer users some value (otherwise why would they be interested?) Put yourself in the user’s shoes and identify what steps they must take to access and use your intended product. This step is important in designing a product that users want to and will actually use.
Step 3: Prioritize the features to include
The MVP is not the full or final product. The idea is to test the high-priority feature or features with users and collect their feedback. Non-priority features are effectively add-ons; they may be part of the final product, but they are not critical to success and do not need to be part of the MVP.
Step 4: Build the MVP
In steps 1 to 3, you have carried out a kind of due diligence process for your MVP. Now it’s time to build it in the most efficient way possible. Whether you’re building it in-house or partnering with an outside service provider, we can definitely recommend Scrum as a highly effective development methodology.
Step 5: Collect and analyze the feedback
In line with the lean startup Build-Measure-Learn cycle, it’s time to review the fresh data you have from the response to the MVP. An MVP is an experiment. The feedback data is the result. The question is, what does it tell you about your planned product? Is it worth continuing the digital product design and development in the intended direction, or do you need to pivot?
The minimum viable product (MVP) stage will benefit your startup
It’s in the nature of all startups to be risky. When you are trying to build and market a genuinely new product, there are many initial assumptions – both around the product idea, and the wants and needs of the people you’re building it for. Incorporating a minimum viable product stage into your development process is often the most efficient and evidence-based way to test your assumptions. You can either proceed as planned, ensure that your plan is solid, or pivot and develop a product that you now know people want more.
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