How much effort should you put into developing your product before launching it? A common temptation is not to launch the product until you feel that success is certain. Some entrepreneurs don’t want to find out that their innovative idea is less attractive than they had expected.
A Minimum Viable Product (MVP) is the “version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort”. The purpose of an MVP is to test your fundamental business hypotheses and to start the learning process as quickly as possible.
The MVP is not an early version of the final product. It could be built using completely different technology if that would be less expensive. Manual processes can be used to deliver less critical parts of the new service and the product does not need to be scalable to support the full market opportunity. The MVP only needs to support the number of users required to test your critical assumptions.
John Foley, the founder of Peloton turned to the crowdfunding site Kickstarter to raise capital. He recorded a short video to demonstrate the prototype and asked interested customers to contribute. Peloton raised $300,000 from about 300 backers which included advance orders for 165 bikes. The video was the MVP since it created the initial customers and allowed testing of the product concept. Peloton went on to raise nearly $1 billion of capital before its Initial Public Offering in September 2019 which valued the company at $7.6 billion.
The Lean Startup
The MVP is one of the core concepts which Eric Ries introduced in his book The Lean Startup. The Lean Startup aims to reduce the risk, time to market and cost for new businesses and new products. Through a series of experiments, you can gain information about the customer requirements.
Ries noted that Nick Swinmurn, the founder of Zappos, wanted to test the idea that customers were willing to buy shoes online. Instead of building a website and buying stock, Swinmurn approached the local shoe stores, took pictures of their inventory and posted the pictures online. After he had made a sale he bought the shoes at full price and then shipped them directly to customers. Swinmurn decided that customer demand was good and Zappos eventually grew into a billion-dollar business based on selling shoes online.
Airbnb’s riskiest assumption was that travellers would be willing to live in the house of a stranger, not in a hotel. The founders took pictures of their own apartment and posted them on a simple website. Soon they had three paying guests.
Facial recognition technology
Sporting events are moving towards mobile ticketing and entry to all venues will soon be paperless. Panasonic believes that facial recognition technology can be used to identify the visitors.
Panasonic is worried that not all consumers will accept the use of facial recognition. They are creating MVPs for smaller groups of people where there are less likely to be objections. General consumers will not object to the use of facial recognition to recognise troublemakers. Neither will they be concerned about the use of facial recognition for the admission of accredited journalists.
Panasonic’s facial recognition system has already been used in a pilot scheme to improve crowd safety for FC Groningen in the Netherlands. Cameras at the turnstiles are used to automatically recognise images of fans who are banned from the stadium.
Alex Mather and Adam Hansmann started The Athletic with the mission of producing “smarter coverage for die-hard fans”. The business was built using a paid subscription model at a time when the conventional wisdom was that internet content had to be free. The idea clearly has global potential. However, its MVP was to launch in Chicago covering the Chicago Cubs (baseball) and Blackhawks (ice hockey) to test the idea that sports fans are willing to pay for high quality, sports journalism. After testing the MVP, The Athletic, has expanded to about 20 cities in the USA and Canada. It started in Europe by launching in the UK in August 2019 offering coverage of football both within the UK and international.
MVP shortens time to revenue
Most entrepreneurs, who don’t think about their MVP, launch their products too late. They spend too much time trying to reach an unnecessary level of perfection. The attraction of the MVP concept is that it forces you to think about what the buyer will pay for. The MVP cannot be “viable” unless someone is willing to pay for it. It is the least cost way of proving that someone is willing to pay for your new product.
Forget your desire to develop the perfect product and focus instead on getting into the market with a product that can generate revenue and enable you to learn about your customers.
By Tania Vie Riba, Director Vie Carratt Ltd