Photo via Craig Murphy

No doubt you are familiar with the concept of minimum viable product (MVP). But no matter how long the term has been around, I talk to entrepreneurs all the time who seem to be confused about the term. Are you confused about it?

If so, I’ve answered the four most important questions when it comes to thinking about MVP. These are questions every entrepreneur needs to ask his or herself. The MVP is a great concept, but only if it is used right.

What is MVP?

In its essence, the MVP will help you start the process of learning as quickly as you possibly can about interest in your product. However, I’ll explain more below, but it’s not the same thing as the smallest or most minimum product.

Author Neil Patel

The MVP is simply a tool to help you build a sustainable business with minimum effort. One thing that differentiates the MVP from the traditional development process is the time. The traditional process usually took months, if not years, of idea incubation, reaching for product perfection before you shipped.

Unfortunately this could lead to developing a product nobody wants. And a development process that takes years to perfect can be costly, without any type of learning process involved. MVP’s goal is to start that learning process early and often and never really end it.

The important thing to remember about the MVP is that it is not just about solving product design issues or answering technical questions. What MVP is really doing is allowing you to test your basic business hypothesis. In other words, a minimum viable product is simply the smallest batch that will teach you something.

Is minimum viable product the same as “minimum product?”

No. The minimum viable product is not the same as a minimum product. A minimum product is your product at the basic, entry level stage for your customer. It solves a problem and that is all that it does. You are never in the hypothesis stage when you release a minimum product. If you are, then you are in trouble.

Think about Twitter, for example. The minimum product was the ability to publish a 160 character posts or less. Over time they’ve added features. (By the way, the actual sketch was the MVP.)

Why are you in trouble if you are testing hypothesis with a minimum product? The reason is that even to get to that stage, you’ve had to invest a lot in production and development. The MVP is a cheaper and easier way to test your hypothesis.

If you think MVP sounds a little too abstract, here are a few examples to give you an idea of what an MVP is:

  • Dropbox – Drew Houston and Arash Ferdowsi, founders of Dropbox, started with a boring 3 minute video for their minimum viable product. It looks like a normal product demonstration. And that’s all it is. There is no code. When they released the video online, however, their waiting list went from 5,000 people to 75,000 overnight!
  • Foursquare – Collects customer feedback using Google Docs. Nobody has to maintain code.
  • Virgin Air – Virgin Air used only one plane and one route to test their hypothesis. As they worked out the kinks in their strategy they started adding more planes and routes.
  • Groupon – It started out as a simple WordPress blog with a widget that used AppleScript to send PDFs coupons via Mail.app. Now it’s worth several billion dollars.
  • Spool – The Instapaper for the offline video world, Spool’s MVP is a video and an invite list that includes an email address box, but also a radio box to check which kind of phone you have.

Can you work in small batches? 

Working in small batches just means you are isolating tasks done at each level of development and inside each level of development. This requires a commitment to checking in early and often, and it’s crucial to a successful MVP.

Author of The Lean Startup Eric Reis says: “There are many techniques for controlling these batches, ranging from the tiny batches needed for continuous deployment to more traditional branch-based development, where all of the code from multiple developers working for weeks or months is batched up and integrated together.”

There are a lot of advantages of working in small batches. They include:

  • Faster feedback – Instead of spending a month on mock ups, a design team could hand in their earliest sketches to the developers and just say: “Hey, this is what we are thinking.” This way the developers can start questioning assumptions right away. And by doing this your project and idea can start evolving with the design by taking these new facts into account. This process of small batches should be daily, where each round is shared and discussed, and everybody should understand that everything is subject to change.
  • Reduce risk – Working in small batches allows you to minimize that amount of investment you put into a particular task during the stages of development. If you think about it, this makes sense because you’re not waiting until the end of the development stage to identify problems. You are doing it for each small batch.  For example, if you have a piece of code that depends on a certain configuration when it’s deployed, but that configuration changes before the code is deployed, nobody will know that there is a problem…so you’ve got a ticking time bomb! Working in small batches will catch a problem like that.
  • Reduce overhead – If you get into the habit of working in small batches, your organization will get more efficient, and when you are more efficient your cost of doing business drops. This is true at every level, because people get better at those things that they do very often. So if you are engaging in more frequent design reviews, code checks and releasing more often, you are going to get better at that, too.

Can you cross The Penny Gap? 

Pennies: Photo via John H Kleschinsky

There comes a time when your product needs to pay for itself. They call it the penny gap, and it just asks the question: “Can you actually get people to pay for anything?

See, you can have all the market research in the world, you can have competitors who are making money off of a similar product and you can even have early users telling you that they love your product. But the true test comes when you have to ask people to pay you.

Chris Anderson, in his book Free, writes: “There are really two markets: free and everything else. And the difference between the two is profound.” If and when you charge a price, your customer is forced to ask themselves if they really want to open up their wallets. NYU professor Clay Shirky said: “In a world of free content, even the moderate hassle of micropayments greatly damages user preference, and increases their willingness to accept free material as a substitute.”

How do you get people to except payments? Use the following process for the best results:

  • Inform – Tell your current customers that in order to keep the product going, you have to start charging. Do not hide or blind side them with a fee when they’ve been getting it free for so long. That will easily cause people to defect.
  • Explain – Be honest on why you have to charge. Tell them the reasons. Most people understand, even in a free market, that you can’t work for free all of your life.
  • Detail – Go as far as even itemizing your costs and sharing what you’d like to make for a profit. Honesty is a great way to build trust, besides, when you close information gaps like profit and salary keeps people from starting rumors or believing just about anything.
  • Survey – After you’ve disclosed that you have to start charging in the near future, ask people with a simple survey what they would be willing to pay. Compare the results to your own ideas.
  • Layer – One strategy for easing into the fee structure is to start lower than your target fee. Let customers know that you are doing this. At least you are making money, though it may not be a profit, but this way you can program people gently to pay for your product as you increase it.

Conclusion

Using the Minimum Viable Product concept is a great way to bootstrap products and companies, but only if you truly understand what it is and how it works.

Have you had success with the MVP concept? What helped you succeed?

Neil Patel is the co-founder of KISSmetrics, an analytics provider that helps companies make better business decisions.

More from Neil Patel on GeekWireSeven signs that you might just be an entrepreneur Eleven things every entrepreneur should know about innovation… 17 things I wish I’d known when starting my first business

Comments

  • Devin Miller

    Thanks for the article Neil, I agree that the definition of MVP can be a bit hard to nail down sometimes.  At our company, we look at MVP as creating something that users can “touch and feel”.  If a user can more visually or otherwise interact with a concept in a tangible way, you can get more accurate (but not perfect) feedback from your user around their intent to purchase / engage / use your product.  We find this helps immensely to get user feedback that is at a deeper level and drives more tangible directions on what to build next.

    Devin
    CEO
    Balance Financial

  • Guest

    Great article. Lots of good advice there and stuff I never knew.

  • Autodot
  • http://www.starwebapp.com XuDing

    Thanks, Neil.

    This is how I try to launch my latest product.

  • http://www.johnmcfarlane.me.uk/ John McFarlane

    I dont think that you should ask people what they are willing to pay, especially in a survey (and im not knocking the idea of surveys, i intend to use surveys for various reasons) but asking how much they would pay in a survey if the survey is not put together in the right way might result in confusing data.

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