The MVP is a great way for entrepreneurs to test the strengths and weaknesses of their venture. The best ones allow people to use the product or service before giving feedback and revealing the level of demand for the offering. They also show whether the team behind the venture can deliver on its promise to potential investors and customers. But too often the MVP is built as an end in itself rather than as an experiment to test and to learn, resulting in wasted energy, time and resources.
Some years ago, the term ‘minimum viable product’ (MVP) entered the entrepreneurs’ lexicon. It refers to a new product that enables the team behind it to use minimal effort to collect the maximum amount of validated learning about customers.
The term was first coined by Frank Robinson from SyncDev, a new products, markets and businesses venture that created the MVP, in 2001. Robinson claimed that the words “went viral right before my eyes”. The idea was later popularised by Eric Ries, co-founder of online social metaverse IMVU, as a pillar of his ‘lean start-up’ methodology. Serial academic and entrepreneur Steve Blank is also a fan, having advocated using scientific, hypothesis-driven methodologies and the MVP as essential tools for ‘customer development’ in start-ups.
The MVP is a hugely valuable concept, but like many new managerial tools and frameworks, it can take on an aura and be mistaken for real progress. Some believe it to be gold dust rather than just an entrepreneurial tool to be used thoughtfully and with a specific purpose in mind.
The possibilities for misuse and misunderstanding became clear to me during a recent hackathon event organised by the London Business School Entrepreneurship Club. It was a wonderful occasion that brought together throngs of business, technology, coding and design students for a caffeine-fuelled weekend of spirited entrepreneurial mayhem. At the end of the weekend, the newly formed teams needed to have created an MVP and used it to learn something useful about their ventures.
Sure enough, every team had heroically built an MVP. But the winning team, Fumble, didn’t have the best one; in fact, it took them just a few hours on the Saturday morning to develop it. The difference was they used social media to promote their prototype. With more than 5,000 comments, they could use that feedback to develop their business.
For Fumble, the MVP was a strategic means-to-an-end rather than an end in itself, creating great data and providing a unified purpose for the entire team.
Rise of the MVP
The MVP, a term that is becoming increasingly common, is considered to be an essential stepping stone in the genesis of any entrepreneurial venture. In so many ways, this is a good thing since it leads to action and experimentation. But building an MVP without thinking about its purpose can also result in the most enormous waste of scarce resources. There are two main dangers for the nascent entrepreneur:
1. Building an MVP in a form that is unnecessarily elaborate and costly. If the imagined product is a mobile app, there is a predilection to build a functional application when a few PowerPoint screenshots may be enough to test with users. Dropbox’s MVP was simply a video.
2. Believing that one ‘MVP-fits-all’ or that an MVP is always necessary. Every venture needs to sell to or agree profitable deals with a range of companies and end-users for its business model to work. Some businesses will pay based on results, giving them little need for an MVP. Others will invest time, money or credibility, raising questions that can only be answered with an MVP. But different questions beg very different MVPs.
At its heart, an MVP is an experiment and, as any scientist knows, such tests are expensive and must be devised with thought and purpose. The most precise are hypothesis-driven, but there is room for others that set out to explore and understand the universe in a deliberate way. The ones most likely to be dismissed by investors are those that second-guess a venture’s weakness or fall within the entrepreneur’s comfort zone. Indeed, coders love to code well past the point of diminishing returns.
An MVP methodology
The London Business School Entrepreneurship Summer School is now in its 14th year. As I write this, 60 students are conducting primary market and industry research on a venture that intrigues them and will, at the end of the course, use the evidence they collect to argue the viability or otherwise of that business.
This year, I’ve noticed a huge upsurge in interest in MVPs. Everyone thinks they need one and agonises over what form it should take. Most probably need to create a minimal manifestation of their product or service, but it’s wrong to focus first on the MVP (as an end in itself) rather than thinking about what it needs to do for the entrepreneur.
Fundamentally, it’s all about answering one, slightly pessimistic question: why wouldn’t an investor back my venture? You then have to think about the evidence needed to allay investors’ concerns or show their fears are unfounded. This encourages the entrepreneur to question and prioritise their venture’s weaknesses and think about how they can mitigate any risks.
This is where the MVP may be able to play a part. For instance, an MVP can:
- Help potential users visualise the product in the same way that a picture is worth a thousand words. Users are far more likely to give reliable feedback if they ‘get’ the product, and a well-designed MVP can do this far better than any pitch or stand-alone survey
- Assess the interest in your product and the propensity to purchase it by taking potential customers through the decision-making process, even when there is no product on sale. This can be through a website promoted on social media
- Enable users to play with the product and provide feedback on their favourite features, the interfaces, price and engagement. The time they spend with the product and how much they tell friends about it are all key metrics
- Tell you how complex and costly it will be to build the product and the expertise and partnerships needed to develop and inject life into it
- Pressure test the team’s ability to deliver and the entrepreneur’s capability when it comes to attracting top talent into the business.
The entrepreneur needs to think about and prioritise the important risks, dependencies and anything else that has to go right for the venture to succeed. These become the hypotheses. The next step is to test the hypotheses by designing experiments that probe any weaknesses. The MVP is merely a tool – albeit a critical one – for conducting the experiment. It’s a way of failing and learning from any mistakes quickly and cheaply.
Manifestations of the MVP
The MVP was popularised in an age of web-based ventures where developers built them relatively cheaply and quickly through coding. However, the same concept applies – and has always applied – to any type of business. Experiments are good and come in many guises such as prototypes, proof-of-concept, valorisation, pilots, test sites, concierge services, demonstrator and dummy landing pages. These tests are all forms of MVPs that are designed to answer fundamental questions about a venture’s viability. At their heart, they all share the same characteristics, which are:
- Designed to explore some critical behaviour or test a hypothesis
- Dynamic and flexible; built in a way that enables learning and adaptation such as A/B testing
- Non-viable – the only part of an MVP that needs to work is the one that users experience. What’s ‘under the hood’ can be held together with sticky-tape and have horrendous unit-economics. A smooth, viable engine comes later.
One tool among many
MVPs have become all the rage and added a fantastic new tool to an entrepreneur’s armoury. But they are simply one tool among many. When used wisely, they can accelerate learning and force entrepreneurs to test (rather than imagine) user and investor behaviour. But they are not a panacea and often aren’t the first or best tool to reach for. It all comes down to prioritisation of risk. MVPs are great when user behaviour is critical. But other tools are better when different risks are paramount. For example:
When timing is the issue, analyse the underlying drivers (trends), adjacent markets, complementary (enabling) technologies and tales from the ‘start-up graveyard’
Where margin is an issue, use five forces analysis to identify scarcity and power along the value chain, deep dive into fixed and variable costs and research margin structure in your industry
Where sustainable competitive advantage is an issue, look to analogous markets and industries and study the winners’ salient ‘value capture’ strategies.
Entrepreneurship as science
If entrepreneurship is a science, it’s still in its infancy. As management theorist Peter Drucker once quipped, “Entrepreneurship is risky mainly because few of the so-called entrepreneurs know what they are doing; they lack a methodology.”
The MVP is another plank in that methodology – one that brings useful rigour and scientific method – and gets entrepreneurs, ‘the hell out of the building’. But at the end of the day, it’s just another tool.