What is the Right Approach for Developing a Minimum Viable Product?

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• What is the Right Approach for Developing a
  Minimum Viable Product?

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Introduction

• Before launching a business idea, entrepreneurs
  first develop a minimum viable product (MVP), and
  conduct various tests to validate or invalidate
  their assumptions about the idea.
• For instance, if they have developed an MVP that
  is inferior to the final version, then the
  success of the test validates their idea.
  However, its failure doesnt prove that their
  business idea is set to fail. If their MVP is
  much better than the final version, then success
  of the test doesnt necessarily prove that their
  business idea will be successful but its failure
  will definitely invalidate it.
• However, entrepreneurs generally choose the
  incorrect MVP they tend to go with the
  validating MVPs and most of the businesses fail
  as they continue solving the wrong problem.
  Invalidating MVPs are precisely designed to
  prevent the same.

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Approaches to MVP

• Two approaches to MVP
• First type is the Validating MVP which uses an
  inferior product than the imagined final version,
  whose success proves that the model will be
  successful but its failure on the other hand is
  inconclusive.
• A classic Validating MVP is all about marketing
  an idea. Before entrepreneurs start working on
  their idea, they try to reach out to people who
  could be potential customers for their product.
  Then they try to sell them their product idea,
  which is to be developed yet.
• If the customers are ready to pay them today for
  the product theyll deliver after a month or so,
  then they can certainly construct a profitable
  business from that income and they will
  definitely attain success in their business.
  However, tests failure doesnt necessarily
  invalidate their business idea.

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Approaches to MVP

• For instance, Drew Houston released a Digg video
  for Dropbox in March 2008, which gathered a
  handsome 70K signups for a product, which hadnt
  even been released yet. It sufficed in confirming
  that the product was market fit.
• Nevertheless, failure of the test wouldnt have
  necessarily meant that Dropbox wouldnt work. It
  could imply that the Digg users werent perfect
  as early adopters or that the quality
  expectations was even higher than expected, or
  that some other event had diverted users from
  sharing or watching the video.
• The failure of Houstons validating MVP solely
  wouldve proved that only one of the ways of
  winning customers, i.e., through a Digg video,
  was a failure, not the entire business idea.

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Approaches to MVP

• Second type is the Invalidating MVP which uses
  a better product than the final product.
  Therefore, its failure certifies that the
  business idea is doomed but its success is
  inconclusive.
• Most of the concierge MVP approaches fall under
  this class. In this approach, entrepreneurs
  develop a much better product at an unsustainably
  high price by personalizing it for each customer.
  If they are unable to get people to pay a
  sensible long-term price for the better product,
  it means that their business idea is set to fail.

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Example

• For example, Jennifer Hyman and Jennifer Fleiss
  started Rent the Runway using this approach
  they offered an in-person dress rental service to
  college students, where they could try on dresses
  before renting them.
• This was definitely a much better experience than
  renting online. If no one wouldve rented from
  them, then it would have confirmed that online
  rental would be a failure. However, 34 first and
  later 75 of women rented from them, which meant
  their invalidating MVP was a success. So they
  moved on to a validating MVP. They emailed a PDF
  of dresses to about 1,000 women, out of which 5
  women rented dresses from them.

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Deciding between the two Approaches

• Its ironical that the only successful MVPs
  usually heard about are validating MVPs, because
  in an invalidating MVP, people present better and
  improved version of their business idea and its
  success implies that no one would pay heed to
  their actual final products success.
  Consequently, they would probably think more of
  validating tests. But most businesses dont
  succeed as peoples assumptions about client
  demand are wrong, owing to market risk.
• Therefore, startups with substantial market risk
  should first run an invalidating MVP, to test if
  the customers would buy a better product, instead
  of running validating MVPs. This would prevent
  them from questioning why people arent buying
  is it because the product isnt yet satisfactory
  or the idea is flawed or just because theyve
  been targeting the wrong audience.

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Deciding between the two Approaches

• Thus, its better to test the market risk first
  and if you are able to develop a better product
  and no one is paying for it then its time to
  move on.
• But developing a better product early on is at
  times, impossible, especially when the product
  performance results from scale, like in
  multi-sided platforms, where the value
  proposition is entirely dependent on network
  effects. In such cases, it becomes compulsory for
  startups to run validating MVPs, like with
  Dropbox. However, its essential to predefine
  failure. Generally, this means failing to
  convince early adopters to purchase a product,
  after having built a fairly good yet inferior
  version of the product. This process normally
  takes much more time than similarly effective
  invalidating MVP.
• Majority of invalidating MVPs are comparatively
  simple and most of them reveal peoples
  essentially flawed assumptions about client
  demand, sparing them a vast amount of time as
  well as frustration in engaging in multiple
  validating MVPs.

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Gaining knowledge from MVPs

• MVPs basically have twin goals first, learning
  about the problems to be solved and second,
  driving risk out of peoples existing
  (hypothetical) business idea by testing their
  fundamental assumptions.
• People need to focus largely on the second goal
  however invalidating MVPs also incline to be more
  effective at first, as those better early
  products tend to be more similar to concierge
  MVPs, which give up scalability and unit cost for
  flexibility and performance. These tests replace
  human labour for technology, and the human
  element means they can collect more information
  from potential clients about their problems and
  our possible solutions.
• Thus, people should generally start their
  businesses with an invalidating MVP and if it is
  inconclusive then they should shift gears and
  concentrate on validating MVPs for their business
  idea.

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