What is an MVP?
Short definition MVP:
With a MVP, the hypothesis of whether a product is marketable is confirmed or refuted — quickly and relatively cheaply.
Detailed MVP definition:
A Minimum Viable Product (MVP) is the first functional iteration of a product. The MVP has just developed to the point that user feedback can be collected. User feedback is used to avoid erroneous developments from the customer's point of view. It is also intended to decide whether further development makes sense after the first iterations. The aim is therefore not to offer customers a perfect product that has been developed over many years. The aim is rather, as far as possible, to swiftly present a product as a basis for decision-making that is available for further action. The MVP only really has the important features that makes it special and sets it apart from competitors.
We would also like to share a quote from Reid Hoffmann in this context, even though we would not sign the essence of the statement in this way:
What are the benefits of developing an MVP?
Die development of digital products is expensive and time-consuming. Despite previous extensive quantitative and qualitative market research, this does not ensure whether a product will actually be accepted. The risk of investing a lot of time and money in developing a flop is correspondingly high. That is why MVPs are used, especially for innovative, novel products and services.
Minimum Viable Product - advantages at a glance:
- Learn quickly
- Develop quickly
- Quick (er) on the market (as a competitor)
- Lower costs
- Decisions are based on real feedback
- Focusing developers on the most important functionalities
- Higher probability of receiving investor funds
- Customer centricity/the needs of users are in the foreground
- Provides the basis for making organizations more agile
Minimum Viable Product - Disadvantages at a glance:
- Even a MVP offers no guarantee of success
- In the B2B environment, a low-budget MVP is rarely possible due to customer demands
- Strong focus and decisiveness are essential
- If sophisticated competitor products already exist, the MVP may appear too thinly equipped compared to
Empirical research also confirms the advantages of Minimum Viable Products: In a recent study, CBI Insights presented that the number of startups that failed within three years is over 80% and the average burned capital at 1.3 million US dollars. It is highly likely that this number of failed business ideas can also be transferred to SMEs and corporations. The only difference is that these established companies usually do not go bankrupt as a result of failed product development. Nevertheless, expensive mistakes entail enormous financial risks. Reason enough, therefore, even for SMEs and corporations to cost-effectively target the market via MVP.
Famous role models who started with an MVP
Airbnb is one of the best-known companies that started out as MVP. The Airbnb story is very catchy and also personal and emotional. That's probably why people love to talk about it: Founders Joe Gebbia and Brian Chesky were short of money. At the same time, they noticed that hotel capacities at trade fairs and other events in their home town of San Francisco were reaching their limits. It was the same in 2007 when a design conference took place in the city. What did they both do? They took pictures of their apartment, uploaded it to a website and offered accommodation. A short time later, three guests spent the night in their apartment. The rest is history. In Germany alone, over 160,000 accommodations are to be offered on Airbnb. There are many more famous MVP examples such as those from Spotify, Dropbox, Uber etc.
These stories are very motivating, but they cannot be considered an average example. After all, the Minimum Viable Products have now become companies worth billions. They also suggest that an MVP is purely a startup or Silicon Valley affair. But also established companies or the Mittelstand and German startups rely on it.
How are MVPs developed?
Even though speed is an important characteristic of MVP development, there are a number of tasks on the desk in advance that happen before the actual development, but are just as essential. After a rough idea has been developed, the process continues as follows:
- arket research
- Ideas for creating value
- Feature prioritization
- Development and launch
- Feedback analysis/Build-Measure-Learn
1. Market research
Market research is essential before starting MVP development. It serves to provide an overview of the market, consumers and their needs in order to be able to position themselves optimally and reduce unnecessary costs and expenses. This requires taking a close look at whether and which competitors there are, which features they prioritize, how they approach the market, etc. Market research should also be used to create users or buyers.
2. Ideas for creating value
Once market research has been completed, this usually has an impact on the orientation and project scope. The findings are used to sharpen the idea and get an even more accurate picture of the MVP. The focus here is on added value for users. Why should they buy your product right now, what does it help them/ what value does the product have for users?
3. Feature prioritization
Market research and the development of the idea lead to feature prioritization. An MVP only has a few core functionalities. It must be carefully selected which these are in the first iterations. There are various methods available for this, which we will discuss in more detail in the course of the process.
4. Development and launch
After feature prioritization, you can start the actual MVP development. As described, the MVP should only have the most important features. At the same time, it is important that these features also work, that bugs are fixed quickly, and that UX and UI have also been taken into account.
5. Feedback analysis/Build-Measure-Learn
The feedback collected from users and the measurement results of predefined KPIs are used to optimize the MVP. The optimizations are then launched in order to then analyse feedback and measurement results again, which are once again the basis for optimizations. We're talking about the Build Measure Learn Cycle.
In many scenarios, the first launch of an MVP serves as a basis for even making a decision about the progress of the MVP project:
Negative feedback — abort
The MVP is rated as a flop. Users generally showed little interest and saw little or no added value: In such a case, the project should be discontinued. Should you be angry now? Admittedly, the originator of the idea may be briefly disappointed. But that is exactly what you do, namely to receive feedback quickly, including negative feedback. A lot of money and time was definitely saved and learnings were collected, all under the motto fail fast.
Positive feedback — develop
Overall, the test is a complete success: Users are generally enthusiastic, show great interest and (if possible) are also prepared to spend money for the purchase: These are good signs that even a sophisticated product will be successful. The project team should trigger the next stage of development. An expansion of the team and an expansion of resources will probably be necessary in the medium term.
Feedback leads to Pivot
Overall, users do not provide any positive feedback for the MVP in its current form. However, the feedback suggests that a product could perform with other core functionalities or a different target group. This is called a pivot: The original development idea is dropped, but the project is continued in order to develop a modified product.
What types of MVPs are there?
The word product in the abbreviation MVP suggests that something has actually already been developed that potential customers can use. Here, however, the term MVP is partly deceptive. A product is not always actually developed. It is only partially simulated that a product actually exists or will be available soon. In such cases, marketing and communication channels such as landing pages, videos, blogs, etc. are used to promote the product. Mockups are often displayed and the main features described. Through targeted targeting, the target group is made aware of the alleged product. Based on selected KPIs, it is then decided whether the project has a chance and will be pushed forward. The MVPs are also known as landing page MVP, video MVP, blog MVP, etc. They are assigned to Low Fidelity MVPs. The purpose of low fidelity MVPs is to make the problem and needs of users tangible in order to then be able to evaluate whether a market even exists.
Minimum viable products that go beyond this purpose are more difficult and complex to develop. They are known as high-fidelity MVPs. With the exception of the fundraising MVP, the other MVP types such as Concierge MVP, Wizard of OZ MVP, Piecemeal MVP or Single Feature MVP can actually be used. More information about the different types of MVP is available at our blog.
Prioritization methods for MVP feature selection
At the latest when a Minimum Viable Product exceeds the Low Fidelity MVPs status and is developed, the question is what features it should have. This isn't always easy for project teams. Fortunately, there are numerous approaches to feature prioritization. In principle, most of them are also suitable for method-based selection that goes beyond gut feeling. Most of the models are qualitative methods, such as the MoSCoW method, which distinguishes between Must, Should, Could and Wont Have Features. Other models take a similar approach, but also take costs and time into account. This includes, for example, the Feature Priority Matrix. Other models include users, including the Kano model.
These characteristics of features influence prioritization:
Innovation: Is the feature new/ does it represent a creative solution?
Added value for customers: Does the feature (exclusively) solve clients' problems/ does it meet their needs? Does it bring measurable added value?
Costs and time: How high are the development costs of each individual feature and how long does development take?
Team skills: Does the project team have the necessary development skills?
Competition: How do I differentiate myself from my competitors?
Monetization: Can the feature contribute to sales? Are customers willing to spend money on it?
MVP KPIs/MVP Controlling
Controlling with the right KPIs is actually always a good idea, even with Minimum Viable Products. But there is so much data that can be collected. So which are the right ones? First of all, it is important not to fall for so-called vanity KPIs. Vanity KPIs record key figures that may be nice, may even flatter the founders, but are actually no help in measuring success. These include, for example, (high) engagement rates on social media, or a (large) media presence.
However, there are not THE KPIs that fit every MVP project. Here, the project team should analyse very carefully which KPIs are initially used as a basis for decision-making in order to be able to quantitatively determine a success or failure. Based on this, the decision should then be made as to whether to continue with the project, whether a pivot is necessary or even be canceled. In addition, other KPIs should be used for successful management.
Tips and dos and don'ts in MVP development
- Not here: It is recommended in many cases to shoot an MVP quickly into the market rather than fiddling around behind closed doors for years. However, there are limits here too. Products and services that have (major) effects on physical or mental health should generally not be created as a straight MVP project, as they can harm users. Legislation legitimately puts a stop to this in the area of medical technology and pharmacy, even at a certain risk level.
- Safety: Although, by definition, a minimum viable product is reduced to a minimum of features, this does not mean that you can save on security. For digital MVPs, this applies in particular to IT security and data protection.
- Low fidelity MVPs: If Low Fidelity MVPs are used and at the same time you are on the market as an established company and have built up a brand, it is recommended not to promote the Low Fidelity MVP under your own brand name. There is a risk that the brand name will be damaged.
- Established competitors and substitutes: You should be particularly careful when entering markets with MVPs in markets where numerous substitutes and similar products are already established. Here, reducing it to core features can make your own product look immature compared to those of competitors. For example, if I want to test a new presentation tool on the market using an MVP, users will most likely compare it with Microsoft PowerPoint, Google Presentations, Miro, Canva, etc. The comparison not only relates to the functions themselves, but also to UX, UI and design.
- Dealing with fails: A project failure is definitely no shame. If it turns out that the idea is not accepted on the market, that is an important lesson. It is no reason for blaming, reproaching, etc. Quite the contrary, it is a sign of courage and willingness to take responsibility. Failure is also part of entrepreneurial risk. An MVP simply enables a relatively quick and inexpensive failure.
- Honesty: Being honest is generally a good quality in life, and this is even more true in MVP development. If the result suggests an abortion (a pivot is also out of the question), then do it. Don't cling to the project or idea. As already mentioned, the following applies: Fail fast.
We describe further mistakes that should be avoided at all costs in a separate blog post.
Conclusion
Developing an MVP is worthwhile in most cases when ideas for new products are to be implemented. The term MVP stands for more than just a product with a few features. Rather, it is a method or a sophisticated and proven process. Not only (Silicon Valley) startups are doing well with it, but also established companies that want to break new ground. For them, a minimum viable product also offers the opportunity to make parts of the company organization more agile. However, there are pitfalls lurking at some points within the process that managers should be aware of.