Suppose you came up with an idea of a new service or product. You want to prove the feasibility of your business plan first without investing too much money. That’s when the MVP approach comes to the rescue. This article will help you understand why it is necessary to build an MVP for any startup and which advantages this approach has.
Why is the topic of the MVP so relevant? Тhe latest research of Euler Hermes shows that the rate of business failures will have grown by 15% from 2021 to 2022! What is the reason? The lack of market demand is the main problem for startups.
With the help of the minimum viable product, you can test your product, get an idea of the value proposition, and verify the attractiveness of that value to users.
In the diagram below, you can see the main reasons why startups fail. Notice that most often the reason is “no market need.”
Source: CB Insights
The MVP approach is suitable not only for startups but also when developing solutions for established enterprises. The minimum viable product method can help to test any of your ideas. You know for sure Facebook, Airbnb, Instagram, Amazon, Foursquare, Twitter. These all are successful examples of the minimum viable products.
So what do these magic letters “MVP” mean and how can they help you develop and deliver a successful and profitable product?
Before we start exploring the main reasons why you should think of building the minimum viable product, I would like to start with a brief explanation of the term “MVP”.
Wikipedia defines the MVP as a product with enough basic features to satisfy early adopters’ needs and receive the feedback essential for further improvement.
The concept of the MVP is based on 3 ideas:
- “Minimum” means that you will be able to save your resources: money and time significantly. That’s good enough, isn’t it?
- “Viable” implies that the product already has basic functionality and is ready to go to the market to attract early adopters.
- A “product” is those goods and services that you want to offer your customers.
Now we will find out how the MVP approach can help you create a successful full-featured project.
1. Clear focus
The MVP approach enables you to focus on your individual value proposition. It will be easier for you to identify the specific pain point that you are going to address with your service or product. And also, this approach will help you to choose the functionality that should be implemented first.
You leave the minimum set of features to build into your product and thus save your money.
2. Cost efficiency
Because you need only the most basic functionality for a minimum viable product, developers will need less time to finish it before creating the full-fledged product. Therefore, the cost of development will be cheaper.
If you can find the first customers by using an MVP, then for further development, it will be possible to use the funds raised during the operating period of the MVP. It is very profitable.
3. Attracting investors
To obtain funding, you need to prove to investors that your idea is worth the investment. The MVP approach allows you to launch the product faster and then wait for user feedback. If the response is positive, you will make sure that the offer is up to date, and don’t hesitate to introduce your MVP to investors.
Undoubtedly, projects with MVP have a much higher chance of success in general and receiving investments in particular.
4. Quick launch
As mentioned before, it will not take a long time to build an MVP. You need to identify and implement only the key features required to solve a specific problem. The time determines a lot. The quick launch will help you scale your business correctly and test your sales channels and marketing strategy.
The quick launch also helps you get to market faster and outperform your competitors. Right now, someone can work on implementing an idea similar to yours. Thus, the MVP gives you a great advantage.
Time is a great competitive advantage in the innovation market. An eloquent example is Google+ (a social network from Google, which closed in 2019). The tech giant invested $585 million into this project, but it could not lure people into the service from social networks like Facebook. The reason is simple – social networks appeared much earlier.
5. Early feedback
The main goal of MVP development is obtaining feedback from early adopters. Early users will express their opinion on the desired changes, additional features, or updates. It will help you improve your product. Of course, getting the first feedback is very important. If users like your product, they can even build a community around it.
According to Eric Rees, author of the bestselling book The Lean Startup, the most common reason for failing startups is the lack of communication with potential customers.
Dropbox is an example of how customer communication worked successfully. Investors did not want to get into this project at the beginning. However, the company created a 3-minute video. In this video, they explained and showed the functionality of their product. It was enough to get great feedback, a bunch of likes and comments, and, as a result, obtain the finances needed to continue development.
Dropbox is currently valued at over $9 billion.
As you can see, the minimum viable product is a necessity for any business. It is beneficial in the long term as well as in the short term. The MVP helps identify your unique value proposition, reduce the cost of software development, and obtain the necessary funding from investors. Also, MVP helps quickly launch the product to get feedback from early adopters as soon as possible.
Of course, the MVP can give a comprehensive view of the demand for your product in the market. If the idea fails, you can find a fresh idea and go to the starting point. First of all, building an MVP will prevent you from wasting much time and money.
CEO @ Codica. Software Entrepreneur with 15+ years of experience. Focused on the lean startup approach. I write about startups, marketplaces and SaaS products, and custom software development.