The crucial misunderstanding about the MVP
I do not know of an abbreviation in my work as a Lean Startup coach that causes illusions, disappointments and disinvestments more often than the MVP, the Minimum Viable Product. And it’s the rollercoaster video that did it.
The reason for writing this blog was a video of a father who gave his sweet daughter a rollercoaster experience in a laundry basket. The video was quickly picked up by all kinds of people who referred to it as an example of a successful MVP. Didn’t see it yet? Take a look:
“This is the funniest thing I have seen in a while as an example of a real life MVP” someone writes. But is it really an MVP?
Many people define the MVP as the first version of the product with which they go live. In some cases it is just a bit too minimal; so the features that make the product desirable are missing, and the Value Proposition isn’t convincing at all. Not very helpful.
In other cases, often within corporate organizations, the MVP is actually far from Minimal, and is simply the full-blown product. Because “we’re not going to market with anything that’s only half-finished, are we?” The abbreviation is then only used to give the project that nice startup feeling. ‘Innovation Theater,’ Eric Ries calls it.
But having a live product is not enough, the product must also be desirable. So there must be potential users who are enthusiastic about it, otherwise it is not going to work. But there’s quite a lot of difference between saying that they like it, really liking it and wanting to use it. And then we are not even talking about paying users.
The girl in the basket seems to appreciate it, the roller coaster ride, so that is hopeful.
Worth paying for
But are they willing to pay the price, that’s the question. A paying user is not a regular user who out of the blue just decides to transfer some money. No, a paying user is someone who, after a process of consideration, can relate your value proposition to the price he or she has to pay for the product. In practice, this is often a huge hurdle. Many SaaS software companies that use freemium-premium business models know that only too well.
Would the girl, for example, want to exchange a lollipop for the rollercoaster ride?
And usually it is not enough that users are willing to pay once, after which they will stop again. Certainly not if you offer a subscription service. Your business case probably takes into account a higher lifetime value than a one time purchase. You could say ‘great, people are obviously willing to pay!’, but you could just as well say ‘too bad, people decide it’s not worth the price too quickly!’
What do you think: would the girl also want to exchange the next seven lollipops for seven rollercoaster rides?
In short: the product that proves viability
The MVP stands for Minimum Viable Product. That is the minimum product that proves that your plan is viable. The product that proves that people are willing to pay (in money, time, attention, clicks or whatever) for the value that the product delivers in a way that makes the business case valid. In which, among other things, Lifetime Value and Cost of Acquisition are well-balanced.
That does not mean that you have to be able to make a profit with the MVP itself. It is possible that your costs are much higher during that phase, and that that has been taken into account beforehand. But the MVP is mean to test the income side of your business model.
You only know afterwards
The above also means that you cannot use your MVP to prove your viability instantly. You will probably need more time to test the churn rate (i.e. the number of people who drop out) and the lifetime value, or to get your sales going. You can only say whether your MVP is really a MVP afterwards. “The version that we put live in October, that turned out to be our Minimum Viable Product. We knew we were on the right track then.”
On the other hand, in Lean Startup it is all about formulating hypotheses and then validating them. So if the hypothesis is: ‘This minimal version of the product proves our viability,’ you could call that version the MVP: viable until proven otherwise. But then you must start validating as hard as you can.
I cherish the idea that the video dad had a whole jar of cashed lollipops placed just out of the frame and that his business model has long been validated. Then it could in fact be an MVP.