Minimum Viable Product

Okay, so the so-called “MVP” has rightfully taken a place amidst popular lore in the tech industry, but for some reason, a good number of smart peeps still misunderstand what this term really means.

The ambiguity lies with the word “viable.” Most can consistently intuit the same sense of “minimal,” which means the fewest number of features to deliver on a value proposition (caveat here). But I’d argue the idea that you can determine proactively what your MVP is up front, before customers interact with the product, is a trap, and startups fall into this all too often.

Okay, so what does “viable” really mean in this context? I’ve heard folks squirrel around this. Some declare the “V” actually means “valuable.” Others claim it’s “viable for your customer,” or some similarly inventive adage.

No, the V in MVP means something mundane but far more important: “viable for your business.”

The V in MVP means “viable for your business.”

This doesn’t mean that concepts like “valuable for your customer” or “viable for your customer” aren’t also important, but for the canonical concept of “MVP,” in my mind, it’s unambiguous what V should mean. Here’s why.

Viable For Your Business

“Viable for your business” means the cost of delivering a product (or service) is paid for by the product’s own revenues. That’s it. Breakeven. You net 0. It sustains itself.

This means that you’ve found the balance in your value proposition and have a path for a healthy sustainable startup or product line. You have high confidence, actual evidence, of the following:

  1. The users of the product use it because they believe in the value proposition.
  2. The product actually delivers on what the customer will pay for.
  3. Such customers will continue to pay for it. They aren’t tempted to DIY or switch to competing offerings.
  4. Customers pay you enough to cover your costs of delivering the product or service.
  5. You have confidence as you add customers for that one value proposition (not any other value propositions, not new products, not new features), that that breakeven state will evolve into a sustainable profit margin.
  6. Then ultimately, all customers pay you enough for all your value propositions to cover the costs of running the entire company.

In other words, focus on the balance among what you build and maintain, what this will cost, and what customers will pay for in perpetuity.

You Can’t Control Viability

Did you notice the pattern above? They all depend on the behavior of the customer.

This means you can’t control viability. Let that sink in for a moment, The viability of your product is not within your sphere of control, but it is within your sphere of influence.

The viability of your product is not within your sphere of control, but it is within your sphere of influence.

You can control the “M,” the minimal-ness of your product, essentially the feature surface area, but more important, this means controlling the costs of developing and maintaining those features.

MVP, What Is It Good For?

Ok, but it may take a while to acquire enough customers to get to viability. So how is the MVP concept useful if it effectively means, “You shipped a product and are at breakeven?” After all, at that point, it sounds like you’ve already won!

The MVP concept is useful partly because it encourages you to watch your costs. Some aspect of human nature causes us to ship a lot, copy competition, and believe the build-it-and-they-will-come fallacy, and thus we imagine and act upon the world we desire (build it … ? … profit!) instead of struggling with the tough realities of shipping product that stems from customer behavior. MVP is a tack against the trend to spend.

But MVPs are also about shipping quickly. If you can spend less on building by reduce scoping, you can ship faster, learn more about customer behavior, get to market before the competition, and enter the market when the demand for your value proposition is right.

So how do we reconcile shipping faster with the long road to “customers are paying enough to cover my costs?”

I call this having evidence of a path to viability.

Path to Viability

So I said that “V” means “viable for your business.” But viability not just about getting to breakeven only, but modeling (predicting) how a minimal feature set (and the resulting customer purchases) will get your product to breakeven in the future.

Each feature is an opportunity for additional sales, upsells, and more enduring sales (less churn), but each feature also incurs a build cost and an ongoing upkeep cost.

So you start with nothing, you define features, which contribute to the cost structure of your product. Then customers decide whether to buy it, thus adding to its revenues. Assuming each feature is indeed valuable enough to buy, ideally you get to a point at which revenues match your costs, given the number of customers you can convert due to the new features.

Features are salable manifestations of capabilities that in aggregate fulfill a value proposition.

This doesn’t always happen, by the way. Sometimes the costs inevitably outweigh the potential revenues for many potential reasons. Maybe it’s because there aren’t enough customers in your market, or the features aren’t priced properly, or the number of convertible customers is too low because of competing offerings, or you’ve simply overestimated the value of the value proposition.

Emphasis on Evidence

It’s critical to have genuine evidence. Not an idea or presumption about how you believe customers might behave, but documented, outside points-of-view of actual potential customers.

And the only way to gather such evidence is to talk to customers about the value proposition and have them gauge how its value in hard currency:

  1. How painful is the problem to the customer? How much are they willing to alleviate the pain of that problem?
  2. How gainful are the gains they’re seeking? How much are they willing to sacrifice for even greater gains?
  3. How costly are the jobs they’re doing? How much is it worth to have those jobs done on their behalf?

If we gather this feedback from a significant number of representative customers, then we may have enough to reasonably validate our assumptions and thus we have a better model of customer behavior. This doesn’t mean that you have a viable product yet, but it reduces the uncertainty as much as reasonably possible.

And Then…

Revisiting what we’re really looking for… We’re looking for the lowest-cost, fastest-to-market set of product features that fulfills a core value proposition for a target customer segment and represents a path to viability (future breakeven) for our business.

The path to viability is most important, as we’re trying to predict how customers might behave, and the MVP approach involves building a model of that behavior informed by genuine evidence.

We’re looking for the lowest-cost, fastest-to-market set of product features that fulfills a core value proposition for a target customer segment and represents a path to viability (future breakeven) for our business.

Once we have this path to viability defined and our minimum set of features, we have our MVP. Any fewer features and we don’t have something valuable enough for enough customers to buy it, and our costs exceed our revenues. Any more features and the product is too costly to build and maintain, and our costs exceed our revenues.

It’s this balance we’re looking for with an MVP. But the MVP is just the start, and actually executing to achieve a viable business is yet another journey.