MVP development for startups
Avoiding Startup Failure: A Closer Look at MVPs
Starting a new venture, whether it’s a small business or a tech start-up, has traditionally been seen as a hit or miss proposition. According to the classical formula, you are supposed to write up a business plan, show it to potential investors, get a team together, introduce your product to the market, and then sell your idea as hard as you can. However, somewhere in this procedure, you will probably suffer a dramatic and fatal setback. According to a recent research conducted by the Harvard Business School, more than 75% of all startups fail. Simply put, the odds are not in your favor.
SOME REASONS WHY STARTUP FAIL
Generally, we tend to place our attention on the winners instead of the losers, the successful startups instead of the failing startups. This mental fallacy is called survivorship bias. Unfortunately, this is easy to do. Failing businesses become invisible in popular media, so naturally, we pay more attention to the successful businesses. However, it is important to remind yourself that by picking apart the successes and failures, that by paying attention to only one side of the equation you are forgetting the other. For example, if you are thinking about opening a bar in your town because there are so many successful bars in your town, you are forgetting the fact that only successful bars survive to become the example. Maybe on average about 95% of bars in your town fail. But you can’t see those failures, because when they fail they become invisible.
Valley of Death
The “valley of death” is a popular term in the startup industry. It refers to the struggle new businesses have with covering their negative cash flow in the early stages, before their new service or product start to bring in revenue from customers. According to a study by Gompers and Lerner, about 90% of startups that don’t attract investors fail within the first 3 years.
Some founders are too idea focused. It may be hard to accept the truth, but it takes a lot more than just a great idea to reach startup success. In today’s world, everybody has an idea, and you are probably not the first person to think of yours. What matters the most is the people behind the idea. Avoid losing focus of what’s important, and instead, sleep, eat, and breathe the execution of your vision.
SOLUTION - Minimum Viable Product
In recent years an important and countering force has appeared, a tool that makes the process of starting a company less risky. It’s a concept called “Minimum Viable Product (MVP),” and it favors customer feedback over intuition, experimentation over elaborate planning, and iterative design over traditional “upfront big design” development. Although this methodology is only a few years old, it has quickly taken root in the start-up world.
The purpose of an MVP is to efficiently test the potential interest of a product before building a final version. In other words, it’s a prototype or representation of your value proposition, which should validate one or more of your hypotheses.
Instead of taking the old “hit or miss” route of executing business plans, working in stealth mode, and releasing expensive and fully-functional prototypes, many startups are now testing their assumptions by gathering early and frequent customer feedback, and showing their MVPs to potential prospects. This process takes into account the fact that searching for a business model (the primary task of a startup) is completely different from executing against that business model (the primary task of established firms).
Doing MVP the Right Way
Too Much Effort
You spend months and months developing your MVP, adding every feature that comes to mind.
If you’re idea is a hit, then there is nothing wrong with this approach. But you know the odds are against you. Even the best business plans fail. Sometimes there is not a demand for the product or service you have built.
This is not the correct way to do an MVP. You could have launched your venture sooner and validated your concept. You have over-invested before launching, which bears an unnecessary amount of risk.
Not Enough Effort
You develop an MVP with no features. It doesn’t resemble the product you ultimately want to deliver to your customers. As a result, it doesn’t deliver any value and the market rejects it.
This is also not the correct way to develop an MVP. Although you may get some data, is it really valid? Your potential market could just be rejecting your poor MVP, which has no resemblance to your long-term vision. Therefore, you fail to learn anything of value.
The Right Way
You take time to decide on the number of key features that will allow the market to properly assess your idea. If you are coming up with some new functionality, you spend just the required time developing this feature so that it does what it needs to do. You spend the minimum amount of time to get your product or service to this point, and then you launch it.
This way, you provide your audience with a simplified, but practical version of your idea. If there appears to be a demand for your product, then you continue to develop it incrementally. You also launch without too much investment, keeping risk levels under control.
It’s important to remember that while an MVP does not guarantee success, it will cut your loses to a minimum and allow you to pivot your idea in the right direction before it is too late.