The Dark Side of the Minimum Viable Product

I have always enjoying the process of building new businesses and incubating new business models, and have relished any role I have been able to play. And, thanks to the corporate phase of my career, I have collected outstanding insight and honed my disciplined ways of thinking that have proven complementary to my more recent entrepreneurial pursuits.

Founders — particularly in the tech space – are an inspiring bunch. The best ones are blessed with the beautiful business mind that I have recently posted about while those less naturally gifted are nonetheless finding their way. They are learning how to channel their passion and creative thinking into something that has commercial potential…and it has been sheer joy for me to compare notes and to accelerate their development.

Product / market fit is where the game begins in the startup space. We begin by identifying a problem that requires solving or an opportunity that needs servicing, and then we build something to fill that void. We also regularly see a more clunky approach where founders start with a cool idea and then look for a home for it. I have lost count of the number of personal and online appeals I have received that take the loose form of I have this web site (app); can someone please tell me how to get people to come to or use it?? Their success will depend more on luck or their road will otherwise be long because they are looking at the equation from the opposite side of business opportunity.

Nevertheless, in concept or in reality we will quickly get to a place where we create a product of some kind. And, the playbook according to lean startup experts such as Eric Ries, is to first launch with what is called the Minimum Viable Product, or MVP. On paper it makes perfect sense: why blow your financial brains out building something far in excess of what will drive commercial success? You actually can over-serve the consumer; it’s easier and much more sensible to build the minimum product that will help you learn…and then learn some more…and then adjust and grow. As I said, on paper that makes total sense.  But there’s a dark side to that direction of thinking.

I do believe in the MVP as a sensible paradigm under the right circumstances. First, you must live into the intent of MVP by interpreting the idea correctly while also embracing the full process which mandates continuous deployment and organic pivoting. Second, you absolutely must know enough about your marketplace and especially your consumer to understand how to apply it most effectively to your particular situation. If we blindly accept and follow the paradigm as we think we understand it, we can fall into traps or otherwise be led astray. Allow me to share some guidance on the approach for the sake of keeping you on the most direct path to success:

1. Prioritize ‘Viable’ over ‘Minimum’.

The natural tendency for bootstrapping startups is to just get something out there. Go live (launching in beta counts) then start learning and growing, make a bit of money hopefully so that you can keep the engine going.

In so doing you can start to lose your focus on the consumer. The consumer doesn’t care about your issues, cash or otherwise – they just want to be served…and they will accept or reject you resolutely based on the job you do.  Don’t let yourself become intoxicated by the milestone of going live and celebrating even one click in the number of consumers you convert. For as you will see below, you’re doing yourself very little good if you’re not clear on what you are doing for your customer base even when you first reveal yourself. Have a clear sense of what viable means, and be sure it’s something captivating for the consumer. It’s about them, always. Not you.

2. Marketing > Product is false.

Usually. For products with low consumer involvement (e.g. beer), marketing/branding matters more. For most products and services where features matter, product is king. Over even the medium term, marketing cannot overcome your failures to serve the consumer precisely the way they want, if there are marketplace alternatives.

I recently wrote a cautionary article on digital marketing, reminding people of the critical decisions to be made in the business-building process before you even get to digital outreach. If you fail in those bigger decisions, you will sabotage your marketing plans. Be mindful of skipping over your product, believing that promotion will get you to your destination. Your preoccupation with sexy digital marketing tactics can certainly lead to a bump in awareness, but your offering as currently designed will close the sale.

3. The consumer is not a quantitative animal.

Consistent with what we’ve talked about so far, as you think about testing and learning, keep in mind that the path to improving your metrics is to better serve the consumer. You will definitely glean some insights as you collect data on their behavior, but the richer data you’re looking for is the motivation behind the behavior. As such, A/B testing is not your only tool.

That nuanced information lies both in the text of what your customer says and the subtext of how they think. What this means to you is the need for a robust plan to engage samples of your target; more importantly, you will benefit from having someone on your team who is adept at not only posing effective questions, but also extracting learning from what is both shared and not shared by respondents.

Said another way, data can surely tell you what’s wrong, but can seldom tell you how to fix it. I’m less a fan of wildcat drilling and more a fan of a 360 degree plan to study the user. If you’re lucky enough, some early adopters may volunteer to help, but you can’t always depend on this happening.

4. Find the tipping point that turns ‘meh’ into ‘WOW’.

…and if you pull in that learning you’re going to understand much more quickly which of a list of possible features and benefits are required to stimulate meaningful rates of conversion.

Let’s say you have an app and there are 18 features you want to incorporate.  You feel that it ‘works’ if you launch with 5. You pay for some ads, you measure your engagement and you have your results.  Now what?

You can absolutely quantify the results of your test but what you cannot do reliably is extrapolate the data. The only meaningful insight you get is that this ‘worked’ or ‘didn’t work’. And even if you did make money, you’re not sure if you should stay where you are, change something or double your investment or what…

The tipping point occurs when you build enough features and UX knowhow into your product that your consumer is blown away. Then and only then will the trajectory of your results change. The curve tends to look something like this:

The tipping point could be something big, like when Walmart added e-comm to their web site. That’s an easy one. For most of us it’s something more subtle, such as a UX hook or a more sophisticated tool to customize the experience. There are many methods out there to study this in test groups.  Consider that a smart marketing expense. Heck, start small and show your product to a number of people who have no vested interest in your happiness. If you get anything less back than ‘holy cow, this is COOL’, put some more work into the design. It will be money well spent.

If you’re already in market, make sure you have viral functionality in your site. The number of shares in social media is a great indicator of the power in the connection you are making with customers. Today’s consumer has a high threshold to become an advocate. Until you ‘go viral’, keep going.

5. A more primitive product offering makes for messy analytics.

Also, if you upgraded your product to a point of rounding the corner, you get a cleaner read out of your A/B marketing testing. You can filter product issues mostly out of the equation so that you can attribute any failures to marketing or obvious UX missteps. The more elements you know you have right – or close to it – the more quickly you will optimize your entire marketing mix.

6. If you’re in a crowded space…

The MVP makes less sense. Or, as I said at the get-go, you need to make sure you redefine ‘viable’ as something clearly separated from the competition along a valuable dimension. Sexier branding or aesthetic elements wouldn’t count; you need a critical set of ownable components that make you the easiest or the fastest at something…or just better. You’ll need to raise the bar for your launch offering and be demanding of yourself to do it. Any target consumers aware of your competition will be similarly demanding to be tempted to choose your solution.

The MVP watchout is to avoid building such a complete product that you become inflexible to adapt after launch. As long as you don’t paint yourself into such a corner, you’re good.

A super simple MVP makes the most sense if you’re truly breaking new ground, such as in the earliest days of #FinTech, a massive space only now being invaded by one startup after another. Take investing, for example. The options for the less sophisticated investors have historically been self-direction at one end of the continuum and expensive wealth management at the other end. Even just a few years ago there was an empty grey area of alternatives. Newer companies such as Wealthsimple had the luxury of launching something barely better than a spreadsheet. When you have fewer competitors and relatively open spaces, time is more on your side to start small, build and perfect.

Another credible way to look at this is using Harvard professor Clay Christensen’s model of disruption. In short, if you’re disrupting at the low end of the market, the incumbents won’t bother with you, so you have time to incubate your product. If you disrupt at the higher end, you essentially poke the bear; you awaken the most formidable competition, who may quickly initiate strategies to ensure you don’t get traction. So you may need to move quickly…which means launching with a solid product from day one.

update: February 2020 — This is the debate I’m having with my network as I prepare to launch my app in March. I see myself as launching at the high end, so I’m pushing for something closer to perfect than a traditional MVP for launch. It’s tough to convince people of the strategic intent behind my approach; most choose to see it more through the lense of me obsessing over a product I’m emotionally connected to. Time will tell if I’m right; I think I am.

 

7. In-market testing sacrifices today’s cash flow AND tomorrow’s revenue.

Here is a risk that more traditional marketers understand very well but is not talked about so much in the startup space. Every customer you talk to has potential value, and every customer you burn through with poor messaging or a substandard product is a customer who rarely gives you a second chance. Even the ones that sign up can’t be counted on to stick with you. If they are dissatisfied with the experience they become some of the toughest to win back. Consumers are are finicky; if they don’t like what they see they will swipe left if you get me, and they’re gone. They don’t typically see themselves as partners on your tireless journey of product improvement.

What’s worse, the consumers you are turning off in the early days of your business are among the ones with the highest revenue potential….or at least with the strongest need. Their desire for a solution in your category is so powerful they will overlook your imperfections to try you out. And, as with the others you get only one shot. Well, usually. And if you lose this cohort in your experimental phase, you are giving away the future value of their engagement.

I won’t even bring up the negative word of mouth a substandard product can create through its first time users. Depends on how good/bad you are and it’s a challenge to quantify.

In my corporate marketing days we did mounds of communication and user testing in controlled environments. We would hand select the minimum viable (test) group – or MVG…just made that up aha – that was statistically significant. The bonus was that we weren’t exposing large numbers of consumers to test messaging or experimental solutions.  This approach is of critical importance when working with both emerging and developed brands; you must speak in a consistent voice to the market at large, or you risk eroding your brand identity and cache. For a startup, if you insist on in-market testing only, you will challenge yourself to build brand equity, although I recognize that’s not something on your radar today.

The net lesson for you is to control the market exposure of your product so that you just get enough learning and hopefully attract some early adopters to champion your development. Ramp up your marketing as you get closer to the ideal solution to max out the current and future ROI of your extended plan.

8.  You have fired the starter’s pistol.

Even in the last two years, I have watched startups fill up empty spaces in the marketplace at an ever-increasing pace. We’re getting smarter at it, by building communities of entrepreneurs and start up hubs across many towns and cities outside of the valley. Subject matter experts are writing books, giving talks and managing communities in social media. Accelerators and new forms of incubators are appearing and taking founders under their wing. And then people like me are changing the world with their blog posts, too! (just checking to see if you’re paying attention; don’t spit out your coffee).

Only a handful of years ago the spaces of FinTech, EdTech, and HealthTech were wide open. I’d love to metric the amount of money that has since been pumped into each area (never mind SportsTech, FitTech, etc). Whatever it is, I’m sure it’s enough to make you think twice about jumping in, if you’re only at seed idea stage.

So here’s the thing: you need to similarly keep pace. Once you launch your MVP you have fired the starter’s pistol; you’re effectively on the clock. Because you have revealed yourself to not only your consumers but the competish, including those not yet in market. If your proposition is sufficiently minimal, you may inspire existing or new adversaries to trump you. And as I said, they’re doing it rapidly now, so be ready, and be aware of how much time it could take for a competitor to pass you. If it’s not a lot, you might want to build something better to extend your head start…or at least set yourself up to learn quickly and pivot to stay ahead.

The notion of MVP assumes a commitment to continuous learning via solid user metrics and ongoing coding. Ries believes you should be publishing new code daily. You do this for the sake of better serving the consumer but also to distance yourself from the field. Not enough startups embrace this part of the MVP equation; they launch and leave the rest in the hands of marketing. As mentioned earlier, that’s a dangerous trap….or a function of plain laziness.

Me, I’m more in favor of raising the barriers to entry and being a bit more sure of what I’m doing from the outset. My ego prefers to be challenged to scare the crap out of my competition, not excite them by how easy it is to beat me. That’s just me.

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I think the following characterization of MVP ties a number of my points together. While you are thinking about just getting something launched, the rest of the world is engaged in a race to deliver consumer value. That’s the hyper-competitive world we live in now.

So yes, it is a race.  Think about where in your evolution you want to begin the race and how you want to run it; it’s so much more than getting something out there. MVP is a great startup philosophy that complements a lean and agile infrastructure…but it’s very ‘2012’. In tech terms, the idea is on its way to becoming obsolete. You should feel obligated to question and challenge how you’re incorporating the paradigm into your business, so that, yeah, some of those nasty left turns. If you build your own growth model sensibly, you’ll more quickly pile up revenue… and satisfied customers who will pony up for your cause.

ADDITIONAL READING:

Really cool article from Harvard Business Review. Its main purpose is why big companies fail to successfully migrate their product or service into digital delivery channels. It goes on to talk about how corporations struggle even with ecomm spinoffs because they don’t have appetite for the ‘fail rapidly’ mindset of the entrepreneurial / tech types they need to run it.

Then it gets interesting. They claim you actually CAN incubate a successful digital value prop by taking the jobs-to-be-done approach and applying to controlled market research. You have to study four key questions on behalf of the consumer. If you can answer them properly, you’re ready to go. You max out your chance to be successful and minimize your risk!

2. Seems I have a kindred spirit. F*ck Failing Fast is written by the CEO of Canada’s Hubba. There’s a time and a place to do it smartly and get it right.

3. Lessons from airbnb scaling up: “one of the reasons you have to ‘Blitzscale’ is because of competition”. The idea is that you have to pivot/perfect/scale quickly. Even since MVP came into vogue we have already learned it’s not a measured, ambling journey.

4. The End of the Lean Startup, posted in January 2016 by respected startup consultant Mark Evans, supports some of the points here, especially the last two.