Creating an MVP, the Lean Startup

MVP and UVP

 

The Minimum Viable Product represents the minimum functionality a product needs to create demand. Even though this concept does not apply to all activities – a restaurant will have to invest large amounts of cash upfront to bring a full service to market – it allows the entrepreneur to apply the pivots and Lean Startup concepts just described. In its most basic definition, an MVA will be the wrong product that will have people actually buy it, allowing early feedback to pivot and address the market with a better product.

 

This product will be the core of the startup and define its unique value proposition. By aiming at creating a minimum viable product that is scalable, repeatable and profitable, entrepreneurs will be able to set the basis for a more sustainable growth strategy. Not only is this technique time saving, it is also less capital intensive – see Webvan example on the Home Page.

 

 

As mentioned on the Home Page of the website, having a rigid business plan does not allow for any mistake, and is one of the primary reasons for the very high rate of startup failures. The Lean Startup, published by Eric Ries in 2011, aims at improving the efficiency and speed of pivots within a startup. Pivots are course corrections, and occur at all points of a startup creation and growing. They apply to each single part of the business plan (distribution, pricing strategy, costs...) and are part of the learning experience.

 

One common pivot that entrepreneurs forget is planning for exit of the startup, whether in the early stages of the entrepreneurial journey or when seeing an acquisition opportunity by a bigger competitor. Knowing when to stop before spending too much in the early stages of a startup to avoid any adverse repercussion, or knowing when to sell in order to walk away with the cash entrepreneur(s) had forecasted to make with is crucial. This is not only money related but also time related.

 

Pivoting can also be necessary once the business is started and grows as entrepreneurs face new issues they did not plan for. By giving some flexibility to their business model when moving forward, entrepreneurs will be able to pivot more easily, and address challenges they did not plan for. The Webvan example in the introduction section is a great example of having a business model that is too rigid to allow any adjustments to the operational reality of the business.

 

It does not mean however that entrepreneurs should not be calculating in advance each and every step necessary to move forward. It mostly means that they should rather keep pivoting in mind and be prepared to adapt to challenges they did not predict. The Lean Startup identified top 10 common pivots to consider beforehand:

 

• Zoom-in pivot: A single feature in the product becomes the actual product or service. It relates to the following concept of Minimum Viable Product (MVP).

 

• Zoom-out pivot: Opposite situation when a single feature is not sufficient to support a customer base. In this case, the whole product become the single feature of a larger product with more features.

 

• Customer segment pivot: If the entrepreneur(s) realize that the personas created are not in demand for the startup's product once it is launched, but others are, entrepreneurs will need to create new personas willing to buy the company's product and reposition it accordingly.

 

• Customer need pivot: This occurs when customer feedback shows that the problem solved is not important enough to create sufficient demand. In this case, entrepreneur(s) should try to reposition the product to attract demand or drop and find a related problem worth solving.

 

• Business architecture pivot. Geoffrey Moore, an American organizational theorist, observed that there were only two possible business architectures:

  • high margin, low volume (luxury products or complex problem solvers),

  • low margin, high volume (commoditized products)

         ->Both cannot be achieved at the same time.

 

• Value capture pivot (monetization or revenue model). This variable has consequences for the business, its product, and startup's marketing strategy. Finding the right pricing strategy and evolving it is paramount to have sales occur. The “free” model often found in the tech industry does not capture much value.

 

• Engine of growth pivot, or growth models identified for today’s startups:

  • the viral (strong appeal, simple problem solver, may lack sustainability in the longer term e.g.: a smartphone app)

  • sticky (implies many operational constraints and large upfront investments, harder to take off but more sustainable if working. e.g.: a rental car company)

  • paid growth models (company is paid per product or service, which allows it to grow according to demand)

        -> The choice of the growth pivot can dramatically affect the speed and profitability of the company. However, they remain

             dependent on the activity and industry of the start-up cannot be applied to all types of activities. 

 

• Channel pivot: A distribution strategy can take many forms and influence many variables such as pricing or brand positioning (brick and mortar, click and mortar, click)

 

• Technology pivot: As mentioned earlier, answering a problem can take many forms and can use different types of technology. This is most relevant if an alternative technology can reduce costs, improve performance of the product, its delivery...

 

Pivoting and the Lean Startup do not only emphasize flexibility but execution. This could for example mean bringing an unfinished products into market to test reaction, pivot according to feedback, and then iterate. Not only this approach allows for more flexibility, it also acknowledges that nothing in this world is certain and that getting out of the building is the only way entrepreneurs can know and better understand their customer.