MVP stands for minimum viable product and can be explained simply as the simplest possible product that a customer is willing to pay for.
Product development is one of the most important functions to keep efficient for a growing company, and especially for a startup, where time and capital are two of the scarcest resources.
Startups often raise several investment rounds, with the intention of increasing the company’s value between rounds. One of the most important factors in justifying a high valuation is traction, that is, showing that the product has gained a foothold in the market.
The most important measure of traction is paying customers. They confirm with a high degree of certainty that the product and the business model work in the market, and that the company can make money.
After working with and training a large number of startups, our experience is that the most common bottleneck to gaining real traction is product development itself. Companies often underestimate the resources and time it takes to develop a finished product, whether physical or digital. When the product is ready to sell, the first customers often ask for more features, which leads to delays and higher costs.
Since startups are usually short on both time and money, it is generally more important for them to get early sales going than to develop a perfect product. This is where the MVP concept is very useful.
To develop a good MVP, product development needs to go hand in hand with concrete customer feedback. A practical approach is to build customer meetings into the development process, and then only develop the features that customers have validated. The company can of course also suggest innovations that the intended customers have not thought of themselves.
This approach makes it possible to charge for the product at an early stage, and it keeps expensive product development to a minimum. The companies that give feedback early on often become the first paying customers.
In the beginning it is useful to meet customers in several business areas, since they are likely to have somewhat different requirements. The fewer features needed to reach a level of innovation the customer is willing to pay for, the better. At the same time, look at each business area more broadly, for example its market potential, willingness to pay, purchasing processes, lead times, competition and synergies with future business areas.
Once the MVP is in place, more features can be added as sales pick up. Over time, continuous innovation is an important competitive advantage, but it should be balanced against generating revenue.
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