Minimum Viable Product MVP — development has long been used in the business world, especially among startups. As our practice shows, this approach is almost always the best way to build software projects. Aiming to launch a better digital solution tailored to user needs, it allows companies to save costs, reduce time-to-market, verify their ideas, and quickly receive a working website or application.
In this article we will define Minimum Viable Product and you will learn answers to the following questions:
- What is a Minimum Viable Product?
- What advantages does the Minimum Viable Product development approach provide?
- What is the difference between Minimum Viable Product software, proof of concept (PoC), and Software Prototype?
- How to build a Minimum Viable Product?
But there is more! We will also consider:
- Myths about Minimum Viable Product project development.
- Metrics that determine the success of a Minimum Viable Product.
A bonus for readers: inspiring Minimum Viable Product examples of how world-famous companies began with startup development and gradually extended their projects. Let’s start our journey!
What is a Minimum Viable Product?
In short, a Minimum Viable Product, or an Minimum Viable Product, is a software solution that contains only the minimum functionality required to resolve a user problem. Focusing on addressing only the top-priority user issue(s), you don't implement unnecessary features and avoid large financial investments. On top of that, the Minimum Viable Product development approach allows customers to quickly receive a working app or website and test ideas in action.
Dispelling 5 myths about Minimum Viable Product development
Myth № 1. A Minimum Viable Product has only one valuable feature
Building a Minimum Viable Product—website, application, or a large-scale system that consists of several apps—is much easier than making a complex software solution from the very beginning. Imagine that you need to release a comprehensive online flight booking platform with over 10 features for both smartphone and desktop users. Seems to be quite difficult and time-consuming, doesn’t it?
Sometimes it’s very challenging to define what functionality is really necessary and what can be left down the road. As you have heard a lot of good about Minimum Viable Product development, you decide to try it. But then you find out that it has only one valuable feature when all of them—that you would like to add—seem to be truly useful…
Well, don’t worry! An MPV product comprises a minimum set of functions required for addressing customer challenges or increasing their engagement.
Myth № 2. Minimum Viable Product product development suits for building small solutions only
Remember that a Minimum Viable Product is not just a draft that can’t be released on the market. It is a powerful tool for exploring user needs and preferences. With a successful test of your hypothesis, you can easily continue building the solution, polishing and extending it. That is why the key emphasis in Minimum Viable Product development is on testing the concept, collecting and analyzing user feedback.
For example, in case of creating a comprehensive online booking service, integrate only flight search with several main filters, a list of flights, automatic data updates, booking itself, and card payments. Launch a web application and then gradually scale it. Later, you will understand whether your audience actually needs a mobile application or not.
Myth № 3. A Minimum Viable Product is equal to Lean Startup
Often Minimum Viable Product development is mistakenly identified with the Lean startup methodology. In fact, the focus of the Lean approach is not so much on making a digital solution as it is getting feedback from users and learning from it. Although the creation of an Minimum Viable Product is a part of Lean, there are cases when it doesn’t require it.
Say, your top-priority goal is to raise funds with mobile application development. You launch a simple Minimum Viable Product product to showcase it to investors and receive a lot of money. As you clearly understand who your customers are, what problem they have, and what features will address them, you no longer need to test the app on the audience.
Therefore, an Minimum Viable Product is not only used in a Lean startup. This is primarily an effective software tool to build a project concept, prove your idea, and collect user feedback.
Myth № 4. Minimum Viable Product development is a guaranteed source of users and revenue
It is a mistaken belief that once you create a Minimum Viable Product, you will be greeted with a flood of users and income. Generally, there is a long way to go: collecting and measuring feedback, processing user analytics, preparing a list of features, prioritizing, and developing them.
An Minimum Viable Product may win the hearts of your audience but there are many iterations ahead. An Minimum Viable Product is just a tool to test and refine your ideas. The financial aspect will come into play only when the app or website becomes truly valuable to the target customers.
Myth № 5. Minimum Viable Product failure = Project failure
Nobody likes failures associated with the lack of demand. This means you have to admit when your idea is interesting only to you alone or to a very small audience. One of the most common reasons startups go under is the lack of market demand.
It is important to remember that the primary objective of Minimum Viable Product product development is to test the concept in action and measure the reaction of the target audience. If your customers don’t see value, you should try to change the focus and implement a different vision.
Minimum Viable Product examples: 4 world-famous companies that began with Minimum Viable Product development
Minimum Viable Product development helped many billion-dollar companies achieve success and gain popularity. Here are some inspiring Minimum Viable Product examples.
Minimum Viable Product example № 1: Amazon
Amazon is the world’s largest retail store that provides the most popular shopping application in the United States. In September 2019, the number of mobile users accessed the Amazon solution reached 150.6 million.
Amazon’s Minimum Viable Product started out as a simple online bookstore. People ordered books, employees bought them from the distributor and sent them directly to the customer. Jeff Bezos, the company’s founder, and his team constantly worked on improving and extending their service.
Thanks to Minimum Viable Product development, Amazon grew into a large world-famous organization with nearly 800,000 employees and revenue of $280.522 billion (as of 2019).
Minimum Viable Product example № 2: Airbnb
This is another Minimum Viable Product example that can inspire you. Created by Brian Chesky and Joe Gebbia, Airbnb was born in 2008. They were roommates with no money to pay rent for a San Francisco apartment.
To earn some they allowed people to sleep on air mattresses in their hall for a fee. That is what prompted Brian and Joe to run a new business. The goal was to provide customers with paid accommodation worldwide.
The investors in Silicon Valley forecasted the failure of this concept. Nevertheless, very soon friends attracted the attention of Paul Graham, and their startup got into his business incubator “Y Combinator”. A year later, in 2009, Airbnb fundraised $7 million and grew to about 700 thousand booking operations.
As of today, the number of Airbnb users has exceeded 150 million and continues to grow.
Minimum Viable Product example № 3: Dropbox
Dropbox is a great example of an Minimum Viable Product in business that adds true value to users. Drew Houston came up with the idea of a service for cloud file storage when he realized that keeping the necessary files on a USB flash drive is not always convenient as people can lose it or just forget it at home (as happened with him).
A Minimum Viable Product from Dropbox was very cleverly marketed. During internal beta testing, the company published several demo videos. They became viral. That helped attract hundreds of thousands of users and receive feedback from them. Therefore, the final application was born from an analysis of the target audience’s needs.
Minimum Viable Product example № 4: Virgin Atlantic Airways
The famous British airline began with just one plane, which went along only one route. This was not due to a lack of funds. The main objective of Richard Branson was to validate his hypotheses and improve them. This Minimum Viable Product development approach allowed him to increase the number of planes and grow the business.
What benefits does a Minimum Viable Product provide?
Building a Minimum Viable Product, you will receive the following advantages:
- Check real market tendencies.
- Test the concept with minimal resources.
- Engage the early users, collect their feedback, understand their needs and preferences.
- Receive a loyal user base for the future.
- Minimize development costs while significantly increasing chances for project success.
- More opportunities to attract investors and raise funds.
- Reduce both costs and time-to-market.
- Don’t waste developers’ hours and resources on building unnecessary features.
You can create and test a Minimum Viable Product in many ways. See the list of Minimum Viable Product examples that you can develop:
- Landing pages that include a unique value proposition and introduce a digital solution to users.
- Demo videos to quickly catch the attention of potential customers.
- Presentations made, for instance, in Keynote or PowerPoint, they will allow you to demonstrate your digital offer to customers and make the idea tangible.
- A Piecemeal Minimum Viable Product is an inexpensive way to showcase a software solution to the audience. To create it, existing resources and personal assets are generally used.
To test your Minimum Viable Product in action, you can choose one of the following techniques:
- Concierge Minimum Viable Product gives a startup founder the opportunity to directly communicate with users and to find out if there would be demand for the proposed product without actually building it.
- Crowdfunding helps to test your website or application in front of potential backers.
- Wizard of Oz Minimum Viable Product. It allows the client to make sure that this is the final product. Meanwhile, you can extend it by adding new features and enhancements.
- Email Minimum Viable Product for a unique offer to a large number of people (from the mailing list).
The bottom line is that Minimum Viable Product product development enables companies to obtain valuable feedback, tailor a digital service to customer needs, and fill a niche in the market.
Since a Minimum Viable Product, proof-of-concept (PoC), and prototype are often confused, we’ve decided to clarify them and explain their use cases.
Minimum Viable Product vs. Proof of Concept vs. Prototype
The key purpose of testing a proof-of-concept is to reduce technological risks, confirm the feasibility of a specific task, and check the value for customers before product launch. It is also a great way to confirm the financial startup viability.
A Minimum Viable Product and prototype are often confused with each other. They really have a lot of similarities. For example, they provide a solid foundation for future development based on user feedback. Both of them help startups attract investors and raise funds. However, there are some critical differences.
Prototype testing is usually carried out by engineers and other parties involved, for instance, by the customer/business stakeholders. By contrast, Minimum Viable Product testing involves customers from the target market.
A prototype is a part of a Minimum Viable Product or any other type of software solution. Unlike a Minimum Viable Product, a PoC cannot be moved to production.
As you can see, all three terms—a PoC, prototype, and Minimum Viable Product—mean different stages of making a digital service. When you know their goals, the priority of functions, and the target audience, you will no longer confuse them with each other.
In the software development lifecycle chain they are ordered as follows:
Top 6 metrics to estimate Minimum Viable Product performance
How do you understand how successful your Minimum Viable Product is? Fortunately, there are special metrics that you can track and analyze to understand both the strong and weak sides of the delivered software solution.
1. User feedback
User feedback has crucial importance for defining the preferences of real customers and improving a Minimum Viable Product product accordingly.
This Minimum Viable Product performance metric is needed for:
- understanding problematic issues
- learning user expectations
What to do:
- check out comments
- employ a feedback form
- use polls, questionnaires, email communications
- measure user reaction in groups and social networks
- see review and ratings in app stores
Tracking this metric, you will get a complete picture of where to go next and what to change in order to achieve success.
2. Customer acquisition cost (CAC)
This Minimum Viable Product performance metric shows how much money you should spend to attract one customer.
It is needed for:
- defining the viability of your project
- measuring the product scalability and profitability
- measuring marketing performance
What to do:
- check expenses on sales and marketing activities
- count the number of gained customers
Remember that you shouldn’t reduce the CAC to the lowest possible value. Otherwise, you can lose potential customers and therefore, profit.
3. Monthly active users (MAU) / daily active users (DAU)
Interest in MAU/DAU users depends on the Minimum Viable Product product type. MAU is typical for B2B applications when people expect to work with your solution several times per week or month (e.g., mailing services, reporting, and accounting).
DAU is generally employed for services customers expect to interact with every day, for instance, a calendar, games, mobile fitness applications.
It is needed for:
- the establishment of a loyal customer base
What to do:
- monitor the number of created accounts
- see how many users log in
- track the number of customers who are constantly using the existing functionality
If the number of active users decreases, think about how you can enhance the methods of their involvement. Or, perhaps what features you should add. To this end, monitor user feedback in groups, social media channels, forums, and app stores.
Integrate user analytics, for instance, Google Analytics for websites and Localytics or Flurry for mobile applications. These tools enable businesses to track and visualize user behavior in real-time. Thanks to them, you will increase chances for Minimum Viable Product success.
4. Monthly recurring revenue (MRR)
This Minimum Viable Product performance is needed for:
- a clear understanding of the generated profit
- financial forecasting and planning
- measuring product/startup growth
What to do:
- track costs and revenues from upgrades/downgrades, discounts, outflows, product reactivation, etc.
5. The average revenue per user (ARPU)
This Minimum Viable Product metric shows how much profit you can earn from each customer.
It is needed for:
- revealing preferences of individual customer groups
- identifying popular price categories and up-trending
What to do:
- track the number of solvent customers—count all users who paid for your service within a month and have active accounts
- carefully measure the MRR
ARPU Minimum Viable Product performance metric allows you to identify trends and implement changes that will increase the bottom line for your business.
The primary objective of this metric is to measure the first user reaction.
It is needed for:
- generating revenue from registering new users
- increasing the level of popularity
- receiving new user feedback to understand what should be changed and how to develop your startup next
What to do:
- track the number of registrations
If new users don’t come, you should take measures. For example, launch a marketing campaign, or improve the UX design of your product.
How to build a Minimum Viable Product in 4 steps?
We will explain our method of how to create a Minimum Viable Product in just four easy steps. The main stages of this are similar to those of many other software projects.
Here at YSBM Group, we employ the Think - Build - Ship - Tweak scheme, which has proven itself as the most suitable for both our customers and the development team. Let’s consider this process in detail.
1. Thinking stage
At this Minimum Viable Product development stage, you should devote the maximum amount of time to the idea behind your product and how it resonates with your potential users. Here it’s important to analyze the market, describe an ideal customer, create a unique selling proposition, and define the most valuable app features.
Most likely, you will need the help of experienced consultants. They will not only assist in market and competitor research but also provide an estimate of the amount of work, draw up a budget, and prepare a project schedule.
2. Building stage
When building a Minimum Viable Product, the most critical and challenging task is to avoid being distracted by multiple unnecessary details. Follow priorities, quickly make the necessary changes (for instance, because of altered project requirements or the early user’s reactions) but stick to the initially planned Minimum Viable Product scope.
3. Shipping stage
The key task of this Minimum Viable Product development phase is to get as many new users and reviews as possible. Constantly analyze real market demand. Find out customer expectations regarding additional features they would like to have, create a list of them, prioritize, and gradually implement. This can potentially lead to several product versions.
As a result, you can concentrate on building the functionality that your audience is really willing to pay for right away.
4. Tweaking stage
Analysis and measurement of software system parameters based on customer feedback are the main assistants at this stage. Analyzing the user’s reaction, you obtain a crystal clear understanding of how to extend your solution.
Plan and develop the next versions until your digital service addresses all the desired user problems/issues and meets all their expectations.
Closing thoughts about Minimum Viable Product
At YSBM Group software house, we generally adhere to the Minimum Viable Product software development approach, starting small and then gradually extending the service. This allows us to be flexible and adapt to market changes much faster. Furthermore, this keeps your costs to a minimum while receiving an app or website of higher quality.
Building a Minimum Viable Product is a great way to save costs, test the project idea in action, reduce time-to-market, attract the early users, collect feedback, and improve a software system accordingly. This roadmap is widely used by startups to showcase the value to investors and raise funds.