MVP for entrepreneurs: what a minimum viable product is and how to build one

Proof of concept, business model, fundraising… The entrepreneurial ecosystem glossary covers  several concepts that serve as guidelines for ensuring that innovative projects reach their full potential.  Among these is a term that is particularly relevant for startups looking to test their concept: the minimum viable product (MVP), one of the cornerstones of the lead startup method used to convert an initial idea into launchable products.

What is the minimum viable product and why is it important for a startup?

The minimum viable product is a basic product used for market testing before launch. This prototype includes the basic yet must-have features and makes it possible to test whether the product has the features that meet customer needs, as well as to gauge their interest in the product.

• Low-fidelity minimum viable product. These are prototypes that are quite simple to develop with the goal of finding out what would be the most effective solution for customers. With this version, the entrepreneur can understand consumers’ main needs and wants and test whether the idea is profitable and scalable. An example of this approach is the creation of landing pages, PowerPoint presentations and mockups, which are tools used to visualise the final result of a proposal.
• High-fidelity minimum viable product. These are those products that involve further development given that their goal is, besides defining the most efficient solution to a demand, to identify whether customers would be willing to pay for it. This type of MVP makes it possible to define the marketing strategies for the product. An example of this type of minimum viable product is the basic version of a software service.

Benefits for startups by creating a minimum viable product

Building a minimum viable product offers several advantages for startups:

• It lowers risks. Designing a minimum viable product gives startups enough wiggle room to refine their service and tailor it to customer demands. Doing so means that entrepreneurs can ensure that the product will meet the needs of the market, apply those features that users want and reduce the degree of uncertainty about how well it will be received by consumers.
• It reduces costs. Creating a minimum viable product saves time and money: less time is spent on developing core aspects or features of the service, since only essential features are involved, which helps focus more effort on the subsequent stages of development. At the same time, it also enables faster time to market so that it can be tested by customers.

• Feedback helps make the product better. Building an MVP helps startups get feedback on product-market fit and also on how they can tweak their product before final launch. In a practical example, entrepreneurs Brian Chesky and Joe Gebbia decided to rent out their flat where they lived. They posted the advert on a website and soon had three customers. The information revealed by these users allowed the entrepreneurs to focus on product development and create Air Bed and Breakfast, now known as Airbnb.
• It indicates whether pivoting is needed. Ninety-five percent of the 30,000 products launched each year fail, according to Clayton Christensen, a professor at the Harvard Business Review. The figure is underpinned by one of the main reasons startups fail, reports CB Insights: their product failed to meet market demand.

This proves that launching a minimum viable product is critical: if user response is negative, testing the prototype gives entrepreneurs the insight to decide whether they should rethink the company’s business model or fine-tune the product or service to ensure that their proposal makes an impact on the market.

How to create a minimum viable product

There are a few essential steps to follow when creating a minimum viable product (MVP):

1. Define the problem. The first step is to define the problem or challenge that the product the startup is developing is going to solve, which will make it possible to identify the target audience and their reasons for choosing the product. At this stage, it is also important to carry out a SWOT (strengths, weaknesses, opportunities, threats) analysis to refine the value proposition.
2. Design the customer experience. After determining the need or demand that the product covers, it is important to define the route that users take through the product or service being developed by the startup and to break it down into milestones. For example, for Spotify, users first have to find the band or artist they are looking for. They then choose the music and play it. Identifying the most obvious steps helps to improve the customer journey.
3. Put together the core features. Once the entrepreneur defines the value proposition, as well as the problem that the product solves and the business model, it’s time to narrow down the core features for the launch. Then the entrepreneur needs to hone down the list to only must-have features, the ones that will be most interesting to customers and that will respond to the problem that the product is designed to solve. It is important to have a trusted team during this process to keep the focus on the core features, since customer feedback can shift the attention to other, not-so-important features.

Finally, we recommend keeping four criteria in mind when creating a minimum viable product:

• Functionality. It should integrate the core features to address a need.
• Reliability. The solution can be trusted to be safe and secure.
• Usability. It is useful to people who try it.
• Design. It draws the attention of users.

Building a minimum viable product is an indispensable step for startups seeking to ensure their growth in the entrepreneurial ecosystem. This is also boosted by the end-to-end solutions that BBVA Spark develops, which help high-growth companies drive their evolution forward.