How to build an effective MVP in 3 steps

Building a startup! You have an epiphany and say to yourself:

This is a great idea!
How didn’t anyone think of it before?
I have to build it!
Now!

Fair enough but, as I’m sure you’ve heard, 99% of startups are doomed to fail — and you want to be among the 1% champs. Maybe you have already read the Lean Startup and all about Minimum Viable Product (MVP) and getting your idea tested ASAP. That is important! Speed on testing and testing as much as possible is vital, but should you just build the first thing that pops into your mind?

The answers you’re looking for are just a few scrolls away!

In this article, we will go through:

• The definition of MVP

• The Process in 3 steps -> 123-MVP

• How the methodology was born

• Famous MVPs

• Why creating one will benefit you — and your product

What is an MVP (Minimum Viable Product)?

Let’s take a moment to define a Minimum Viable Product. It really is a case of “it does what it says on the tin.”

In a nutshell, an MVP is the simplest version of a product possible:

“No one has ever created “X”, I want to build “X” because I think everyone will love it and it will improve their lives!”

The MVP is the minimum effort to test if your target market (your “everyone”) will actually love it. It’s a simple but extremely effective methodology.

The Process

This 3 step process intends to help you decide:

• If you should or not build your startup; and if yes,

• Which features should be inside the MVP (Minimum Viable Product)

The process is called 123-MVP and we’ve used it with all the startups we worked with through Altar.io and 10kstartup, we’ve also applied it to the 10+ startups we have built together in the past 6 years.

The Process in 3 Steps -> 123-MVP

• Nail the Value Proposition

• Set the main assumptions to validate

• Define the shortest way to validate the assumptions

While going through the 3 steps I’m taking Airbnb as an example, to make it more tangible and less theoretical. Airbnb is one of the most used Startups to benchmark whatever. Sorry for using a commonplace, but this way I’m sure all of us know what we’re discussing.

Sure you don’t want to dedicate months of your life building something useless: You should start by asking “is this product really relevant to my target?”. This is something you want to see answered asap. How can you nail it in a structured way? Answering these questions:

1. What is the problem/pain you’re trying to solve?
2. What is your Value Proposition?
3. Who is the main target? (Know them in terms of demographics, psychology, behavior in the observed context. Eventually, build UX Personas)
4. How does each target stakeholder deal with the problem today? (Benchmark)
5. Why are we better than the current solution? (say what differentiates you from the alternatives/your existing competition)
   ___(name of your product) is a_____ (a statement of its key benefit / solution)
6. What is your Elevator Pitch?
   It’s been created for ____ (your stakeholders) who ____ (state their problem). ____ (name of your product) is a_____ (a statement of its key benefit / solution). Unlike ____ (current solution) we ____ (say what differentiates you from the alternatives/your existing competition).

The final output must be an SSCC Elevator Pitch = Simple Stupid, Crystal Clear!

If it is unclear, go back to step 1).

1) Problem?

Travelers around the world cannot find an easy way to book a room with a local or become a host. The main existing offer for tourism accommodation is an hotel, which is not adapted to the preferences of Millennials because it leaves them disconnected from the City and its culture.

2) What is your VP (Value Proposition)?

Airbnb is an online marketplace connecting travelers with local hosts. On one side users can list their available spaces to local tourism and make extra money while travelers can book unique places from locals, saving money and getting a chance to interact with them.

3) Who is the main target?

Traveler: a person who enjoys traveling without spending the whole budget in a hotel room. He/She usually is a millennial, keen on learning from and co-living with different cultures and willing to enjoy experiences with locals rather than people from the home Country.

Millennials' tourism behavior is quite interesting: 3/4 vacations per year, they prefer experiences over resorts, they save in accommodation and spend on activities.

Host: owner/renter who is willing to rent out his space. The reason is usually making money accompanied by the interest to meet interesting people.

4) How does each target stakeholder deal with the problem today (Benchmark)?

Hotels, Hostels, Couchsurfing.

5) Why are we better than the current solution?

Airbnb is perfect for Millennials. It enables travelers to manage their trips accommodation in a natural, hassle-free and simple flux with the best value for money, taking into account their concerns for being more genuine and cost-efficient. It also enables owners to rent out their spaces in an easy way, by simply listing the place on the platform once and receiving money exclusively online and offers an affordable solution to the travelers.

6) What is your Elevator Pitch?

It’s been created for millennials who want to travel in a comfortable, cost-efficient and genuine way. Airbnb is a marketplace to fill the gap between Hosts that want to short-rent their homes and Travellers that are willing to pay to be hosted in private venues by locals. Unlike Hotels, Airbnb creates engagement between guests, hosts and their cultures and simplifies the entire process of renting a space around the world. Unlike Hostels and Couchsurfing, Airbnb is more exclusive and suitable for a more private and comfortable stay.

Let’s remember what you are doing: (i) Deciding if you should or not build your startup; and if yes, (ii) deciding which features should be inside and outside your product’s first version/Minimum Viable Product. Taking into consideration the elevator pitch:

1. What are the main assumptions from your Elevator Pitch?
   What are the relevant assumptions required for the product to be meaningful? We should in this step decompose all the relevant statements from the VP/Elevator Pitch.
2. From these assumptions which are already validated?
   Part of the listed assumptions can be validated with research; research is much more accessible than product testing.
3. From these assumptions, which ones do we need to validate and which are the KPIs?
   From the assumptions that are not proved and need to be tested, what are the metrics to measure them.

1) What are the main assumptions from your Elevator Pitch?

• Travelers want to pay to be hosted in private venues by locals to have a genuine experience

• Travelers are willing to share venues with total strangers

• Travelers want to stay in private venues on a constant basis

• Hosts want to short-rent their homes to make money

• Hosts are willing to accommodate total strangers in their homes

• Hosts want to short-rent their homes several times per year

2) From these assumptions, which ones have been already validated?

• Travelers want to pay to be hosted in private venues by locals to have a genuine experience
  → 17,000 temporary housing listings on SF & NYC Craiglist (9–16 Jul 2007)

• Hosts want to short-rent their homes to make money
  → 17,000 temporary housing listings on SF & NYC Craiglist (9–16 Jul 2007)

• Hosts are willing to accommodate total strangers in their homes
  → 630,000 spaces available on Couchsurfing.com

• Travelers are willing to share venues with total strangers
  → 630,000 spaces available on Couchsurfing.com

3) From these assumptions, which ones do we need to validate and which are the KPIs?

• Travelers want to stay in private venues on a constant basis
  → KPI: Travellers retention ratio

• Hosts want to short-rent their homes several times per year
  → KPI: Hosts retention ratio

This step is intended to squeeze your first sprint features list down to the juice nectar. But before picking the features there is a consideration that must be made:

• Is it possible to build an MVP that is faster than an application to implement and that is enough to test my main assumptions? See this article: The Early Stage Dilemma: Functional or Non-functional MVP?

• After the first consideration, assuming you considered a non-functional MVP is not a good approach to test your market, then you are ready for the process of picking the features to develop.

Go through your extensive list of features and one by one do this exercise:

• Is it mandatory to prove any of the main assumptions?

• If yes, keep it, if no, trash it.

Remember a large ratio of entrepreneurs lose their way on this path because they don’t focus on relevant features to test the market. Considering we already have the main assumptions to validate with the MVP and we also know how we are going to measure them, we are then good to know where we must focus to craft our Minimum Viable Product.

Picking the right features is a battle between your emotional fetishist mind (This is essential = “oh I love this feature, please don’t take it away from me! Noooo, it is my precious!”) and your analytical mind (“I can’t do them all, let me focus in what is relevant to prove the main assumptions”).

• Is it possible to do an MVP that is faster than an application to implement and that is enough to test my Main assumptions?
  Video option, Airbnb MVP alike platform means a 3.5 months 35K USD implementation and the real metrics are much more valuable to prove my assumptions. Even if we could build the non-functional MVP and gather interesting metrics about the appetite of leads, it would not be gathering indicators of retention, just early adoption.

• For this demonstration let’s not get a massive list of features, but the filtered and most relevant features in the shape of user stories. This should be the very last skinny list after screening thousands of features/user stories that are awesome but not essential to prove the concept:

As a traveler I want to:

• See available houses with prices and the host profile with ratings, so I feel safe about my options

• Have credits when sharing with my friends (this referral system will not only enhance traction but will also give an incentive to repeat the experience-enhancing retention because the credits will only be used in future trips)

As a host I want to:

• See applicant travelers, so I can pick the applications I accept, so I feel safe about who I let in my home

• Have Airbnb helping me to get the best results out of my home (for the MVP these incentives are non-functional, mostly related to marketing content: the professional pictures Airbnb took from all first houses)

Wrapping up the list cutting the b*sh*t:

1st STEP — Nailing the Value Proposition

• What is the Problem?

• What is your VP?

• Who is the main target?

• How does each target stakeholder deal with the problem today (Benchmark)?

• Why are we better than the current solution?

• What is your Elevator Pitch?

2nd STEP — Setting the Main assumptions To Validate

• What are the relevant assumptions from your Elevator Pitch?

• From these assumptions, which ones have been already validated?

• From these assumptions, which ones we need to validate and which are the KPIs

3rd Step — The Shortest way to Validate the Assumptions

Is it possible to build an MVP that is faster than an application to implement and that is enough to test my Main assumptions? if yes, which is it?

If no, go through your extensive list of features and one by one do this exercise:

• Is it mandatory to prove any of the Main assumptions?

• If yes, keep it, if no, trash it.

That’s it!

But how did the initial method of MVP come to be?

How was the MVP methodology born?

It all started when Eric Ries experienced failure in the startup scene. Many months, and many dollars, later he was still seeing his colleagues in Silicon Valley failing for the same reason:

“The features we built are not being used”.

After researching for a way out he found his inspiration in the Lean Manufacturing methodology. Toyota invented the concept of Lean Manufacturing — a process to shine a light on what adds value, through reducing everything else, or trimming the fat to make it leaner, because “everything else” is not adding value but only burning money, time and focus.

Ries brought the Lean concept from the car industry to the .com bubble, baptized it as the Lean Startup methodology. MVP falls under the Lean umbrella as the first client-facing version of a product.

I recommend checking out this video for an amazing quick guide to The Lean Startup.

This method has been widely adopted by some great entrepreneurs and before I now want to give you a tangible, real-world example of just how much success an MVP can bring you…

Famous MVPs

Back in 2008, Travis Kalanick and Stumbleupon founder Garrett Camp were just two guys with an idea, an idea born (like most great ideas) from a problem. The problem they wanted to solve? The cost of black car services.

They created a simple, quick, low-budget platform to test their simple theory.

People can’t necessarily afford a black car service but they don’t like taxis — what if we can create something the bridges the gap and solves the problem.

Uber was born. Originally dubbed UberCab the basic platform allowed people in San Francisco to order black car services through an app on iPhone and through SMS on other devices.

In 2010 Kalanick tweeted what is arguably one of the most valuable tweets in the history of Twitter.

Ryan Graves responded to this tweet simply saying “here’s a tip. email me :)” He would later become Uber’s first CEO and now has a personal net worth of $1.6 billion with Uber’s net worth sitting at $75.5 billion when it went public in May this year.

The app has evolved through several iterations from this simple MVP platform over the years — with lots of newer features such as fare splitting and live driver tracking to name but a few.

Obviously, when we use Uber as an example we also have to recognise one important factor — they are a unicorn.

However, this example shows perfectly how an MVP can have a hugely beneficial impact on your business…

And Uber isn’t the lone Unicorn that built an MVP:

• Facebook

• Instagram — Originally Burbn

• Twitter

• Amazon

• Groupon

• Dropbox

• Airbnb

All of these well-known companies started with a Minimum Viable Product. If it worked for them it could very well work for your big idea too!

And if you are still not convinced I’m going to breakdown even more reasons why MVP can help you.

Why should I create an MVP?

Don’t try to run before you can walk! This is the purpose of an MVP — to launch a product based on your concept quickly and with a small budget.

The average good-quality MVP costs anywhere between $15,000-$50,000 depending on whether you use an agency or hire your own team of developers (if you go down the route of hiring developers be careful of developer archetypes!)

Before explaining in more detail the “why”, I need to point out the alternative to following the MVP framework.

The alternative is known as the Waterfall Model — building a fully-featured product in which the requirements and complete list of features are decided before building the product.

This is what:

• Big-corp and classic consultants do, often failing time after time.

• Many founders continue to do — even those aware of the lean concept and MVP framework.

Working with many early-stage startups I have had many young founders come to me with a laundry list of features they want in the first version of their product. They are telling me it’s an MVP but it is actually an MBP — a Most Beautiful Product. Ironically some of these founders are trying to escape the corporate world and they end up doing the same mistakes — the less than optimal waterfall approach.

But why do founders still want an MBP and not an MVP?

“It’s because people (especially founders) tend to be self-absorbed. They believe they were blessed and have the right vision about what will be adopted and what won’t.”

They also believe they’ll be rolling in money. But let’s look at the facts, soberingly: less than 1% of Founders “make it.” The reason for this is they’re so optimistic they convince themselves that they have nailed their product vision and they will conquer at first trial. It’s very rare to write an amazing symphony in the first draft — not everyone can be a Mozart!

So the to answer “why” you should build an MVP and not fully-featured is because an MVP will:

• Save time
  The quicker you can test your assumptions the quicker you can get to market. Not only this but you will save a considerable amount of energy by using this streamlined methodology

• Save money
  It goes without saying that building part of a product, with only the absolutely essential features, is considerably cheaper than building an all singing all dancing version.

• Protect your credibility
  When it comes to building something new you will always be involving other people. From friends & family to investors and other players in your chosen market. The point is, test the waters. That way if your product fails it will fail quickly — without spending too much money. The alternative is pouring any and all budget you have into a product that fails in a years time anyway — no one wants to be this guy.

• Save Energy
  I’ve seen firsthand entrepreneurs exhausted after giving all of their energy to a full-featured product. If they miss their mark, and the product lacks any kind of adoption, it drains all inspiration from them — leaving them to never want to go down the entrepreneurial path ever again. Using an MVP approach allows you to test the market months before this exhaustion can set in and uninspire you.

Wrapping Up

As an entrepreneur, it doesn’t take a genius to arrive at the following conclusion:

“Let’s find the shortest path to prove we’ve got a market”

By reading this article you have everything you need to follow this process.

If you are thinking about building an MVP and want to talk with a team of experts we here at Altar.io build dozens of MVPs every year. Alternatively, drop me a personal message and let’s chat!

Thanks for reading and I can’t wait to hear from you!

Disclaimer: This post was originally written by Daniel Ruivo, Co-founder at Altar.io and published on the 

company's blog

.