As an entrepreneur and a product leader, I bring new products and features to market at a pretty solid clip, including a massive one about 10 minutes before I sat down to write this. I almost always launch these new products after testing their market viability with a minimal viable product.
The main argument I hear against MVP development is that it hurts the software ecosystem by allowing flawed product to go to market at an ever-increasing rate.
Here’s the problem I have with that criticism: It’s the misconception that those of us who develop and release MVPs are bringing a known quantity to a known market. That isn’t the case at all. If we were doing that, we’d be internal IT engineers, not entrepreneurs.
A true entrepreneur is attempting to bring innovation to market, not a commodity. And when you’re trying to do something that’s never been done before, you’re not so much finding a market as making one.
The Search for Product-Market Fit
Entrepreneurs use their minimal viable product to find product-market fit. You basically have two options to get an answer on the viability of your product before you attempt to carve out a new market for it.
Spend a lot of money.
- Build an MVP.
Those MVP detractors are either folks who can easily get their hands on a lot of money or they’ve never created a market.
I’m going to help the detractors here as much as I’m going to help the entrepreneurs and innovators. Because the detractors are indeed correct about one thing:
The true test of viability isn’t whether or not your product works. It’s also not whether or not you can sell that product to a customer. True viability comes down to whether or not that product can establish market fit.
Markets are tricky things, especially new markets, so that answer isn’t always as binary as many would like it to be. It may take months or even years to determine whether or not you can achieve product-market fit with an MVP.
But the opposite of viable is impracticable, as in, impossible in practice to do or carry out. A failed MVP is one thing–because if you’re willing, you have the opportunity to fix the issues and move on. What you don’t want – and what the detractors are actually railing against, whether they know it or not – is an impracticable product, one that will never be viable.
Here are the four reasons why your MVP might never be viable.
1. There is a fatal flaw in your choice of target market.
This mistake is the one I see the most and the one that is the hardest to come back from. It’s also the one that’s the most difficult to nail down. But the root cause is usually the same: In an attempt to make the biggest splash, the company chooses the largest possible target market.
In hindsight, this flaw is easy to spot, because the market was chosen only for its potential – the size of its total addressable market. But TAM is the last thing that needs to be taken into account when choosing a target market. In effect, when you consider the other three reasons for an impracticable product, your TAM is pretty much chosen for you.
2. There is a fatal flaw in your product’s value proposition.
All good products solve a nagging problem. Innovative products solve particularly painful and plentiful problems efficiently and affordably.
Of course, many product ideas are really just solutions in search of a problem. But even once you get past that trap, one of the biggest mistakes an entrepreneur can make is building a product to solve a problem that’s too small.
A similar mistake is developing a solution that doesn’t solve a problem broadly enough to warrant a purchase. People like the status quo, and they’re usually comfortable with the devil they know.
If you’re solving a small problem or only part of a broader problem, your value prop is off. Your product may find initial traction, especially if your target market is narrow enough, but it may never scale.
3. There is a fatal flaw in your positioning.
Sometimes, the problem is a combination of both product value proposition and chosen target market. This error is in positioning. Positioning can be kind of complex, but in its simplest form, it’s about nice-to-have versus must-have.
A well-built product can always find a few customers who want it. What’s more, a good salesperson can make any product desirable to some folks. But finding fit in a market usually comes down to whether that market needs the product or just wants it.
When “want” gets misdiagnosed as “need,” the result is a poorly positioned product. Either the value proposition or the target market needs to be reevaluated, or both.
4. There is a fatal flaw in your pricing.
Pricing is where companies usually start fixing failed MVPs first. And that’s a mistake.
Here’s a how-to on pricing in a nutshell:
- Your customer acquisition cost (CAC) is what you spend to acquire a customer in a given market.
- Your lifetime value (LTV) is the revenue over the life of the relationship with that customer.
- Your margin is the difference between LTV and CAC, minus the cost of serving the customer.
- Your pricing determines your LTV.
Narrowly targeted markets produce lower customer acquisition costs. Higher value props produce higher lifetime values. Until your total addressable market, value proposition, and positioning are fixed, pricing is just an exercise in guessing.
Once you optimize those things, the rest is simple math. If that math results in negative margins, especially at scale, you have an impracticable product.
The good news is if the reverse is true, you have a viable product on your hands, and that will produce a return on all of the time and money you put into it.