How the MVP Concept Makes Companies Rethink Their Business Models

It seems everyone has been constantly talking about the concept of Minimum Viable Product (MVP) for decades. Essentially, MVP is a tool that allows companies to test the ideas before proceeding to stages of full development and launch. It is a model resembling the final product but with a minimum possible set of features needed for its deployment.

There are five main goals that MVP helps to achieve:

1.     Initial customer testing. Probably, it is the main MVP function as it gives you a chance to see if potential customers are going to be interested in the product and to what level.

2.     User feedback. May provide some insight into the product's usability. From here, you can make the necessary improvements.

3.     Market trends research and validation.
This step will give essential data on how to position the product on the
market: from general ads campaigns to customer segmentation.

4.     Early client acquisition. In many cases, a segment of customers who have tested the product and would like to get it after the launch. Therefore, MVP helps to build the initial client base.

5.     Investment planning. Depending on the testing results, the company will understand how much it should invest in the idea – or whether to invest at all.

According to the listed MVP benefits, it seems absolutely necessary for businesses to develop MVP. However, the concept rarely gets sufficient attention. Let’s see why.

Not to be underestimated

MVP should not be viewed as a one-off activity, but rather as an integral part of the company’s strategy. It is nearly impossible to implement in organizations with a traditional corporate culture where management wants to see a predictable return on every dollar invested. Conversely, under the MVP approach, they must be ready for the funds spent on the product modeling to have zero ROI if it fails in the testing stage.

Refusal to invest in MVPs is closely associated with the companies’ fear to innovate. They normally tend to stick to predictable patterns without moving too far from their usual way of doing business. Eventually, neglecting to implement an MVP practice leads to lost opportunities.

Minimum Viable Transformation

That said, MVP also cannot be limited to a narrow set of activities within a single development cycle. While gathering information about the product, companies get tons of data that tells them about the broader business environment. If interpreted correctly, that data will definitely play a huge role in adjusting the company’s strategy going forward.

The minimum viable product approach makes you rethink the fundamentals of how a business creates value. As early as a few decades ago, corporate leaders were focused on how to combine specific features to produce a sellable item. As time passed, they started concentrating more on the wider concept of business model innovation. Today, you can hardly find a strategy session that does not aim to discuss the ideas of reinventing the existing business model. Hence, it expanded the MVP to a much larger and more impactful process – a minimum viable
transformation.

Consider the early case of National Geographic.

Few of its readers know that it used to be a journal of an adventurers’ club
funded by its members. After having the original printed edition tested on a sample of enthusiasts, National Geographic developed into a world-famous magazine with millions of readers. Today, it is an enterprise with multiple revenue streams from advertising, licensing, tours, TV deals, and more.

Or look at Charles Schwab – a phone-based discount brokerage that transformed into a full-service financial institution by learning from its ecosystem. The company’s management took their time to learn how the customers were reacting to the products they launched. On the other hand, they were constantly exploring industry innovations,
implementing remote databases, and building a network of third-party advisors.

Perhaps, at this point, we have come to an agreement that the minimum viable product has ceased to exist as a short-term tool. Now it is an integral part of a non-stop strategy cycle designed to improve the company’s business model. Or, and it has often been the case, completely transform it in a way that suits the ever-changing business environment. Fast, large-scale change is highly risky and must be reasonable. Therefore, minimum viable transformation provides opportunities to succeed in the modern business world.

Takeaway

Building an MVP may be challenging, but with the right approach, it brings tremendous benefits. There is a reason why most wonderful ideas do not survive the first contact with customers – basically, the developers never studied their audience beforehand. However, over the last decade companies started to implement the MVP concept within a broader range of strategic activities – a minimum viable transformation. It is an ongoing process called to alter the business model in a way that brings the most benefits in the long term. And we believe that MVP stage is one of the most responsible ones, that affects on the further product development.