Growth 101: Part 1 - Product development
This is our first post in a multi-part blog series about how to turn a startup into a successful business that attracts investors and customers. In this post, we look at product development and the Minimum Viable Product concept.
Investors are looking for reasons to invest. A solid sales pitch and sound numbers are always beneficial, but tangible results from a Minimum Viable Product (MVP) garner extra attention.
Originally coined by Frank Robinson, the term has since gained traction and become a common go-to product development strategy. There are many different interpretations of MVP. Where some focus on feedback, others focus on market validation, i.e. revenue.
The MVP method
An MVP has two key dimensions: effort and viability. The aim is to achieve maximum viability with minimum effort using an approach something like this:
Before an MVP, test and prototype to gather in-house feedback and share your concepts with others. Confirm the essential aspects of your product before investing in productization.
1) Set the goals
An MPV needs clear goals. What do you want to achieve? Is it a specific revenue threshold or customer base? Do you need to verify performance or validate expected results? The answers guide you in the next step.
2) Scope the work
List all the features of your MVP. Determine which are hygienic must-haves and which are competitive differentiators, then prioritize them. Select high priority features that can deliver the most impact on your goals for the least cost and develop those first.
3) Iterate, test and evolve
Plan development iterations so that you can reconfirm or adjust priorities as needed along the way. Prepare for and act on the feedback you get. Aim for steady evolution, but acknowledge when a major revolution, or pivot, is needed in your product concept. Unfortunately, the MPV approach doesn’t guarantee success. There are inherent risks in giving customers a product that by your own definition is a “minimum” offering.
Use what fits best
While MVP is certainly a popular concept amongst startups and investors alike, there is no one right way to develop a successful product. Reality, as always, is an infinitely vast grey area. You need to choose a product development path that best suits your target market.
In heavily regulated industries that lean toward conservatism (read: skeptical), an MVP may not be an option at all. New deep tech that impacts power distribution, for instance, cannot expose customers to risk of failure. It has to be pretty solid before customers can even consider trying it out.
That is why piloting is a common approach in the energy sector, and for B2B business in general. A pilot project gives everyone involved a clear scope and a comforting degree of risk control. You may not yet have a product, much less an MVP, but the co-development that comes from piloting gives you the feedback and focus you need.
It is important to not overdo piloting. You don’t want to get stuck in pilot after pilot, starting from zero with each new customer.
Do everything you can to make your first pilot so credible that it can easily convince new customers and investors. Collect all the data and reports you can from the first pilot and ensure you have the necessary clearance to share all that hard-won evidence with others.
Don’t pilot for free, either. A price tag on the pilot not only helps your financing, but it also gives the customer a reason to commitment and really participate.
If you need to do run several pilots, try to structure them so that each one provides you new insights. You don’t want to repeat the same thing. For example, add a new component or limit the scope of each pilot to focus on specific areas. Then, taken together as a whole, your pilots give you the full range of feedback you need to confirm your entire solution.
To pilot or not to pilot
Once you have an established revenue stream, piloting can work against you. To investors, a solid revenue stream is a positive sign, but if you continue to enter new customer deals with pilots, this may be interpreted as a lack of confidence.
If you are confident in your offering, you could also work with your customer(s) on defining what would be needed to skip piloting and move straight to a full launch. Instead of asking what features they want, ask what would need to happen for the customer (or investor) to use the product.
In some cases, your idea combined with, for example, new regulations may allow you to establish a captive audience – customers who need a solution like what you offer to be able to meet new requirements. There is not pilot per se – you hit the ground running with a contract in hand to build what must be built.
Add the key ingredient
So, where does that leave us? What is the extra ingredient that will get you that you that next customer or investor? The answer is deceptively simple: people.
Your relationships with investors and customers are the best recipe for convincing new customers and new investors. The trust and confidence they have in you says as much, if not more, about your product to the people that know them than any MVP.
Personal relationships can help bridge the trust gap in the early stages of product development. This is often the difference between a flash in the pan and a steady fire. Solid funding and a motivated team can develop a really good MVP, but if you don’t have an investor or customer on your side, that MVP may be your first and last product.
Find your champion
VC funding is a people business. Reports and presentations lack convincing power without the backing of individuals who have relevant contacts and personal networks that are based on trust and mutual respect.
Also consider these networks as sources of guidance. Having a CVC on your side means you have access to customers from day one. You can find out what they need and expect from a product like yours without having to actually roll out an MVP.
Find your investor and/or customer who can be your champion and carry your torch. This one customer can be your springboard to success no matter where you are with product development. Winning a well-known customer (or investor) early not only gives you the revenue needed to develop a full product, it attracts other investors and boosts your momentum.
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