Definition
The term “Minimum Viable Product” (MVP) is not exclusive to finance; it’s predominantly used in product development and startups. It refers to a version of a new product that has just enough features to satisfy early customers and provide feedback for future product development. It’s a strategy used to avoid building products that customers do not want and to maximize learning about the customer with the least effort.
Key Takeaways
- The term “Minimum Viable Product” (MVP) refers to a product that contains the smallest possible set of features necessary to effectively solve a problem or satisfy customers’ needs. In finance, this concept is often used to launch a product quickly to test market viability and attract early customers without massive initial production costs.
- MVP allows companies to gauge customer interest and obtain feedback for further development and improvement. It reduces the risk of building products that customers do not want, and it provides initial revenue and customer base growth for further expansion.
- An MVP, while minimal, should still provide value to customers to generate interest and engagement. Even though it may not have all the intended features, the key features it possesses should be functional and able to deliver the core promise to its customers. Designing an effective MVP requires careful consideration of what features are essential to solving customers’ problems.
Importance
The finance term Minimum Viable Product (MVP) is important as it represents an efficient strategy used by businesses, particularly startups, for product development.
It refers to a product version with just enough features to satisfy early customers while also providing feedback for future product development.
This means it allows companies to validate their business ideas by releasing a product to the market with minimum resources, reducing financial risks.
Additionally, it helps businesses learn about the customer’s preferences and gather data regarding the product’s performance on the market.
Therefore, MVP serves as a crucial tool for making informed business decisions and optimizing returns on investment.
Explanation
Minimum Viable Product (MVP) is a concept that is not exclusive to finance but is largely utilized in the technological development and startup world. However, it plays an important role in financial strategy in these contexts. The main purpose of an MVP is to validate a business idea with minimal costs.
It is about identifying the basic core features that a product must have to meet its intended functionality and to be delivered to the first users to gather feedback. The feedback will then provide guidance for further product improvements and development. Serving as a critical tool for startups, it allows them to market a version of their product quickly, without an excessive initial investment.
In terms of financial implications, creating an MVP helps prevent wastage of resources on a product that may not be feasible or does not resonate with the market. Developers can gather direct information from an MVP’s initial users, which helps in decision-making relating to investment in further development or alteration of the product. It helps a firm steer their financial resources more effectively and gain insights into the potential return on investment.
By developing an MVP, companies can mitigate financial risks by testing the waters before making any significant investment into a full-scale product development process. This method can provide a much safer, financially sound route to successful product launches.
Examples of Minimum Viable Product
Dropbox: When Dropbox was first launched, the founders created a simple video demonstrating how the product would work, even though the infrastructure wasn’t completely ready. By demonstrating the key functionalities of the product without actually having the fully finished product, they were able to gauge user interest and gather feedback. This is an example of a Minimum Viable Product (MVP), as their initial offering was simple and basic but illustrated the overall vision of the product.
Uber: When Uber was first launched, they initially offered the service only in San Francisco and only on iPhone. Their initial functionality was simple: people could request a black luxury car by using the app. This was their MVP. They didn’t have all the features we see today, but they had the basic functionality that solved the main problem they were targeting – getting a cab easily and quickly.
Airbnb: Airbnb’s first version was a simple website that allowed the owners to rent their apartment during a local conference when all hotels were booked. The site didn’t have any of the features it has today such as reviews, verified IDs, or even photos of the apartment. However, it solved the basic problem of providing accommodation for people when it is most needed, proving the concept valid and becoming the foundation for the billion-dollar company it is today.
FAQs on Minimum Viable Product
What is a Minimum Viable Product (MVP)?
A Minimum Viable Product, also known as an MVP, is a development technique where a new product, website or application is developed with sufficient features to satisfy early adopters. The final, complete set of features is only designed and developed after considering feedback from the product’s initial users.
Why is an MVP important?
An MVP is crucial as it allows a team to collect the maximum amount of validated learning about customers with the least amount of effort. This concept is especially applicable in the Lean Startup methodology.
Who should use the MVP approach?
Teams or companies interested in releasing a product that they want to test and learn from can build an MVP. It’s especially useful for startups who want to validate a product concept before fully building out the product.
What are some examples of an MVP?
Famous examples of MVPs are products like Airbnb, Uber, and Zappos. These companies started with a basic product, gathered feedback, and iteratively built out features over time.
What’s the difference between an MVP and a prototype?
A prototype is a preliminary version of a product from which other products are developed. It’s designed to test and validate the usability and functionality of a product, while an MVP is a product that is minimal, but sufficient enough to be launched on the market.
Related Entrepreneurship Terms
- Prototype
- Product Design
- Lean Startup
- User Testing
- Pivot
Sources for More Information
Sure, here are some reputable sources about the term “Minimum Viable Product”:
- Investopedia: This finance-specific platform has numerous articles and definitions related to finance and business terms including Minimum Viable Product.
- Entrepreneur: It is a popular source for business and entrepreneurship related content where you can find in-depth articles and blog posts about Minimum Viable Product.
- Forbes: Forbes has many business-related resources and articles, including content about the concept of a Minimum Viable Product.
- Harvard Business Review: Here, you can find academic and professional resources related to business practices such as the Minimum Viable Product term.
