“Success is not delivering a feature; success is learning how to solve a customer’s problem.”
-Scott Cook, founder of Intuit
Today I’m very excited to share with you how to build an MVP the Zappos way and create a billion dollars startup…..
Ok guys I am kidding…., obviously I don’t know how to create a billion dollars startup Nonetheless, few weeks ago I came across the story of how Zappos founder build its empire and I was fascinated by the ingenious way that he started.
The vast majority of young aspiring entrepreneurs, already know that the easiest and safest way to understand if their business ideas “has legs” is via an MVP.
But the question is how?
In our today post, I will outline an 8-step process that I modeled from the Zappos example how to build and test a Minimum Viable Product the smart way. In addition, I will give a brief summary of how the founder of Zappos kick-start it’s startup via the creation of an MVP.
For those that you are not familiar with MVP and their usefulness is simple words;
MVP definition: Is a product with the least possible features (provide the smallest number of benefits) that nevertheless can create customer satisfaction and which is based on your core business assumptions.
MVP usefulness: As Josh Kaufman puts it: “It allows you to start collecting data from real customers as quickly as possible, directly testing the idea’s CIAs (Critical Important Assumptions) and reducing the risk of failure”.
Bottom line: It enable us to test our assumptions with our target group and see what works and what doesn’t.
Talk is cheap, let’s move on with the actual 8-step MVP creation process.
The 8-step process how to build and test an MVP in a Zappos way
1st step: Start with creating your business model canvas
As it was explained in one of my previous posts, the business plan is broken for startups and the startup community replaced it with the Business Model Canvas.
Business model canvas is composed by 9 elements (Value Proposition, Customer Segments, Distribution Channels, Customer Relationships, Revenue Streams, Resources needed, Key Activities, Key Partners and Cost structure).
Each startup for each of those elements, must create some assumption based on their current product and market understanding.
(For example in the Value Proposition we need to write down which features/benefits we strongly believe will resonate with our target group and solve their problem. In the target group will describe the various customer segments that compose our ideal customer profile).
2nd step: Define our MVP specification
Essentially we need to narrow down our Value Proposition features/benefits. Namely, define which 3-4 of the features/benefits that constitute our Value Proposition (link) can partly solve our target group problem via our MVP.
In this selection process we have to take these 3 variables into account; Customer Satisfaction, development time and cost.
Customer satisfaction: We don’t intend to generate a sale nor to learn everything;we simply want to validate that we understand their pain point and our solution can partly solve their problem.
Development time: Those features/benefits should not take more than few weeks to be created. Keep in mind that MVP is the simplest and leanest form of your product, everything else is simply waste of time and energy.
Development Cost: Most often than not those MVPs require $0 cost. We simply don’t want to waste any of our precious resources at this point; if you think that your MVP will require some small investment think again (see the examples below).
3rdstep: Determine which form our MVP will take
After we determine which benefits are must to be included, we have to start thinking which product forms can shape our MVP. We are looking for something that will integrate effectively those benefits so as to start testing our main assumptions.
As it is pointed out above this first “version of our product” (yes is an MVP and probably has nothing to do with our final product as we visualize it, but is kind of the 1st version) as it is adviced by Eric Ries “shall be intentionally simple and lean”.
A) Dropbox first MVP: It was simply a video that was showing in detail how their product will work in the future. This video was shared with their target group and the prospects reaction validated that their core assumptions were right.
B) Groupon first MVP: Some handmade PDFs, a pizza coupon and a simple blog was more than enough to make sure that they understood their market pain point and that the solution intended to create will resonate with their target group.
C) KickStarter first MVP: It was simply a Landing Page which basically explain their target customers how the concept works and urged them to sign up for further information.
This forms might not work for your business idea, but think creative. It might be a little bit more complicated than a simple video, blog or a landing page but you got the point.
4th step: Figure out which assumptions of your business model you have to test first
Initially we should focus in the most important assumptions. As Eric Ries describes “It makes sense to test the riskiest assumptions first. If you can’t find a way to mitigate these risks toward the ideal that is required for a sustainable business, there is no point in testing the others”.
In most cases those core CIAs for startups have to do with their Value Proposition, Customer Segments and how to market their product.
Thus, we should write down which are those core assumptions for those elements (elements of our Business Model Canvas).
Example of such assumptions for an MVP that has a blog form
Assumption #1: Each satisfy reader will refer our blog to 3 of his/her friends.
Assumption #2: My blog will attract 100 new visitors per week
Assumption #3: My blog will resonate with young affluent (have parents with annual disposable income higher than $200K) fashion conscious female college students age 19-23)
5th step: Design the actual MVP
In this step we have to carry out a small research and find out how we can build efficiently and effectively the actual MVP.
It shouldn’t be sophisticated but it shall be developed in a way that our core assumptions can be tested effectively.
It is recommended to have a look on products with similar forms so as to gain a better familiarity with what we’re trying to build and how it can be done.
6th step: Select the right audience for testing your MVP
As it is stressed above the MVP should be tested in front of some members of our target group.
Nonetheless, because this “1st version of our product” is kind of buggy,it should be tested first with the so-called early-evangelists/ early adopters.
Who are those?
Those are individuals that by all standards are consider by you as the ideal customers. Those should be the most motivated, passionate and eager to “consume” your solution.
In simple words, we have to select those individuals of our target group that have the most pressing problem and are willing to “settle’ with even something that is not the complete product/solution. Those individuals will accept it because they strongly believe it will alleviate partly their problem and their visionaries from their nature.
Take into account the famous Crossing the Chasm model; In each market there are 5 categories: innovators (techies), early adopters (visionaries), early majority (pragmatists), late majority (conservatisms), laggards (sceptics).
Nonetheless, don’t overthink it and leave this model to have the analysis-paralysis effect. Just think which persona you had in mind when you thought that your business idea will be great for this kind of people. In the end of the day is just an assumption and it will be validated or invalidated with your MVP testing.
7th step: Actual testing
This is probably the most important stage of this process. The actual testing need to be in a small scale.
The question is how on earth I will manage to bring it (my MVP) in front of that qualified audience?
If you did your homework (with the creation of the business model canvas) this question is already answered.One of the elements of the business model canvas is Customer Relationships. In simple words this element shall be about how to build demand (acquisition), retain (activation) and grow your audience.
Thereby, we should employ some of the tactics defined in the Build Demand element (Acquisition) which we think are most appropriate for attracting the attention of our target group. We simply want to find and approach them for the testing purpose.
If we use again the blog example (MVP in that form) think what tactics we enumerated in the respective business model canvas element. Do we need to guest blogging, search engine optimized our site, create a YouTube video promoting our blog… what?
8th step: Assess the “customer” feedback
After the MVP is exposed in front of the prospects 3 scenarios can happen;
-the initial assumptions were right and thus no need to change anything (very rare scenario)
-An iteration needs to take place (small incremental improvements, modifications, changes need to occur so as to create a better product/market fit; namely a compelling solution to a pressing problem or need of the market)
-Pivot has to occur (a radical or considerable shift need to happen to one or more business model elements) that will have as a result the whole business model canvas to get revised significantly)
The Zappos MVP story: Think Big, Start Small
Market need and be one of your target group model: “The year was 1999, and our founder Nick Swinmurn was walking around a mall in San Francisco looking for a pair of shoes. Nick spent the next hour in the mall, walking from store to store, and finally went home empty-handed and frustrated. At home, Nick tried looking for his shoes online and was again unsuccessful. Nick decided to quit his day job and start an online shoe retailer…. and Zappos.com was born!” –Zappos site
His Hypothesis: The Customers were ready and willing to buy shoes online (thus validating that there is demand for this kind of “service”)
The ingenious MVP idea: And I quote from Eric Ries book “Instead on testing his complete vision complete with warehouses, distribution partners, and the promise of significant sales he started by running an experiment. To test his hypothesis, he began by asking local shoe stores if he could take pictures of their inventory. In exchange for permission to take the pictures, he would post the pictures online and come back to buy the shoes at full price if a customer bought them online”.
Test Results: Over the course of this testing process he managed to learn much more about his target customers, the market need, the operations needed so as to work this concept smoothly.
Next actions: He refined, tweaked and iterated his whole business model after he went through this massive learning curve/experience and although that his MVP was tiny he managed to accomplish his major goal; make sure that his business idea has legs (product-market fit).
End result: Some billion dollars………
Now tell me; what do you think about MVPs and their usefulness?
That’s it “guys”. I hope to enjoy are today lengthy…post and keep in mind that always action beats planning.
If you got any friends that still refuse to use an MVP, please pass the post to them; it will be much appreciated
“Action may not always bring happiness but there is no happiness without action”
Learn more on how to start an LLC.
-Benjamin Disraeli, former British Prime Minister