Lean Startup Business Tactics - Identifying Your Minimal Viable Product
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The minimum viable product (MVP) is that version of a product which allows a team to collect the maximum amount of validating insight about customers' needs with the least amount of product building. It's one of the most important principles of a lean startup. This deck provides you with insight into the value behind building an MVP, the overall process of achieving the maximum amount of validating learning, why in-depth customer interviews (and not just user testing) are crucial to testing your initial hypotheses about your business or product, and how you might collect or analyze qualitative and quantitative metrics to iterate your MVP. Josh Cyr, founder of Alpha Loft and web app developer, also shared real lessons learned from one startup while building their MVP.
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Lean Startup Business Tactics - Identifying Your Minimal Viable Product
- 2. Who Am I Joshua Cyr Developer and Startup Enthusiast Owner Alpha Loft - Coworking in Portsmouth focused on tech/creative/startup Run the Startup Meetup / Web Dev Meetup
- 3. What is Lean Startup Lean Startup is a rigorous process for iterating from Plan A to a plan that works.
- 4. Leap of Faith Hypothesis Your business model is actually a leap of faith. Find a way to test your hypothesis as quickly as possible.
- 5. Examples Will people listen to music privately in public setting? Will people pay for music online? Will people share their personal moments on video in a public portal? Will people share their dating interests publicly?
- 7. My MVP The term ‘Minimum Viable Product’ is best thought of as “the smallest iteration of work you can do to validate your assumptions”. The product in MVP can be a misnomer as it’s not always a tactile object.
- 8. Minimum Viable Product How we test our Leap of Faith. How we know what is working and not. How we do it quickly.
- 9. Minimum Viable Product Iterate often. Measure EVERYTHING Fail quickly and learn from it to improve.
- 11. Short Cycles Stuffing Envelopes - Efficiency vs Reality What if something is wrong? We can perfectly execute what ends up being a failed hypothesis.
- 12. Customer Interviews The average person isn’t usually very good at giving feedback on something that doesn’t exist. That’s why we create a small product for our customer to play with.
- 14. Measuring Innovation Accounting and Measurement Build into our product and process such as Split Tests. Learn from mistakes.
- 15. Cohort Analysis Full Month Sign Up 9700 (100%) Download 5804 (59%) Activate/Install 3186 (32%) Purchase 1147 (12%)
- 16. Cohort Analysis Full Month Week 1 Week 2 Week 3 Week 4 Sign Up 9700 (100%) Sign Up 2100 (100%) Sign Up 2450 (100%) Sign Up 2550 (100%) Sign Up 2600 (100%) Download 5804 (59%) Download 1218 (58%) Download 1470 (60%) Download 1530 (60%) Download 1586 (61%) Activate/Install 3186 (32%) Activate/Install 630 (30%) Activate/Install 808 (33%) Activate/Install 1020 (40%) Activate/Install 728 (28%) Purchase 1147 (12%) Purchase 210 (11%) Purchase 269 (11%) Purchase 408 (16%) Purchase 260 (10%)
- 17. Split Test Control Layout A Layout B Sign Up 2000 (100%) Sign Up 2100 (100%) Sign Up 2450 (100%) Download 1100 (55%) Download 1449 (69%) Download 1470 (60%) Activate/Install 600 (30%) Activate/Install 945 (45%) Activate/Install 808 (33%) Purchase 200 (10%) Purchase 630 (30%) Purchase 269 (11%)
- 18. Build Into Your MVP To properly measure we need it built INTO our Minimum Viable Product. Which means it must be part of your MVP, not tacked on after.
- 19. Vanity Metrics Millions of downloads vs no activations. Incredible website growth vs no paying customers. 20% month over month customer registrations vs flatline customer return rate.
- 20. Useful Metrics Actionable: Is there a clear cause and effect? Accessible: Is the measurement simple to understand and available to all? Internal finger pointing? Auditable: Is the measurement credible to all employees?
- 21. Growth Engines How can we understand our likely growth engine so that we may know how to measure and thus improve?
- 22. Sticky Engine Example: Games, Auction Sites Measuring new customers not enough information. Customer retention and Churn rate of existing customers key. Customer Acquisition must be > Attrition Reducing Churn is key aim.
- 23. Viral Engine Social Networks, Tupperware Viral Coefficient is key measurement 1 person in 10 recommends product = 0.1 Not a sustainable loop. 1.0+ Coefficient = 1 person brings > 1 new person in.
- 25. Viral Engine Example Hotmail Sluggish growth at first. Added "P.S. Get your free email on Hotmail" to bottom of every email. 1 Million in 6 Months 5 Weeks later 2 Million. 18 Months later 12 Million / $400 Million Sale.
- 26. Paid Engine Measure Lifetime Value of Customer Must be greater than Customer Acquisition Cost. Customer Acquisition includes Advertising, Outbound Sales, Retail Location, etc.
- 27. Tuning Feedback Loop Key 8% vs 10%
- 28. Tuning Feedback Loop Key 8% vs 10% Compounding Growth Rate As Of Company A Company B Six Months Ago 0.5% 9.8% Five Months Ago 2.0% 9.6% Four Months Ago 3.2% 9.9% Three Months Ago 4.9% 9.8% Two Months Ago 6.1% 9.7% One Month Ago 8.0% 10.0%
- 29. Burn Rate runway = cash on hand / burn rate # iterations = runway / speed of each iteration How many iterations do you have left? How many businesses are exactly the same as when they started off?
- 30. Time to Pivot Is it time to change direction? Options: ● Zoom In: Focus on one Feature ● Change Vertical Markets ● Focus on new Customer Segment ● New Product Idea Entirely Goal is to do this before you run out of funds.