What should your Minimum Viable Product (MVP) be comprised of? This is a million dollar question in itself. Instead of talking subjectively, let’s make up a hypothetical case for a B2C business and study the decision making process.
The IDEA
Rachel is a high- school graduate in Boulder, Colorado. Books felt boring to her. Homework assignments required reading and she always lost focus. Her friends felt exactly the same way too.
An e-learning idea occurred to her where in books become interactive. It would require her to build a web application where books would talk like professors in class. She realized that a group chat room and “talk to the expert” feature would be required to ensure students could get help if needed.
Minimum Requirement
After a detailed study, she realized the following cost estimates would bring her entire vision to life.
Requirement | Cost |
A technical team to design and build the application. | 65,000 USD |
Compiling 150 books to make them interactive.
| 250,000 USD |
Total Cost | 315,000 USD |
These numbers could have put her off. Even if she managed to secure the funds, spend the money and build it all out, what if the idea didn’t click with students? Rachel knew she had to make wise decisions and embrace her challenges.
CONSTRAINTS are Good
There are only 2 challenges for Rachel: Time and Money. If she eliminates the extra features such as “talk to the expert” and chat rooms, that leaves only the core feature of interactive books in the requirement. Also she trimmed down the number of books to ten, by carefully choosing only history as the one subject to focus on. The new cost table looked like this:
Requirement | Cost |
A technical team to design and build the application. | 30,000 USD |
Compiling 10 books to make them interactive. | 17,000 USD |
Total Cost: | 47,000 USD |
The number has been dramatically reduced. So what’s next? Will she succeed? In order to make this venture successful, Rachel will need a large number of students to sign up and pay a high price for the service.
Validate your Hypothesis
Rachel got a call from her friend Jane about how hard it was to memorize the history of the Eiffel Tower. Rachel immediately came up with the idea to create a quick video for her friend. She spent about $50 to get this done.
She forwarded it to her friend, and it was very well received.
Realize that the idea validation does not always require a product to be ready.
SELL before you BUILD
The next day, half of the students in Jane’s class had seen it and asked her to create one about Madame Tussauds Wax Museum. She realized the opportunity, and asked them if they would pay her $5 each in advance to create the video. Twelve students handed her $5 on the spot.
Note, that it is not the money that is important. It’s the willingness of the target audience to pay to validate the hypothesis. The risk to go out and build the product is an essential one to take.
Change in Course
Rachel realized that the cost of creating one video was $500 and would not be a viable business model. It would also take months to complete. She needed to thin about her business model. Instead of creating each video herself, she wondered if every student would create just one video.
Now the business model has changed from a solo endeavor to a crowd-sourced one. The idea of making classes interactive is still the foundation. It’s the implementation that has changed. The change in business model caused the cost to drop down again.
Requirement | Cost |
A technical team to design and build the application. | 30,000 USD |
Compiling 10 books to make them interactive.
| 0 |
Total Cost | 30,000 USD |
Was it the right time to build the product now? What if the students did didn’t agree to create the video products? The products require a big number of students to become producers and an even larger number of students to buy. Also how would she ensure the videos were of the highest quality?
We’ll leave the story here as it already highlighted a few important ways to help you make decisions for your MVP. If you are still dying to know what happened next, take a look at Udemy.com and Coursera.org/.
If you want help defining your MVP, let us know. We would be more than happy to help you figure out the right plan of action to bring your vision to life with the greatest margins.
