Small businesses should consider thinking like a startup to help achieve better results, especially when it comes to adopting the concept and execution of a minimum viable product (MVP). Basically, a MVP is a cost effective way to test an idea, product, or solution without going all in. This will also allow continuous improvement of the initial idea as feedback from customers will directly help the idea shape and grow.
A simple example is a restaurateur renting out a food truck before they sign the shop lease, design the menu, and build the interior.
Using the concept of a food truck, the restaurateur is able to test the local appetite for the menu items. Is there a big enough demand for the type of menu being considered? What do customers prefer? What price point generates the best demand or overall profit? They’ll also be able to drive around and whittle down potential locations for the permanent shop based on customer volume, competition from other restaurants, and even assess time of day demand.
The idea of creating a MVP is to not get it perfect on the first go but to offer a basic version of what you think your customers want, give them a “prototype” version, listen to the feedback, and adjust the offering based on feedback to create a higher quality and more targeted product. This notion can be applied for other business ideas as well.
Zappos, an online store that sells shoes and clothing, was started in 1999, ten years later it was acquired by retail giant Amazon for US$1.2 billion. Back when it first started, the founder went from store to store locally and took photos of the most popular shoes to sell on his online site. Once a customer purchased a pair from his website, he went to back to the relevant local shoe store, purchased the shoes and shipped it to the buyer. He tested the hunch that people wanted the flexibility and simplicity of purchasing shoes online and he was right. There was also a very small overhead to get this idea verified.
Validating a product idea before creating a manufacturing line to build it can also work. Kickstarter and Pozible are two crowdfunding communities that allow people to sell their idea to the public before it gets mass produced. This method allows the entrepreneur to validate their idea, get feedback, and even raise money at the same time.
In 2012, an 18-year-old engineer put a prototype of his makeshift virtual reality headset on Kickstarter; it subsequently raised US$2.4 million from fans all around the world. Not only did this tell the entrepreneur that there was demand for the product, but it allowed him to fund the engineering of the product. Two years later, the company was acquired by Facebook for US$2 billion.
As you can see, the concept of minimum viable product can help create large billion dollar businesses as well as smaller businesses that want a semi-scientific method to validate an idea. This startup mentality will help save both time and money for businesses as they continue to grow and offer new products for their customers.
Rajhev Rajkumar is the general manager at Small Business First.