What Is a Minimum Viable Product (MVP)? An Expert Guide

Introducing a new product to the product market often requires a huge amount of time, energy, money, and other resources. If the new product is successful — able to satisfactorily meet the needs of mainstream customers who are in turn willing to pay for and actively use it — all the investments involved throughout the product development life cycle are well worth it. If the product provides a subpar user experience, however, the financial fallout could spell disaster for the company behind it.

By first developing a minimum viable product (MVP), lean startups — new businesses using a startup method that advocates for developing products consumers have already demonstrated their desire for — and bigger businesses alike can rely on real feedback from real customers in real time. This will help ensure that their final, full-fledged product provides an optimal user flow based on users’ feedback, not just the developer’s own key assumptions about customer wants and needs.

What Is a Minimum Viable Product (MVP)?

A minimum viable product is a product containing just enough features — the unique core features and functions essential to the product’s value proposition — to attract and satisfy early adopters, validating a product idea early in the product development life cycle. This approach allows lean startups and other companies to test their product ideas within the product market at a lower all-around investment and pour more resources into the products with the most potential. Across industries, MVPs also bolster product development by helping product teams receive and react to the customer feedback of initial users in a timely manner, improving and optimizing the final full-featured product or service.

Key Takeaways

• An MVP is a cost-effective, resource-preserving way to determine a product’s viability.
• When evaluating whether to develop an MVP, it’s important to consider the potential pitfalls in addition to the benefits.
• Customer satisfaction is far from the only measurement of MVP success.
• An ERP system can help continually test and improve an MVP in a more streamlined and organized way.

Minimum Viable Product Explained

Designed to solve a specific problem for a specific audience, an MVP is a rapid iteration of a product just functional enough to provide value to initial users yet not polished or built-out enough to release to mainstream customers. The user feedback provided by this subset of people is used to refine and enhance the product, making it more valuable to the masses in future iterations. By using an MVP, businesses can validate their product ideas and even their riskiest assumptions with a minimized risk of failure so they can focus on creating a product that addresses their target users’ needs.

Conversely, if an MVP isn’t received well by initial users and key assumptions are proved wrong, a business can shift gears by either reconfiguring the product vision and overall product roadmap or by moving on to another product idea entirely. Either way, the MVP saves time, money, and other resources that may otherwise have been wasted. In this way, MVPs can be immensely valuable for lean startups in particular, especially since 44% of startups fail because they run out of cash.

Minimum Viable Product Purpose

Doing too much too fast is a common way that many startups end up failing — in fact, 74% of high-growth startups fail due to premature scaling. So while rapid growth may be a key aim of your product development and the marketing plan surrounding it, rushed growth can backfire and result in rushed failure.

MVPs are designed to prevent this. An MVP allows product development to happen in sync with vital customer feedback as you learn about customers and their unique user experiences with your product, and it lets you incorporate this feedback accordingly, prioritizing development efforts on the features that matter most to your target audience. As word spreads about your MVP and the more comprehensive product it’s leading to, your potential customer base likewise expands, giving you a built-in audience with demonstrated interest for when your full-fledged product is made available to mainstream customers.

Benefits and Pitfalls of MVP

MVPs have a lot of benefits, making them attractive to a lot of businesses. At the same time, however, they also have potential pitfalls. When deciding whether to develop an MVP, it’s important to be mindful of both sides of the coin.

Benefits of MVP

An MVP can help companies gather feedback for future development, test product ideas, and validate them in the market before committing significant resources.

• Cost-effectiveness: Building an MVP is a financially responsible way to test a product idea, since it requires only the minimum set of features to validate the idea. Whether the idea is a hit or a miss, this approach reduces the cost of development before a developer finds that out.
• Faster time-to-market: Since they only have the essential features, MVPs can be developed and launched far quicker than a full-fledged product, allowing businesses to enter the market sooner. If a business has multiple product ideas it wants to test, products can also go to market more frequently.
• Idea validation: MVPs help determine customer desires and overall market potential for a product idea before the business behind it invests resources into developing the ultimate product. By getting feedback from early adopters, businesses can have more confidence when deciding which ideas are worth pursuing and which need to be revisited.
• User-centric approach: As they focus on the core needs and all-around feedback of the initial and target users, MVPs result in products that are tailored to their audience’s unique needs, making for an overall better user experience when the final product is released.
• Attracts investors: By demonstrating the benefits of and customer interest for a product, an MVP can help attract investors — especially since they can see the product in action as opposed to simply conceptualizing it.

Pitfalls of MVP

However, focusing too much on the “minimum” part can lead to an underwhelming product with lower quality than the final product, which can create challenges for interpreting feedback from the early users.

• Limited features: Since MVPs are bare-bones experiences compared with fully developed ones, they may not satisfy all user requirements. This could result in negative user experiences and deter users from using both the MVP and the eventual full-fledged product.
• Determining the value of features: It’s challenging to decide which features to include in an MVP and which to exclude — it requires a balance between providing users with enough value while also keeping development costs low. In the end, initial users can only provide feedback on what they have access to, meaning a business might not be able to determine the true value of all the features it intends to include in the final product.
• Inadequate testing: Internal product testing might not be as thorough as required in the rush to release an MVP. This could lead to technical issues that will need to be addressed in future iterations of the product.
• Design hang-ups: Product design is essential to making an MVP look attractive, so some lean startups opt for an appealing look to counterbalance the limited functionality of an MVP. When a business spends lots of time on UI/UX design, however, customers will have to wait even longer for the functionality. In the case of an MVP, features are the priority, so it’s reasonable to compromise the design and to focus on functionality — but that doesn’t mean it’ll feel good.
• Misinterpreting user feedback: Feedback from early adopters can be beneficial. But it can also be harmful, particularly when this feedback isn’t indicative of the larger product market’s needs. Misinterpreting user feedback or relying on a small sample size that isn’t representative of your true customer base can lead to incorrect conclusions and decisions about the product.

An MVP will be worth it for some businesses; for others, it won’t be. And that’s OK — there is no one-size-fits-all approach to the matter. When deciding whether it’s best for you and your team to explore the MVP route, however, it’s important to carefully consider these benefits and potential pitfalls.

MVP and ERP Testing

Working with an MVP model has applications beyond developing customer-facing products. MVP principles can be applied to internal “products,” such as software, including enterprise resource planning (ERP) systems.

ERP software is modular business management software that supports cross-departmental system integration to address business management challenges that might otherwise impede business growth and efficiency.

Taking an MVP approach to ERP implementation best practices involves deploying only the most essential features of the ERP system. Instead of rolling out the full-fledged ERP to all users and discovering midstream that the features the administrators selected aren’t matching organizational needs, the MVP approach allows administrators to road-test the core functionality. This approach helps minimize costs and reduce implementation time. Once the MVP-supported ERP is in use, administrators can add features based on feedback.

With an MVP mindset, ERPs become “living” software, or systems that can grow with the organization’s needs — an approach that is compatible with ERPs’ modular capacity.

ERPs can be valuable in supporting the other MVPs an organization is developing by collecting and analyzing data that informs the development of the final products. But before ERPs can do their job, organizations need to make sure that they have configured their software in a way that maximizes the ERP’s value and delivers what they need.

Measuring MVP Success

It takes more than one metric to gather a well-rounded assessment of an MVP’s success — positive customer reviews alone won’t cut it. While some metrics may vary depending on the goals of the product, here are some common metrics frequently tracked by ERPs that are used to measure MVP success:

• User engagement: This metric tracks the active users engaging with the product. It can be measured by tracking the number of users who have signed up for the MVP, the number of daily or monthly active users, the number of sessions per user, and the average session duration. The more active the user base, the better.
• Conversion rate: This measures the percentage of users who take a desired action, such as using their email address to subscribe to your newsletter, sharing a link, or making a purchase. A high conversion rate indicates that the MVP is meeting the needs of users.
• Customer satisfaction: Customer satisfaction is generally determined by customer feedback, which can be garnered through surveys, feedback forms, online reviews, or customer support interactions. Though it’s far from the only measurement of MVP success, a high level of customer satisfaction is a good indicator that the MVP is providing value to your initial users.
• Retention rate: This metric measures the percentage of users who continue using the MVP over a set period of time as opposed to those who use it once or a few times and then stop. A high retention rate indicates that an MVP is providing ongoing value, meeting the needs of active users.
• Churn rate: The flip side of the retention rate, this metric measures the percentage of people who stop using the MVP. It’s calculated as the number of customers lost per month divided by the number of users at the start of that month (though, depending on your situation, you could adjust this calculation to measure the daily, weekly, or annual churn rate). A high churn rate should be worrisome, as it means your MVP isn’t providing the continued value that it was designed to.

Whether you use some of these metrics, all of them, or none of them, the success of an MVP should be measured based on how well it meets the needs of users while simultaneously adding value to your organization. Toward this end, the metrics you use to measure MVP success should align with your product goals and your business’s overall strategy.

MVP ERP Examples

Several prominent companies have used an MVP approach in ERP implementation. Clothing-rental company Rent the Runway launched with a minimal set of features for its ERP system, including an inventory management system — the core offering of Rent the Runway. As the business grew, it added features, such as customer engagement.

Warby Parker also used an MVP approach to ERP implementation. The company launched with a basic ERP system that met its core commerce needs. As Warby Parker took off, though, it recognized it needed analytical capabilities to stay competitive and develop capacity. The company changed how it handled data, and today it’s a household name.

ERP Implementation Is Painless With NetSuite

NetSuite offers an MVP version of its ERP system that includes basic features such as financial management. It lets you start small when it comes to system modules, keeping the overall cost low, and then grow as needed as your organization scales. Learn how implementing NetSuite ERP can help you experience the many benefits of MVPs and accurately measure their success.

Taking risks is part of business … but that doesn’t mean every risk is necessary. MVPs are a fantastic way for businesses to validate product ideas and confirm even their riskiest assumptions with a minimal risk of failure, allowing teams to focus on creating a product that best addresses their target users’ needs.

Minimum Viable Product FAQs

Is MVP the same as a prototype?

An MVP and a prototype aren’t the same. Despite having minimal features, an MVP is a fully functional product. A prototype is a simulated item designed to make a product idea more tangible instead of merely conceptual — and since prototypes can vary from something as high-level as an app to something as simple as a paper sketch, they’re not always fully functional.

What are the characteristics of a minimum viable product?

Common characteristics of an MVP include basic features (as opposed to the more comprehensive features of the final, full-fledged product), faster time-to-market, cost-effectiveness, and a user-centric interface.

What does MVP mean in ERP implementation?

Using an MVP approach in ERP implementation means that administrators roll out ERP software with only the core functionalities and features. This allows organizations to understand whether the way they have configured their ERP is meeting their needs without devoting all of their ERP resources up front to a software system that might need adjusting before it helps them reach their goals.