Before I jump too deep and into the weeds of creating an MVP, it is important to understand that by this stage in your product journey you have already laid the foundation for your product. When I say foundation, what I mean is you have determined your target audience and identified the market need and market fit for your product. Although, the market fit is something that will continue to evolve as the product is refined based on user feedback and changing market conditions. Also, outside of this, you have determined that there is an underserved customer need in this market which your product will address. The next step in this process is to create a value proposition. This process will help you understand the difference between must-haves and the nice to haves. To add to this category of must and nice to haves are “Delighters”. Delighters are unexpected features which, when presented, cause a positive reaction.
Now assuming that you have performed all the pre-requisites, we can focus on some of the critical and necessary steps that must be taken to create MVP.
MVP Feature Selections
Start by utilizing the user stories and scoping techniques to list down all the features that we plan to add at this point. Agile principles state that all stories/scope items should now be estimated. Usually, a Fibonacci series estimate, or multiple of 2 estimates, or t-shirt sizing can be used as a method. What this estimation does is allow you to create a Return vs Value matrix to identify top features.
Measuring Value
The first question that arises at this point is, how do I measure the value of a feature. Well, let me tell you that there is no standard answer. Let me show you why. The value of the feature depends on a lot of factors like revenue, cost, margin, customer retention rate, cost of customer acquisition, etc. Each business and product will have a different goal. For example, amazon 1-click pay is focused on increasing the number of customers. Whereas, within Amazon, the section “you may like this too” or “usually bought together” has the goal of increasing sales or revenue.
Recently while working on creating an analytical dashboard I faced the similar situation. How do I measure value for identifying my top features? After much research and introspection, I asked a simple question, what value does this dashboard help the customer achieve. The answer was in front of me, this feature will help my customers increase their revenue and improve patient care. Well, this is still not good enough. Why, because I still cannot measure the value.
Converting Customer Value to a Mathematical Unit
Mathematically, Customer lifetime value can be calculated as:
Customer value * Average customer lifespan
Where, Customer Value = (Sales Price – Cost Price) * Number of purchases per year
and, customer lifetime in years = 1/(1- customer retention rate%). For more details use this link
What is the ROI from this Product?
Once the customer value is calculated and Rough order Magnitude (ROM) sizes are available from engineering and design teams, we can easily figure out the ROI. Suppose two features A and B have a value of 6 and it takes 3 and 2 weeks to deliver them respectively. The ROI of feature A is 6/3 = 2 and that of feature B as 6/2 = 3. What I usually do is create a scatter chart for return vs investment and it gives me a good indication of what features should feature in my MVP.
From this image, we can understand the ROI of each feature and time to delivery or cost of delivering that feature. In a real world, there are a ton of constraints which will restrict us in determining what features should go into an MVP. As PM’s we should be innovative and have a clear thought on what will determine an MVP. If we look at the example above, feature B has a very high ROI but costs more than feature A to deliver. What I would do and recommend in this scenario is to look at the prioritization matrix and see if there is any way we can reprioritize the backlog items and move feature B for delivery as part of MVP.
Finalizing your MVP features
The user stories, scoping, chunking, and ROI will enable you to narrow down on the list of features that are required for MVP. I am a visual person and a number’s guy. What I usually do is create a simple matrix (example shown below) to identify and communicate the priority features to leadership, engineering, and design team. Please refer to my previous blog as to why the MVP should have must-haves, nice to haves and delighters.
After the MVP features are selected, we move towards creating and validating MVP design. Creating an MVP requires a huge amount of collaboration with the design (UX) and engineering teams. All stakeholders should align on the roadmap and priorities. Engineering should have a say on prioritization and roadmaps as they are the ones delivering the product. At this point in the game, I rely on other teams for guidance and support to create a backlog which we can share with marketing and sales.
MVP is created NOW WHAT?
Dan Olsen in his book Lean Product Playbook emphasizes the concept of qualitative and quantitative tests. See the image below from his book which shows the different types of MVP tests and the category they fall into. So, let us understand what is meant by qualitative and quantitative tests and why they are useful in testing your MVP.
Qualitative MVP tests
Qualitative tests mean that you are directly talking to the customers. In qualitative tests, you care about the detailed information and feedback that is coming from users. You should talk to your users one on one or in small groups to understand their perspective. Recently, my colleague was in a client meeting which I happened to join for verifying the MVP design. I liked how the team was allowing the customers to use the product and taking feedback without leading questions or pointing them in a certain direction. They were asking questions like why you clicked these buttons, what were you trying to accomplish, did you meet your goal, etc. Some clients provided great feedback, some were silent, and some overly harsh on the product design. It is the responsibility of the product manager to take into account all perspectives without taking harsh comments on their ego.
To conduct the qualitative test, you can work with design and engineering to create clickable mockups, wireframes, static mockups, or interactive prototypes. A lot of free and paid software are available in the market today to leverage and create wireframes or mockups. I generally prefer clickable mock-ups as it allows me to see how customers are using the product and what are the issues they are facing while using it. These are good learning opportunities which should be captured either by recording your sessions or by taking good notes. In either case, always seek permission from the user if they are fine with recording or you are taking notes for future use and reference.
Quantitative MVP tests
Quantitative tests are generally conducted in bulk or large a group with a wide audience. With quantitative tests, you are not concerned about individual client feedback but the aggregate result. These tests generally help us understand the “what (actions the client took)” and “how many (clients took that actions)”. These tests will not tell you the “WHY (certain actions were taken)”. These details can only be discovered with qualitative tests.
Minimum Viable Product is a key milestone in the journey of a product. Achieving this correctly will instill confidence in leadership and other members associated with the product development.
Please share your experiences in the comments box. Each and every experience counts and will help readers learn. Also, if would like me to answer any questions, please put them in the comment box.
In my next blog I will share my thoughts on what is a product north star and why we should create one.
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