The Case for the Minimum Viable Product
Conventional wisdom says the startups should first build a Minimum Viable Product (MVP) to test customers’ reactions.
The MVP is a barebones version of the actual product the startup intends to sell. Unlike the genuine product on the shelves (or in the app store), the MVP would provide only the key functionalities – those that make it worthwhile for the clients.
The startup would analyze the feedback from the clients and then refine the MVP into the final product. The process usually takes several phases. Each phase addresses the issues identified by the client as well as new ideas the startup team comes up with. Eventually, the product is polished and ready to sell.
Starting with an MVP allows the startup to save money and time by avoiding developing features the customers won’t need. It also helps the startup find out early on if customers care about such a product.
People often say they would like something, yet when they get it, it turns out they don’t need it badly enough to generate a profitable business around it. Therefore, using an MVP and collecting their feedback goes a long way towards avoiding a costly failure.
The Trouble with the Minimum Viable Product
Sometimes, it takes many months just to develop the MVP. Even worse, it might require some expensive parts. For example, building the MVP for a flying car would hardly come cheap.
In these cases, entrepreneurs sometimes build mock-ups or models instead and use them to extract as much helpful feedback as possible before moving on.
Such models are OK for getting feedback on the product’s looks, but since the models cannot perform the job the client is interested in, there is no way to gather usability data. If the feedback on the looks is positive, the team enthusiastically starts working on the MVP, pouring resources into it.
Juicero, a startup that burned through USD $120 million venture capital, did precisely that: worked for 3 years on a device that was squeezing juice bags. The product ended up having an initial retail price of USD $700, soon slashed down to USD $400, only to go belly up when the clients realized the obvious: that they could squeeze the juice bags manually. So why pay for the expensive bag squeezer?
In practice, Juicero’s business plan relied on selling juice bags at USD $8 per piece.
In theory, the thought process was that people could have continued buying the bags and squeezing them manually. That would have allowed the company to break even and then become profitable. The problem was that once you removed the high-tech bag squeezer from the mix, all that was left was an expensive bag of juice with no justification for the price. That killed the business very quickly.
Was there any way to test the viability of the business without building a Minimum Viable Product?
The answer is yes. There is a way to test if a business can be built around it for any product or app, even without investing in the MVP, and we call it the Butler Criterion.
The Butler Criterion
Clients don’t buy cars. They buy a means of getting from here to there. A taxi, a bus, a train, or a bicycle can and do replace the need to own a car. Before cars existed, people used horses or porters to carry them in rickshaws.
The fundamental idea is people have needs, and just like in the case of the rickshaw, they are willing to hire other people to fulfill their needs. A butler was such a hire. The butler directly served his master, and in addition to that, he was managing the other servants, each of them providing a particular service like cleaning, cooking, gardening, etc. Therefore, the butler was the most important servant of the household and, as such, received the best pay and enjoyed a lot of other perks (better lodgings, nicer clothes, etc.)
All the modern appliances around the house perform duties that used to be assigned to hired help, which laboured manually, under the supervision of the butler. If the person who owns the appliances is well off, they usually hire someone to operate them, even nowadays. The reasoning is simple: the time spent vacuuming a large mansion has a higher hourly cost if performed by the estate owner than if the maid performs it. The owner could afford the building precisely because they earned more by the hour than the maid.
That brings us to the Butler Criterion: is there a human who gets paid to do the work our product or app would do for the client?
If the answer is yes, then it makes sense to build the MVP, which would replace or improve that specific human activity.
Applying the Butler Criterion to Juicero would have quickly revealed that people willing to pay for somebody to squeeze juice bags for them would rather pay a cook or a maid to prepare fresh juice directly from fruits and vegetables. That meant there was no real market for an expensive bag of juice and even less for a high-tech bag squeezer.
There is always a market of premium juices, but they come in packages that suggest their premium status, not in plain-looking bags. Therefore, since the business was about selling premium juices, there were other ways to do it properly, and none included building an expensive high-tech squeezer.
Let’s apply the Butler Criterion to Facebook. The paper variant of Facebook, the yearbook, existed for 200 years before its Internet version. Students hired photographers and printing shop workers to make them, and local businesses hired copywriters to create ads for these yearbooks, which appeared on certain pages.
So, when Mark Zuckerberg went to build an online version of the yearbook, he was confident the yearbook was something humans were willing to pay other humans to make. Even though he chose to monetize only the advertising part of the yearbook, he knew for sure Facebook passed the Butler Criterion.
The beauty of the Butler Criterion is it helps more than just evaluating the viability of the business built around the app or product. It also helps detect the right market segments.
Imagine we know how to make a robot which can put clothes on us. At first glance, the robot would replace a 19th-century valet. The thing is, nowadays, people who can afford to hire a valet would find it strange to have somebody dress them.
Yet, even today, people are paid to dress other people, such as those who care for the elderly or differently-abled people. This point relates to our supposed startup because it can identify interested parties by seeing who is willing to pay a person for dressing another person. As a result, they might discover that were a robot to work with the elderly or those suffering from disabilities, some additional features might be needed, which could not have been imagined otherwise. All of that can be achieved before even buying the first screw for the MVP.
The Butler Criterion can be performed through observation or practice as part of an experiment.
For instance, before attempting to build a high-tech-based business platform, it is worth checking if a low-tech version of it can work. Don’t build the high-tech one first. Use manual work to test if there is any need for the platform’s service. If customers keep coming, then build the high-tech platform to replace the “butler” (the manual work). Amazon started that way. So did zappos.com and diapers.com, both later acquired by Amazon.
These examples prove that the method works time & time again and, therefore, every startup should use it before starting to work on the MVP.
If the butler did it, we can (and should) make it using technology.