In our first installment of Lessons from Startup Culture, we examined the importance of building a solution, not a product. What’s the difference? Many smart people have exciting ideas for new products but fail to consider whether there is a market need for that idea. In fact, 42% of startups fail because of a lack of market need for their flagship product, CB Insights reports.
A solution, on the other hand, is created based on need: entrepreneurs identify a problem that real people have and build a solution that those people will pay to implement. Here is where one of the most brilliant facets of startup culture comes into play. With limited funding and a short runway to validate their ideas, many companies begin their journey by creating a Minimum Viable Product (MVP).
A Discovery Process for Consumer Insight
Startup guru Eric Ries defines an MVP as “a version of a new product which allows a team to collect the maximum amount of validated learnings about customers with the least effort.” In short, an MVP is the most basic solution that can be built and sold to a targeted market. But the creation of an MVP itself isn’t the revelation here – it’s the ability to learn and adjust based on the customer response that results.
Following the release of an MVP, its creators must be open to the insight that its users deliver. Are they simply happy to have a solution to their problem, or are additional features needed? How can the user experience be improved? In this way, an MVP accelerates the product development process through early testing of consumer response. Let’s look at a prime example of this process.
AirBnB’s MVP Journey
Late in 2007, two entrepreneurs zeroed in on a problem – San Francisco’s hotels were expensive and overbooked during the many tech conferences occurring in the city. Their solution? A pair of air mattresses on their living room floor (and access to free wifi and breakfast to boot). The question was “will strangers pay to stay in our apartment?”.
As Fueled notes, these entrepreneurs “didn’t rent out space or build new beds,” rather “they leveraged their existing assets in order to test their assumption as quickly as possible.” They targeted a very small market, the attendees at one sold-out tech conference. That weekend, they made $240 and proved their concept.
This was just the beginning of the website AirBed&Breakfast, which of course became the app AirBnB. With their concept validated, AirBnB’s Minimum Viable Product was a simple website that allowed guests to connect with hosts in San Francisco. However, there was still a lot to learn from their initial users – both guests and hosts.
As the founders realized that many of their guest users were travelers and not just conference attendees, early features such as a conference guide quickly fell by the wayside. Another early insight revealed that high-quality photos made a big difference in booking rates, so the company began offering more guidance to the hosts using their platform. And as their audience grew, it became clear that a rating system for both hosts and guests would help users feel more safe and comfortable sharing space with strangers.
Through careful attention to consumer insights, AirBnB grew their MVP into the disruptive and highly successful company it is today. By allowing consumer’s needs to lead the way, they avoided building out costly new features until they were sure of their value. They kept their product as simple as possible for as long as possible, only expanding into markets where they saw a direct need until they were confident enough to launch a global platform.
A User-Led Development Process
There are many other compelling examples of successful MVPs in social networking, the sharing economy, and beyond. What they have in common, beyond the simplicity of their initial product offering, is a commitment to user-led development in which consumer insights accelerate the discovery process. Their example should inspire entrepreneurs to build solutions to real problems and to let their consumers guide the way. The result is a product that takes the market by storm.