Product development efforts provide key opportunities to test the underlying assumptions of your business model. As an entrepreneur, you continually refine your business model through customer interviews, market research, and discussions with competitors, suppliers, and distributors. You should have many customer and marketplace discussions as you craft the “first cut” of your business model. Once you have early validation that you have a solution to a customer problem that is of great value, you can begin to think about the best way to design and build your product.
Early product design activities provide a tangible and measurable way to test your business model assumptions with customers. This phase of customer engagement helps to clarify any misunderstandings you have about the problem, desired solution, and what they are willing to pay for in a finished product. By engaging the customer early in the design process enables them to visualize your proposed solution in a way that was not possible during initial interactions. By engaging with early product designs, the customer co-creates the solution. This early customer involvement ensures that you build a product that truly addresses the problem in a way that the market values.
Involving the customer early in the design process is consistent with the current lean startup philosophy. Early product iterations allow you to quickly test key business model assumptions about the customer problem, solution, and expected value. More importantly, it establishes an environment where the customer co-creates the product ensuring that the finished offering meets or exceeds marketplace expectations.
Minimal Viable Products
There is little debate that engaging the customer early in the design process is beneficial to the overall product development, and launch process. Early customer involvement is a best practice for fledgling entrepreneurs and corporate product teams alike. However, as an entrepreneur, you will face many challenges in creating your product including, but not limited to, lack of technical expertise or domain knowledge, time pressures, and funding constraints. With this in mind, it is important that you plan your product design steps carefully and execute in small, but focused increments.
Evolving from the lean product development movement, the Minimum Viable Product (MVP) is considered a good approach to test your product’s alignment with customer needs and expectations. The initial definition of this approach comes from Eric Reis, stating “A Minimum Viable Product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.” (1) Reis, Eric (2011) The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses, Crown Business, NY
The MVP concept has evolved through practice. The major tenets remain, especially the need to build a product version that is focused on a very specific and limited part of a problem solution so that you can validate the outcome with the customer. Early MVP versions do not have to be fully functional, but designed to solicit customer feedback. Don’t strive for perfection, but make sure that the product version is “good enough” to illustrate core features required to solve the customer problem. Once you receive feedback from potential customers, you can make small incremental changes as required and solicit input on the next version. Early product design must be iterative to be successful.
Early product design follows the same hypothesis testing approach applied to validating your business model. You start with assumptions on how the product solves the customer problem and creates value. You test these assumptions through customer engagement, make adjustments and repeat the process. As part of the testing process, you should create outcome measures or metrics that support business model validation. Validating metrics include post use surveys, web statistics, or specific measures associated with problem solution, sometimes referred to as quantifying customer value. Measuring customer value may include how product use has created cost savings, time efficiencies, performance enhancements or error reductions.