Greg de la Cruz works at NCR Corp's R&D center in the Philippines, one of the leading technology firms in the country.
The Lean Startup
If you’re reading this, chances are you’re either just beginning to launch your own company and product line, or you’re about to. Before you proceed, I highly encourage you to get your hands on this perspective-changing book by Eric Ries called The Lean Startup. This book will not only help you get started on your business venture, but it will also steer you onto the right path. What’s wonderful about this book is that it demystifies ‘startup fanaticism,’ the idea that as long as you have the guts to start a company of your own, have great ideas under your belt, and persevere, in the long run you will become a success.
This absolutism about how how pure perseverance and action will make you eventually reach the mountaintop is very dangerous thinking. It’s a fact that most startups fail. There is an overwhelming amount of data that shows how promising startups fail more often than they succeed. That’s why knowing the principles of the lean startup will give you the right perspective. It is cruel in its truth, but at the same time it provides real hope instead of some false, fanatic hope that a venture capitalist will come knocking on your door looking to invest after watching your awesome video commercial. The book will convince you that if you just put your product out there (without it being totally perfect), more often than not, customers won’t really notice the flaws, and you’ve actually released a product. Sometimes, harsh customer feedback will help you decide whether to ‘pivot’ or ‘persevere,’ another insightful principle presented in Ries’ book.
Before this article turns into a full-blown advertisement on Eric Ries’ book, let’s take a look at what he means by a minimum viable product, or MVP.
What Is Minimum Viable Product (MVP)?
A minimum viable product (MVP) emphasizes the impact of learning in new product development. A MVP is a version of a new product which allows a team to collect the maximum amount of validated learning about customers without the least effort.
What Is Validated Learning?
Validated learning is a type of learning that treats product development as a series of experiments that use the scientific method to answer questions about market demand. This is a matter often missed by people in the startup business, because not all type of learning is ‘validated’ learning. There’s learning that feels useful (like when you fail miserably after months creating a product but learn that nobody wants to use or buy it) but is actually useless. Well, it’s not totally useless; however, validated learning argues that you shouldn’t have wasted all that time and money creating something that nobody wanted in the first place.
Why Do Startups Fail?
And this is how we go back to why most startups fail – it’s not because they create crappy products or don’t have enough good ideas – it’s because the awesome products or the wonderful ideas they have often end up not being what the customer wants.
Going back to the principle of developing and releasing a MVP, it’s about creating a product with essential features, in as limited a time as possible, to deliver a basic need. And the next step is to have it tested out as early as possible. While this certainly violates a popular principle of Steve Jobs in releasing a product right the first time (I wrote a piece about him here), the ideals of the Lean Startup and the MVP argue that it’s not about getting it perfect the first time; but instead it’s about getting an essential product out as quickly as possible and get valuable customer feedback to improve the next release.
And this brings me to talk about unsuccessful startups, those who failed because they didn’t apply the MVP principle or they misapplied it. Let’s briefly go over two examples.
Two Main Reasons Startups Fail:
They fail to apply the MVP principle...
Juicero. It took them a while to release the $400 juicer that connected to WiFi. Can you even believe that it was once priced at $700? Juicero is another startup tale of how so much venture capital money at such an early stage can lead a company to confusion about their own product. If Juicero was intent about creating a product that mattered to customers, it wouldn’t have released a product 3 years after founding the company which can ultimately be replaced by hand-squeezing the juice produce by ourselves.
...or they misapply the MVP principle.
Stories about Theranos now abound online, often portraying the infamous former CEO Elizabeth Holmes as delusional and a desperate Steve Jobs wannabe. But it was more than just delusional thinking that got Theranos’ boat sinking. Their misapplication of the MVP principle was that, while they did start releasing products with minimum features and as quickly as possible, they did so in a fraudulent manner. In the book Bad Blood by John Carreyrou, the author tells a cautionary tale of what startup money can do to people with a vision that they themselves can change the world. While Theranos did get their products as fast as they could, they did it without the standards demanded in their industry. You just can’t quickly release products that lie about a person’s health and risk the person’s own life.
How Two Successful Startups (Twitter and SpaceX) Started With MVP
I won’t spend so much time talking about the failed startups – discussion on them is deserved for postmortem analysis. Instead I’ll talk about these successful companies which were at one time considered startups in their own industry.
Apple. For millennials, it might be a little difficult to even think that Apple was once a startup, that it originated from the founder’s garage. But that’s what it was. Steve Jobs and Wozniak didn’t know it at the time, but they too were applying the principles of the MVP. When they launched the Apple I computer and showed it on the Home Brew computer club, it wasn’t a perfect product yet. But they already had an audience. And when they sold 50-something units to the Byte Shop local electronics store, it wasn’t even perfect yet. Apple early on was a perfect example of a startup which applied Lean Startup principles. It didn’t spend way too much time in releasing and perfecting its products. However, the aim for perfection early on would also mean the demise of Steve Jobs’ first run at Apple. That early story of Apple is also another good example of why startups shouldn’t spend too much time making something people don’t want. When the Lisa and Apple II didn’t sell very well, Jobs was ousted.
Twitter. They made zero dollars of revenue for their first few years, but that didn’t mean that they didn’t release a minimum viable product that was good enough. What some don’t know is that Twitter started as a podcast company called Odeo. And when that didn’t pan out they did a ‘pivot’ and focused on this new platform called ‘Twitter.’ The founders put out a simple product out there which allowed only 140 characters to be communicated under a single ‘tweet.’ For one of the founders, it was a product which people could use to tell people what you were doing, and for another it was about telling what was happening. Today, it’s a mixture of both. But what makes Twitter a great example of a startup that applied the MVP principle is again how they didn’t take so much time to launch it, and how they applied ‘Pivot’ by leaving behind the podcasting platform Odeo and focusing their efforts on the social media platform.
SpaceX. Why is a $100 million startup (in 2005) on this list? Yes, 100 million US dollars is a lot of money for a startup, but regardless of that fact, SpaceX is another good example of a company which applied the principles of MVP. And this can be seen by comparing NASA’s Apollo project with the SpaceX Falcon 1 project. The Apollo Project cost over 200 billion dollars while the Falcon 1 cost 90 million dollars to launch. That makes the Apollo project 2,000 times more expensive!
3 Key Lessons to Take Away as You Launch Your MVP
1. You don’t have to spend so much time and money launching your first product as a company.
How much did Apple or Twitter spend launching their minimum viable product? Nobody even remembers because it wasn’t that much. The lesson here is to get a ‘good enough’ product out there, don’t trust in ‘market research’ and instead trust in customer feedback.
2. You don’t have to make your first product perfect.
Was the Apple I perfect? No. You can’t even use it today without using the floppy disk which contained its operating system. Was Twitter perfect? No. It kept crashing that sometimes you couldn’t even load your own tweets.
You don’t have to make your first product perfect, and it is an exercise in vanity to make your ideas the reason behind your success. It’s always a mixture of good ideas and customer feedback that makes a product excellent.
3. You have to decide whether to pivot or to persevere.
Sometimes, your first good idea was never really good to begin with, because it turns out your customers don’t like it. There comes a point where you have to stick with it or abandon it entirely. The reason some startups survive and eventually succeed is because they knew when to leave their bad ideas behind.