How to validate critical assumptions through MVP’s

At the beginning of every startup idea, there are many critical questions about the business model, the customers, the pain’s and gain’s, the potential solution and and and… Our job as entrepreneurs is to validate these questions as quickly as possible in real field trials and to test critical assumptions.

Traditional companies rely on expensive and often also ineffective market studies ore surveys to validate hypotheses.

Through my work with over 25 early stage startups, I was able to learn a lot about validating ideas and especially critical assumptions. What I present to you today  is my personal approach to testing such projects using MVP’s (minimum viable products). At this point I would like to credit to the post of hatchery.io, from which I will quote this blog post in some points. Together let’s have a look at:

1. Make critical assumptions (about the customer, the business model, …)
2. Define hierarchy of assumptions (according to relevance and risk) 
3. Building an MVP to validate this assumption

What is a MVP?

An MVP (minimum viable product) is a coined term popularized by Eric Ries from Lean Startup. It is basically about testing a product in its most slimmed down version with the customer. Different MVP’s can be used for different projects – more about this later.

Why do we create MVP’s?

In a startup we build MVP’s in order to validate critical assumptions regarding our business model, our customers, the potential solution etc. Our goal is to learn about our assumptions as quickly and efficiently as possible.

Our MVP is the intersection between an ultra simple product, with very little customer benefit, and a high fidelity solution. We aim to solve the customer’s problem in the simplest possible way without offending him.

1. Identify critical assumptions

In the first step we go and collect all the assumptions that come to our mind concerning the following points.

A. Business model
B. The customer
C. To potential channels
D. The solution

Now we record all the assumptions by writing them down as follows: (example booking service platform for car reparation)

“The customer is willing to spend between 20-40$ for the service.”
“The average customer is male, between 35-50 and has little time in his everyday life.”
“The customer search online through Google for a solution to his time problem”
“The booking platform helps the customer to solve his problem quickly”

2. Prioritize critical assumptions

Once we have made the key assumptions, we begin to evaluate them in terms of their relevance and risk to the business model.
In the past it has proven to be useful for me to use the following framework.

The relevance of the assumption depends on the following: “How likely is it that the assumption is wrong (1-5 points)” and “What impact will it have on the business model if the assumption is wrong (1-10 points)”.
The more points a critical assumption has, the riskier it is for our business model. This means we test the riskiest assumption first.

3. Build an MVP to validate the assumption

We have now reached the point where we want to find out whether our critical assumption is correct or not. At this point, I’ve written down some clues that I’ll use when I’m building an MVP.

Build an MVP DONT’s

1. Long development work are necessary
2. It costs a lot of time and resources (money).
3. I have “fallen in love” with a solution and would like to validate it at any price.

Especially the last point: you have “fallen in love” with an idea is tricky. This happens more often than you think..

In this context I have learned: It only depends on the real customer Pain and how it can be validated the fastest solution independent.

Don’t fall in Love with the solution – fall in love with the problem”

Build an MVP DO’s

1. Create a simple product that solves the customer’s problem in the simplest way possible
2. To draw the first potential customers’ attention to the product with a small budget
3. Quickly validate assumptions through real customer feedback (conduct customer interviews)

Example

Case: We want to build a food platform where you can order many different products online. Such a platform is complex and expensive.
Most critical assumption: Customers order their food online and have it delivered to their home for a price of 5$.
MVP: We put a Whatsapp service online. There we take orders from customers. We purchase all products in a store nearby and deliver them to the customer’s home. For the service we charge 5$ per order.
Learning: We learn first hand from each order what we can make better and about potential problems that may arise (order, logistics, billing…). We systematically use every opportunity to get real customer feedback and then optimize our solution.

The second version of MVP could later be a simple landing page with a fake order, which will later be done manually in the backend.

Real Live example of a great MVP: inlytics.io has build a LinkedIn analytics tool. But before building the entire tool, they made tiny little steps towards marked adoption by first launching a very rough prototype for people to test. After that, they continuously improved upon this first version. Now, they have a great product going for them. Awesome.

I hope I could give you a helpful insight into the way I build MVP’s. If you liked the contribution write me a comment or share the post.

On this page I share my learnings with you. You have found a better/ faster/ more effective way to do what I explain? Let me know at hi@founder-hacks.com – I am happy to improve the article! Let’s grow together!