Thinking Through Viability

Fundamentally, your MVP should be the validated core functionality of your value stream. It’s the discrete functionality that fulfills the promise you’re making to the customer. Nothing more, nothing less.

AppFog built their product from the outside in. What is the minimum—from the customer point of view—required to achieve the value promised; the minimum to satisfy the need?

To shoot long is to waste; to shoot short is to learn what’s deficient.

Minimum doesn’t mean sucky, but sucky might be sufficient; viable is the crux; minimally value-creating.

Perhaps for your particular segment, viability means:

• The look had better rock; it must be aesthetically pleasing.

• It must fit seamlessly within the customer’s existing workflow.

• It must require no more than three clicks.

• It’s so easy anyone can do it.

• Customer must be able to easily open package, but it also must be tamper proof.

• It’s disposable.

• It’s green.

• It must integrate with system x.

• It must complete tasks x and y, and report back z.

Or looking at what it might not need at the outset:

• A terminal command line is sufficient.

• Packaging is superfluous.

• Usable more than a handful of times.

• It’s hard to use, but works.

• Looks kludgy, but does what it’s supposed to.

• Does x, but not yet y.

• Reporting not automated.

• Requires manual intervention.

Case Study: But My Marinara Is to Die For!

Up until the 2008 financial crisis, Dan Palacios was a real-estate developer. Ouch! During the meltdown, Dan lost most of what he had spent years building. A list of remaining assets included not much other than a killer marinara sauce, according to Dan’s supportive but rather nonmonetizable fiancée and friends.

Normally, during a recession one doesn’t look to open a restaurant, let alone a Chicago-style, gourmet pizza restaurant using fresh, organic ingredients and selling them at $25 per pie, in downtown San Diego. Things don’t look up when sporting a credit report featuring recent foreclosures.

The old-school method of opening a restaurant seemed unlikely. The chance of finding the investment necessary to lease restaurant space, build out a kitchen, hire staff, and so forth was, as they say, less than zero. How might one go about learning whether one could create a viable restaurant business in a lean startup fashion?

One possible scenario would be:

• Figure out who your ideal market profile is and where they live.

• Iterate on an MVP, until the product is validated.

• Measure customer passion.

Dan set out to do exactly that. He knew who his customers were, or more accurately, he knew who they weren’t. They weren’t people who bought from the national pizza franchises. They weren’t people who couldn’t care less about fresh ingredients. They weren’t people who lived outside his delivery radius. They weren’t college kids, because they had to be able to afford gourmet pizza.

Most importantly, where do customers in the right market profile hang out or live in or near downtown San Diego? Palacios figured his ideal customers were visitors of the local farmers’ market: Although not necessarily wealthy, patrons tend to be willing to pay more for high-quality goods. They were passionate about food and fresh, high-quality, organic ingredients.

They were part of a community: young, technology adept, vocal, and social. After visiting the farmers’ market, he learned that in order to serve food there he had to have a catering license. To get a license, you must have a commercial kitchen. But to have a commercial kitchen, you need a restaurant, right?

Dan was cleverer than that. To create his first MVP, he rented space in a commercial catering kitchen. Evenings, Dan tried to build a downtown delivery pizza service, and every Saturday, he brought pizza pies to the farmers’ market and handed out samples, guerilla-marketing style. Although revenue is the ultimate measure of success, Dan knew he was onto something when he suddenly appeared in Yelp, with five-star reviews almost across the board. Berkeley Pizza consistently scored in the top five on Yelp’s best San Diego restaurants list. The reviews came from the farmers’-market crowd.

“Suddenly,” Dan says, “customers wanted to invest in my restaurant.” He quickly got interest from local restaurant groups, as well. Within a year, Dan was out of the catering kitchen and into his own restaurant space.

“The plan was always to open a restaurant, but I wasn’t going to get investment for $25 pizzas, not with my credit score. I had to prove my market. The Yelp reviews not only drove business, but demonstrated I had a market that loved my product.”