So far in this series on launching a startup, you’ve learned how to come up with ideas for your startup, how to test out those ideas and select the best one, and how to recruit a team of founders.
Now it’s time to start building your first product.
We’ll explore the latest theoretical approaches, like agile development, minimum viable product (MVP), and lean startup principles. But don’t worry—it will also be a very practical tutorial, in which you learn how to put these theories into practice, and see examples of how it’s been done in the real world by successful companies like Dropbox.
By the end, you’ll have a solid understanding of successful approaches to product development, and will be ready to start building your first product the smart way: in small increments, with constant customer feedback to ensure you’re always on the right track.
These methods are best suited to online, software-based startups, so that’s what we’ll focus on in this tutorial, but the basic principles can also apply to other types of startup.
1. Use Agile Product Development
We live in changing times. Technology is changing, customer preferences are changing, and ideas can go from being viable to non-starters (and vice versa) within a year or two.
In this context, you need a fast, agile way of building products. But the traditional rules of product development were devised in a very different era, and can hold you back if you try to apply them today.
In the traditional product development model, you’d start by thoroughly researching your idea and scoping out your proposed solution, you’d come up with a comprehensive set of specifications, you’d build the complete product from start to finish, and then you’d launch it and start gaining customer feedback.
That made sense in a time when the cost of manufacturing physical products was high, and the ability to get continuous customer feedback was low.
The risk, though, is that you spend so long designing and building your product that it’s obsolete before it hits the market. And because customer feedback only comes in right at the end, you might simply end up building something that meets all the specifications but isn’t what people want.
Today, there’s a better way.
Put the Customer First
With agile product development, you don’t try to design the product from scratch and deliver the finished version to customers.
Instead, you break the project down into small pieces. You start small, gathering potential customers using the methods described in the previous tutorial, and giving them access to valuable, working pieces of software as you develop it. You start satisfying your customers, and you use their feedback to help you design the next component in a way that is most useful to them.
If your final product is a comprehensive software package that helps people manage all their different social media profiles, for example, you might start by releasing a small piece that lets people figure out which Twitter users to unfollow.
You already have a general idea of how the whole package will look, and you can communicate this vision to your customers, but giving them something to use right away accomplishes two things:
- It keeps them happy while they wait for the final product.
- It gives you valuable feedback on the design and features of your product, so that you can avoid wasting time building things that people don’t like or want.
The customer feedback may mean that the design of your product keeps changing throughout the development phase.
This sounds like a disadvantage, but as long as you’re willing to embrace changing requirements, it’s a big advantage. It may take longer at first to change your plans and do something you hadn’t planned to do, but in the long run it’s much quicker than building a finished product, finding out people don’t like it, and going back to change it.
The emphasis of the agile methodology is on continuous development. So instead of pushing to complete everything by a certain deadline, your goal is to keep releasing useful software on a regular schedule—say, one incremental improvement every month.
2. Produce a Minimum Viable Product
Your goal in this first stage of product development is not to produce a perfect product.
It may sound surprising to say this: after all, most industries are so competitive, and you might think your product has to be the best it can possibly be in order to stand out.
But in fact you want to do the minimum amount of work—not because you’re lazy or cheap, but because the most important part of launching a startup is learning from your customers, and doing it quickly.
Producing a minimum viable product (MVP) is the fastest way to start a conversation with customers, and begin learning about what they want, how they want it, and how you can most effectively solve their problems.
How MVP Works: A Case Study
One example of a business that made good use of the MVP approach is the popular file-sharing and cloud-storage company, Dropbox. Today, it’s a $10 billion company, but back in 2007 it was just an idea. People were struggling to share large files online, and Drew Houston thought he had a simple solution.
But the problem was that he needed significant investment in order to build a testable product, and it was hard to convince venture capitalists and others to invest without a testable product. He was caught in a classic Catch-22 situation.
The way he escaped from this stalemate was by producing a simple demo video, showing how Dropbox would work and explaining the painful problem it was meant to solve.
As a bonus to promote shareability, he included a few inside jokes that would appeal to his target audience of keen techies. The video was shared thousands of times, and drove Dropbox’s waiting list from 5,000 to 75,000 people overnight.
A demo video is about as minimal as a product can get. It wasn’t even working software at that stage, and yet it achieved the goal of any MVP—it showed there was interest in the product, and it started a conversation that helped Dropbox develop its product in a way that was most valuable to its customers. In this case, it also helped provide the funding that would take Dropbox from idea to multi-billion-dollar company.
Your MVP could take many different forms. It could be a scaled-down version of your final product, or a demo, or something else. The main requirement is that it lets people see how your product works and start talking about it, which helps you both generate customer interest and guide the development of the product as you progress through subsequent iterations.
3. Embrace the Lean Startup Principles
You learned in Step 1 to keep working through successive iterations of product development, using customer feedback to guide you all the time.
But how exactly do you do that? In this step, we’ll look at some of the key principles of operating a lean startup, and show you how to apply them to your business.
Being lean is not about saving money; it’s about avoiding wasted effort. In this highly competitive, fast-changing environment, you can’t afford to waste time and energy, especially if you’re working by yourself or with a small team. The goal is to make effective use of all your time and resources.
Build, Measure, Learn
Once you’ve started building your first product and releasing it to your customers, you need to start learning and adapting.
The “Build, Measure, Learn” mantra can help you get your product right. We’ve covered the building methodology, but what about measuring? This is where it gets tricky, because there are so many things you can measure, using everything from free services like Google Analytics to more comprehensive and costly products like Ontraport, and with all this information at your fingertips, it’s easy to track the wrong things.
A lot of the metrics you see quoted by startups are just “vanity metrics,” for example. It’s great if you see increased traffic to your website, or have thousands of followers on social media, but the metrics that should matter to you are not the ones that make you feel good, but the ones that help you make decisions.
The exact things to measure will depend on your business, but think about things that give you insight into what your customers want. Conduct A/B split tests on all the key pages on your website, and also within the product itself. Find out what people value, what type of wording appeals to them, what configuration of the page is most likely to make them take the action you want.
You can also look at “cohorts,” or groups of customers that signed up at a similar time. See what percentage of the customers who signed up in a particular week went on to take an action, like buying from you or requesting more information. Track how that percentage changes with different cohorts over time, and how it’s affected by the products you offer and how you offer them.
When you’ve gained some smart measurements of your product’s effectiveness, you can supplement that with good old-fashioned customer contact. Ask them what they thought, use surveys, interact on social media, and start to build up a comprehensive picture of how your product is working.
Then when you’re working on the next iteration, you can incorporate everything you’ve learned from your customers, and change it up as necessary.
4. Keep the Clarity Through Each Iteration
One of the risks in the approach we’ve looked at in this tutorial is lack of clarity. In traditional product development, you and your team all had their marching orders, and worked methodically through each phase until the final product was ready for release. With agile development, on the other hand, you might find yourself changing course every few weeks.
So if you’re following this approach, it requires a little extra effort to make sure everyone stays on track and is clear about what they’re doing and why they’re doing it.
Asana co-founder Justin Rosenstein says that ideally you should be able to walk up to any of your employees or co-workers and get clear, positive answers to the following questions:
- What are you working on right now?
- Are you confident that it’s the most important thing you could be doing?
- Do you know who is waiting on you?
- Do you know to whom you can go for support?
- Do you know how your work fits into the overarching product we’re trying to accomplish?
- Do you know why that product matters?
In practice, however, it rarely turns out like that. People routinely get side-tracked into less important tasks, or mired in bureaucracy, or swamped by email, or waste time trying to track down information.
To overcome this, you need to work hard to ensure everyone working in your startup has:
- Clarity of purpose.
- Clarity of plan.
- Clarity of responsibility.
Clarity of Purpose
This means remembering why you’re working on something in the first place—the larger reason or purpose behind your company’s existence, and the importance of each individual piece. Regularly remind yourself and your staff of the benefits customers will enjoy, and how the product you’re working on will make their lives better.
Clarity of Plan
This is about execution. Decide on a way to get organized, and stick to it. Web-based tools are great for collaboration within a team, especially because they make it easy to update the plan—something you’ll be doing quite often. It could be something as simple as a spreadsheet on Google Docs, or you might want to investigate a specialized project management tool like Trello or Basecamp. Whatever you go for, make sure all the tasks are captured, and you can easily keep track of what everyone’s doing and the expected timeline.
Clarity of Responsibility
This means being very clear about who’s doing what. Even if several different people are working on building a particular part of your product, there must always be a single person with ultimate responsibility. Otherwise it’s easy to end up either in the situation where something is left undone because everyone thought someone else was doing it, or else in a position where people are duplicating effort.
Building your first product can often become overwhelming, but if you get the organizational structure right from the beginning, and focus on maintaining clarity in those three key areas throughout the development phase, you’ll be in a better position to stay on top of things and avoid last-minute panics.
So now you know how to build your first product in a smart, agile way that involves less upfront investment of time and energy, and involves the customer at every stage. You’ve seen how to use the MVP concept to start learning from your customers, and how to keep learning and developing at every stage of product development. You’ve also got some tips on keeping a clear focus throughout all the customer-led changes of direction.
What’s next? Well, although product development is an iterative process, you’ll still want to have an official launch. It’s a great way to generate buzz for your startup, and to signal to the world that you’re ready to open up to a larger market.
So in the final tutorial in this series on launching a startup, you’re going to get some ideas and examples of outside-the-box launch events, and see how to use email marketing and social media to ensure that you have the largest possible base of engaged customers by the time you get to the official Day One of your new startup.
Editorial Note: This content was originally published in 2014. We're sharing it again because our editors have determined that this information is still accurate and relevant.
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