Pharmacy Benefit Managers: The Root Cause of High Healthcare Prices
Healthcare prices in the United States are much higher than compared to the rest of the world. There are many factors which can be held responsible for this high price. However, one of the most important factors is the presence of unscrupulous middlemen. Pharmacy benefit managers (PBMs) are one such class of middlemen which act […]
Information and Strategy – The Virtual Value Chain
Information and Strategy In today’s digital age information technology and information systems play an important role in success of organization. Information technology has challenged the way the business gets conducted. A company with superior product and service content become market leaders. There is a constant urge for the companies to provide a better and competitive […]
What are STRIP Bonds?
STRIP is an acronym that is commonly used to denote Separate Trading of Registered Interest and Principal of securities. This is a complex-sounding term however, in reality, the meaning is quite simple. It is important to understand that when we buy a bond that pays regular coupon payments, we are actually buying the right to […]
The Burning Cost Approach
In the previous article, we have already seen how reinsurance policies are generally priced and what factors are taken into account while pricing them. There are certain specific methods and approaches which have been used by reinsurance companies across the globe for many years. These methods or approaches have now become a standard that is […]
Preferred Shares: An Introduction
Whenever the topic of fixed income securities is considered, the obvious assumption many investors make is that the conversation is about bonds. It is true that bonds are the most commonly traded types of fixed-income securities. However, they are not the only type of fixed-income securities. Preferred shares are another common type of fixed income […]
We have already learned about the technique of proof of concept in the previous article. However, proof of concept isn’t the only technique that is used by entrepreneurs. There are other techniques that are frequently used as well. Minimum viable product is one of those techniques which is widely used by several entrepreneurs. In this article, we will closely examine the minimum viable product technique as well as the various benefits that it offers.
The concept of a minimum viable product is closely related to proof of concept. However, it is still significantly different. A minimum viable product is a particular version of the product which has maximum utility for the end consumers.
Hence, in order to undertake a minimum viable product exercise, an entrepreneur has to create various versions of their product. They can vary the availability of different features in different products. The end result is to find the specific combination of features that provides the maximum utility to the end consumer per unit of cost.
The objective of the minimum viable product is to reduce the wastage of expenses. Sometimes, entrepreneurs and startups spend a lot of time and money in building features that provide very little utility to the end consumer. The objective of the exercise is to find out the minimum combination of features that must be present in a product for it to be considered viable.
It is important to note that the minimum viable product is different from proof of concept because a tangible product already exists in this case. Also, such a product is available to a wider audience even though it may not be sold commercially. Obtaining the correct combination of features in the minimum viable product is often an iterative process. Entrepreneurs keep repeating this process till they achieve the desired outcome.
As mentioned above, the minimum viable product is often an iterative process. This means that the expenses involved in the process can be much larger than the proof of concept. However, entrepreneurs are still willing to undertake this process because of the following benefits that it offers:
The minimum viable product validates much more than technical capability. It validates the design of the product and the fact that it has a certain degree of market demand at a certain price point.
The minimum viable product approach has one major disadvantage. Companies are often not able to find the correct focus group of customers which represent the target market. Even if customers are randomly chosen, there is a good chance that there may be some form of selection bias which may end up skewing the results of the exercise. This selection bias can cost the money a lot of companies and even some lost reputation.
The company may end up incurring expenses to develop a product that may not even represent the mass market. Hence, it can be said that the end result of the minimum viable product is only as good as the sample selection.
Also, the minimum viable product is not able to replicate the subtle effects which products such as branding and packaging which can have a significant impact on sales and consumer preferences in the open market.
The minimum viable product is generally done after the proof of concept. It is done to finalize the specs of the product after the technology to create the different variations of the product has been validated at the proof-of-concept stage. In short, this is a technique that requires a significant amount of effort as well as expenses upfront but helps in avoiding significant problems down the road.
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