Monday, December 4, 2023

Moving Beyond MVP: The Power of Product Ecosystems in Business

By Anand Tamboli

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In this article, we are going to discuss why the concept of a minimum viable product (MVP) is becoming outdated and how businesses can benefit from adopting a product ecosystem approach. Discover the advantages of offering more comprehensive and valuable products and services that cater to customers’ needs and preferences.

What is Minimum Viable Product?

An MVP is a simplified version of a product or service that includes the essential features required to fulfill its purpose and provide value to early adopters or customers. It is not a finished product but a starting point that enables businesses to test their assumptions, gather feedback, and validate their ideas in a real-world setting.

The idea of a minimum viable product, a.k.a. MVP, is not new and certainly not ground-breaking anymore. In fact, it is becoming, to put it mildly, outdated. As much as this may seem shocking to you, it is my observation and finding over the last several years. A more comprehensive way to look at this is to treat your products and services as smaller packages that are part of a larger offer.

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Minimum Viable Product

Classically, we have always treated MVP as a product or service with a minimum set of features. It is supposed to have features that are necessary to be viable and useful to customers, nothing more, nothing less. The whole idea was to keep it simple, easy, quicker to develop, and reduce the time to market testing.

This approach allowed companies to validate their ideas and ensure they solved real problems for their target market, well before putting all bets on their idea. Even for a well-established business, MVP feels like the best way to go.

All the reasons that startups would use to go with MVP still apply to these businesses. It may be to test the viability of the idea in the market or gather feedback and prioritize further development, or both. All in all, MVP seems like a safer way to go in most cases.

The Challenges Entrepreneurs Face in Testing Their Ideas

So here comes a new challenge, as the concept of MVP is becoming outdated. In my recent interactions with entrepreneurs and their customers, it is becoming clearer now.

A product with just a few useful functions and features seems like a lazy offer. Customers have shown apathy towards such offerings. They won’t necessarily reject it on the face, but they certainly would choose something incrementally better and more functional and feature-laden.

Why? I asked a few dozen customers out of curiosity. Their response can be summarised as, “I don’t want to be a guinea pig for someone else’s benefit.” While this seems like a legit reason, there is some profound learning in it; and that is—nobody wants a product that is minimally viable. Even you, for that matter, won’t prefer that just a minimally viable product. Would you?

Four stage product ecosystem
Four-stage product ecosystem

Testing Ideas Effectively

Many entrepreneurs and small businesses grapple with a proper way to test their idea, sometimes unknowingly. They see a cold response to their MVPs and yet cannot reconcile their theory, hypothesis, and estimations with reality. Eventually, those who develop so-called MVP further into a product and go out in the market find a thread of hope. People respond better this time.

I have seen this first-hand with my company’s products and services. When we reached out to potential customers with just the MVP, we received polite appreciation. In some cases, there were a few comments and suggestions. But none were like good feedback would have gotten us.

The problem we eventually realized was that those customers couldn’t test our MVP in their environment as-is. Either it was too skinny from a functionality perspective, or it felt incomplete (which is what MVP is anyway) compared to a full-blown product.

Introducing Proof of Concepts (PoCs) as a More Comprehensive Testing Approach

So, for us to be able to test our ideas, we had to take a few extra steps. We would develop applications for our products and services that prospective customers could use. Let’s call them proof of concepts (PoC), but much more than the traditional PoC. With these PoC, customers were able to fully visualize how our products or services could fit into their own workflows or complement their products and services.

But you have to note one thing here. A PoC is better than an MVP by all means—by cost, by development time it takes, the resources it needs, and the functionality it needs to have to work properly. There is hardly anything that is ‘minimum’ here.

What if PoC Costs More?

Well, if a PoC costs more than the MVP, the best course of action is to stop treating PoC like an MVP—which it is not. A better way to start looking at your products and services is to build a product ecosystem. As a part of that ecosystem, you can have something that is better than MVP and thus makes more sense for the customers to try and test.

It also means that you will have to treat them like one of the offerings instead of just some test samples. It raises stakes for your business as there has to be a full support system to back things up. But it also means two more things—first, you will be able to sell them, and second, you can expect better feedback than what you’d get with a bare MVP.

However, when I say product ecosystem, I don’t mean a bunch of different variants of your offerings. I mean several complimentary products and services that vary in form, function, and price.

What is Product Ecosystem?

By product ecosystem I mean a network of interdependent products and services. These products or services are interconnected but are mutually supportive of each other. Some of the elements in this product ecosystem can include the main product itself along with complementary products and services that are known as accessories.

It also includes supporting infrastructure and the people and organizations that use and support the product. A simple example of supporting infrastructure could be app stores, service providers, repair services, and accessories like cases and chargers.

This is one aspect of a product ecosystem that mostly varies by form and function. However, from a pricing perspective, there is another way to look at it. Can you imagine how difficult it becomes if you have only one key product or service to sell? Negotiations are way tougher, and it directly affects margins.

The key reason why negotiations get tougher is the perspective gap in the value this main product or service delivers. Customers don’t have a clue about what it could be or do, so they underplay it. We think it’s the best thing they could get, so we stick to our ground. As a result, the needle doesn’t move, unless someone backs down—which in most cases is your business.

I remember all our past negotiations and how we used MVPs to anchor the customers’ perspectives each time. However, since their perception was totally different compared to our MVPs, it did not help. But all the PoC we delivered pegged us differently in the sales process as they had reasonably comparable points of reference.

And that brings me to the point that your product ecosystem needs to have PoC (you could give it a different name though) as an entry-level offering amongst other complementary items. Think of it as a more economical offer you can make to your customers without having to justify a large investment in your product or solution.

Understanding Four-Stage Product Ecosystem

Let’s understand what a four-stage product ecosystem looks like. Once you get this, you will realize that many successful businesses already have it. It may be by design or may have been a result of organic development over time. Nonetheless, this can be quite handy for your sales team.

The low-cost PoC I mentioned earlier is part of stage-2 products and services. In terms of cost, it is more economical compared to the main product or service. At the same time, it helps prospective customers to fully visualize and appreciate your product’s role in their own ecosystem.

Once they appreciate that and see the value in moving forward at full scale, your main product or service can take center stage. That is the stage-3 discussion. In my experience negotiations are more balanced if stage 2 has happened properly. Both sides understand each other better that way.

After the main product or service is in the works, complementary services and products make more sense. They provide more cross-sell opportunities that fit well with stage-3 offerings.

One of my mentors said to me once, “Knowing a point of breakthrough or being able to make it is critical for a sales consultant.” And I think having a product ecosystem designed this way is the key to that breakthrough.

Complementary Products and Services for Cross-selling

I’d say it upfront—not every company needs to offer free samples. You need to decide the merit of having the PoC in your product portfolio. But some products and services are way too costly, especially in the B2B scenario. Their free samples make little sense. There is hardly anything you can provide as a free sample in such cases. However, thinking creatively and making something useful happen for your customers, at no cost to them, can still be valuable.

Especially for startups and small businesses, free samples can help achieve some breakthroughs in the early stages of their sales process. In the past, we have seen many design houses and semiconductor salespeople offer free development boards. Those boards were quite helpful in getting to understand their main product—the specific microcontroller or chipset they would sell.

Should you have a free sample or giveaway policy and product or service to offer? I am suggesting so, yes, but be careful about what you offer and how.

Benefits of a Product Ecosystem

Free samples are good tools for building a customer base and driving the adoption of new products or services. However, be careful in considering the value and cost of such a free item. Ensure that it aligns with the overall goals and strategy of the business.

The product ecosystem approach has several benefits, including the following:

Attracting price-sensitive customers: A low-cost product or service usually becomes an attractive option for price-sensitive customers. It doesn’t have to be cheap though.

Building a customer base: Free samples, giveaways, and sometimes low-cost PoC help attract new customers and build a customer base. These introduce customers to your main products and services and encourage them to try your main offerings.

Achieving broader market reach: Sometimes, your main product or service can be limited to expanding market reach due to costs or the vastness of the offer. Stage 1 and stage 2 products allow you to expand that reach and target new market segments that may not be willing to pay full price without testing the products first.

Increasing customer loyalty: By providing a range of complementary products and services in stage 4, you can create a more complete and satisfying experience. That increases the likelihood of customers staying with you longer and doing more business with you, happily, as they see the value and range of your offers.

Increasing the number of revenue streams: When you have more products to offer, additional revenue sources open up. When more customers get attracted due to smoother entry into your product ecosystem, you end up creating additional value for everyone.

The point is, in my experience, the development of a product ecosystem has the power to be effective for startups to create a more complete and satisfying experience. To generate additional revenue streams and differentiate in the market, it is important to develop this ecosystem.

The first step to do that is to assess what you are offering today and where it fits in the four-stage product ecosystem explained here. From there, it is a straightforward journey—to develop things that are missing.

Now to the point about MVP. Gone are the days when minimum viability was an issue. In most cases, it is not anymore. Instead, let’s give a new definition to MVP; let it be a minimum valuable product – a product that costs minimum but is still valuable to customers to place in their ecosystem without hesitation.

Check how to build Minimum-viable Product: Step-by-step Guide

Think about this—‘minimum viable’ is your perspective, it focuses on you. But ‘minimum valuable’ is your customers’ perspective, it focuses on them. And I know, you already know which perspective is better. Don’t you?

Also, Read the High Tech Startup’s Success Strategy.

Anand Tamboli is a serial entrepreneur, speaker, award-winning author, and an
emerging technology thought leader


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