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Why 99.98% Of Entrepreneurs Benefit More From Maximum Potential Strategy Than MVP

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The current thinking in high-potential venture development, and what many business schools teach, is mainly focused on the opportunity and venture capital method. This thinking has popularized pitch competitions and led to the concept of the minimum viable product (MVP). When strategy is considered, it is usually not evaluated for capital effectiveness but in terms of “will the dogs eat the dog food.”

MVP is defined as a “version of a product with just enough features to be usable by early customers who can then provide feedback for future product development.” With its original popularity in Silicon Valley, the assumption seems to be that the initial viable product is followed by financing from angels and venture capitalists (VCs) for the product to lead to a successful venture.

The MVP model was better than the previously popular model where entrepreneurs would often seek capital after developing a product and before testing it in the market. But the problems with relying on the MVP and VC include the following:

·     Most products can be imitated. Developing a salable product is smart because revenues are one of the best sources of financing and makes the venture more attractive to potential investors. But entrepreneurs need to be careful not to rest here because a MVP is necessary but not sufficient.

·     The focus on the product has led to the emphasis on ‘first-mover’ product development and VC reliance. The problem is that about 89/100 first movers fail or fail to dominate. So, a first-mover product is not enough.

·     The focus on a viable product is often accompanied by a capital-intensive strategy and needs angel capital (AC) followed by VC. The problem with relying on VC is that VCs only finance about 100/100,000 ventures because they need to see evidence of potential (Aha!) before they finance. This means that entrepreneurs need to know how to get from Idea to Aha, and there can still be a chasm between MVP and Aha, unless the opportunity is a unicorn technology, like Genentech. This MVP-AC-VC path does not help the 99,900 /100,000 ventures that do not get VC and the 80/100 that fail to succeed with VC, i.e., 99.98% of ventures.

Perhaps most importantly, this focus on the MVP-AC-VC method is not consistent with the real strategies of most billion-dollar entrepreneurs.

The reality is that most billion-dollar entrepreneurs avoided VC (outside Silicon Valley) or delayed it (in Silicon Valley) till after take-off. To bridge the gap from Idea/ MVP to Aha, they:

·     Found the right finance-smart strategies to grow more and need less

·     Used the alternate financing to avoid VC or delay it, and

·     Learned unicorn skills to take off with control. Some got VC after take-off. Most did not.

Maximum Potential Strategy (MPS) seeks to grow more with less, and includes the following:

·     Emerging Trend, which helped billion-dollar entrepreneur to ride the wave

·     Focus on a High-Potential Segment to dominate an attractive segment 

·     Satisfy the Key Unmet Need, which allows ventures to add value and get higher margins in the high-potential segment by using the emerging trend.

Some examples

  • Walmart: Jumped on the big-box trend. Focused on rural America initially. Offered wider selection and better prices.
  • Microsoft: PC trend. Focus on PC manufacturers. Offered standardization.
  • Airbnb: Internet trend. Focused on linking travelers and homeowners. Offered selection and prices.
  • Facebook: Internet trend. Focused on linking students. Offered easy way to meet and communicate.

So why is MPS better than MVP for entrepreneurs?

·     MVP focuses on the salable product. MPS focuses on the potentially dominating strategy

·     MVP seeks AC-VC and helps few. MPS focuses on taking off without VC and helps all

·     MVP focuses on product-development skills and VC. MPS focuses on finance-smart strategies, unicorn skills, and alternate financing.

MY TAKE: MVP and ‘first-moving” can get you in the game. But 89% of first movers did not dominate. To win the long game, entrepreneurs need to use the MPS strategy, i.e., develop finance-smart strategies, access alternate financing, and use unicorn skills to take-off without VC. After Aha, some billion-dollar entrepreneurs (mainly in Silicon Valley) used VC. Most did not.

Summary: The current thinking in high-potential venture development, and what many business schools teach, is mainly focused on the opportunity and venture capital method. This thinking has popularized pitch competitions and led to the concept of the minimum viable product (MVP). The MVP model was better than the previously popular model. But they can be beaten by the Maximum Potential Strategy, as proven by Sam Walton, Bill Gates, Brian Chesky, Mark Zuckerberg, and Michael Dell. Learn how to develop your MPS.

WikipediaMinimum viable product – Wikipedia