Before we start, I just want to clarify a couple of things. Frist, the scope of this post is restricted to the Tech. industry only, hence all other forms of businesses that do not have technology at the core of their operations are discounted. Secondly, by using the terms Minimum Viable Products and Business Plan, I am adhering to the following definitions:

Minimum Viable Product: In product development, the minimum viable product (MVP) is the product with the highest return on investment versus risk. (Wikipedia)

A business plan is a formal statement of business goals, reasons they are attainable, and plans for reaching them. It may also contain background information about the organization or team attempting to reach those goals. (Wikipedia)

Minimum Viable Product and Business Plan serve different purposes in the life of a new venture. A minimum viable product is the first iteration of your idea that is in a tangible form, a ready to ship product that people can interact with. However, an MVP is expected to be just a glimpse of the complete potential of your idea. It’s a thing that you can live with but you cannot peacefully sleep on. The primary purpose of an MVP is to rectify whether there is a market out there for your solution or not.

A business plan, on the other hand, is more or less a map detailing a route to your ultimate company goals and the milestones that you need to reach along the way. It is both an internal as well as an external manifesto; a user manual for your company.

So returning to the primary question, what should come first, an MVP or a business plan. Like every question in business, the answer could be, it depends. I personally have a bittersweet relationship with that answer. It’s true it depends, it depends on your skill set, your business, you market, heck even your geographical location. But I personally think that all things accounted for, there must be a single approach that is superior, even marginally, when compared to the other.

Let’s look at the examples we have. Since I am currently residing in the Kitchener-Waterloo Region, which is arguably the “Silicon Valley of the North”, I am focusing on the local Start-ups that ended up becoming successful. Consider the following specimen:

  • Blackberry – Lazaridis, founder of Blackberry, was an Engineering student at the University of Waterloo when he founded RIM after responding to a request of proposal from GM to work on a network computer control display system. No business plan.
  • Kik Messanger – Was founded in Velocity Residence, an incubator in the University of Waterloo, by a group of mostly engineering students who wanted to further the cause of mobile computing. It’s not known whether they developed a business model first before coming up with their MVP.
  • Clearpath Robotics – The founders of Clearpath were both System Design Engineering student at the University of Waterloo who commercialized their fourth year projects.
  • Achievers – Formerly known as I Love Rewards, Achievers was founded by Razor Suleman, a BBA graduate from Wilfrid Laurier University. It is safe to assume that in this case, the business plan came first before a minimum viable product.
  • Vidyard – The core product offering of Vidyard was a feature of a legacy service business much like Slack. It goes without saying that the MVP came first before the business plan.

I would be a fool to reach a conclusion based on the above sample size but at the cost of being ridiculed I will postulate that most of the successful startups had an MVP before a business plan. It makes sense speaking from my personal experience. If ideas come dime a dozen than business plans come quarter a dozen. A thing that users can interact with, touch and feel will yield much accurate forecast about its success than an idea that is just words and blank spaces.

MVP isn’t the only option. Speaking from personal experience, I have seen the power of even prototypes when you need to sway the audience in your favor. I went to a Startup competition where a classmate of mine was presenting his idea about personal use of hovercrafts. At the start of the presentation, there was a giggle that rippled throughout the crowd when he first described the product he had envisioned. However, as soon as he played a video of the working prototype the giggling stopped. I don’t see why this wouldn’t be the same for investors.

In a recent conference, I got a chance to interact with a Business Development Manager at IDEO. I understand that reading the name of the company will make an average reader predict the outcome of the conversation. However, since the individual in question was in the Business Unit of the company therefore there was still a hope that he would end up rooting for Business Plans. But he didn’t and the argument he made in favor of MVP was pristine. He said that an MVP has the ability of providing profound insights about your business model. It empowers you to test, with some degree of accuracy, your customer segment, pricing strategy, UVP, so on and so forth. He said that a business plan that evolves after the launch of an MVP is much more concrete and grounded to reality. He also remarked that a company with a crappy business plan but a good MVP has higher chances of success than a company with a crappy MVP and an immaculate business plan.

And it all makes sense. The hobbyists are usually the ones who end up creating successful technology start-ups. We have got an abundance of examples from Wright Brothers to Apple Computer. Once you have recognized a burning need in the market, the next logical step is to go ahead and solve it. It goes without saying that if you cannot convince yourself (or a technical partner) that the idea you have deserves to be materialized than how can you convince the world to buy into it? So fold up your sleeves and start creating!