Mastering China’s Minimum Viable Quality (MVQ) Strategy

What is your Minimum Viable Quality (MVQ)? Yes, you have mastered the Minimum Viable Product (MVP) construct where the strategy is to make the least viable product or service to test a market value hypothesis. But if you visit Shenzhen China, you will quickly realize that the most catalytic thing is really the MVQ. Chinese manufacturers evidently understand that price cannot be uncorrelated with quality.

If you want a toy of $1, you will get it, but it may not last more than a day. But if you also want one for $20, that is available. By having that flexibility or range, they allow a mother to show love to a child even though the product may go bad within a day. The alternative is pricing that mother out of range with the possibility that the child may never have access to a toy.

As you build, be constantly thinking on MVQ. The MVQ is really (partly) the reason why China took over the world. Yes, while Western World would never sell unless it is exceedingly top-grade, China will give you something for the size of your purse. If you do not see that as a market penetration strategy, take another look today.

Read what I have written on Minimum Viable Quality (MVQ).

As I noted in the conversation, there is an illusion on quality. While quality is critical, it is very important that you do not lose focus by trying to build a business where quality has no correlation with cost. I am not sure that the latest Apple Mac Pro that goes for $5,000 is a desktop machine. Apple certainly does not expect that product to be sold to the (desktop) mass market, and specifically to the developing world. The new Mac Pro is a great machine with capabilities that exceed performance of some server systems. Yet, anyone that imports it to Lagos to resell will struggle. Sure, it has a great quality but the cost does not make sense.

The fact is this: any product quality that does not correlate with cost (or value derivable) makes no sense. I have designed accelerometers (motion inertial sensors) where my employer gave me diverging product specification targets: one version was for $0.60, another for $260. The one for $0.60 was made for toys while the $260 was engineered for use in pacemakers (heart monitoring systems). In the cheap one, it was a very crappy product that was built to last for weeks. But in the expensive one, knowing a human life depends on it, it was designed never to fail with many redundancies and checks.

Without the cost context you can think that the cheap one was a poor job. It is indeed not a great quality product but that was by design. That is what the market for toys wants because the kids rarely use them for days before they are discarded. It is a mass market product which has to be affordable to make sense. That does not mean that you cannot make very expensive toys only few can afford. But what is the purpose? Put a $260 XL in a toy which would be dumped within days?

The deal is this: the construct of quality has no meaning until the price of the product is put into considerations. I always ask entrepreneurs to build for the Minimum Viable Quality (MVQ) bounded by the product target price which market will respond. You can build rockets to fly around the world: that is an engineering possibility. But does that make a business sense if no one can afford it? Ask the makers of Concorde for answers.

I know that Eko Hotels is a great place in Lagos but the price is huge. I can get a cheaper hotel for half the price in Ikoyi. If I rate that cheaper hotel with the same standard of Eko Hotels in my mind, I have not done justice to the review system. Etisalat NG could have delivered the best service but only few afforded it while Glo produced a service, not necessarily great, but widely affordable. The markets responded and Glo got ahead, at least it survived, while the remnants of Etisalat NG will become extinct on Monday.

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Comment #1

MVQ! Nice share Prof. Ndubuisi Ekekwe.

One way to also look at the MVQ strategy is that it helps incumbents starve off the forces of market disruption. If an incumbent doesn’t attract the low end of the market with those cheap toys, a new entrant, who can’t compete at the top end of the market, would.

And after the entrant monopolises that low end of the market, it would naturally scale up, and come up the ladder for more premium customers. Until it ultimately grows large enough to compete with, or even edge out the established company.

Spot on again sir. As always

Comment #2

On the surface, it makes a lot of business sense to pursue MVQ, but again – unethical practices will erode whatever good intent originally thought.

What happens when conscienceless people decide to put the very cheap device for toys in critical equipment, and then prop up the price? Herein lies the tricky part.

Many hypotheses look great for market penetration, only if we have decent humans across board, else it would be disastrous to allow some creatures to bring just anything to the market; the consumers are not likely to have some luck.

Of course the construct of MVQ works fine for developing countries, where several things still lack standardization, the case is different in top countries. Also when you are a known and respected brand, you are likely to avoid playing on the mud.

As long as price correlates quality, with ethics binding everything; we will all be fine!

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