In a consumer-driven, tech-based world, there’s no shortage of startups trying to turn great ideas into money-making products — but actually succeeding is quite another matter. About 90% of new startups never make it off the ground, and 95% of new products struggle to find a market and end up failing.
Before taking on the risk and cost of developing an idea into a commercial product, there’s a crucial step that every business must first take. It’s called “proof of concept.”
What is a Proof of Concept and How is It Done?
Proof of concept (POC) is a test conducted for the purpose of validating that a product or idea is feasible to take to the commercialization stage.
A POC can be in the form of a document, presentation, or demo. It’s provided to potential investors, managers, and other stakeholders in order to demonstrate the viability of the idea in order to gain approval and funding.
A POC report contains a range of information and data learned during the testing process, including:
- Customer feedback
- Competitor research
- Business analysis
- Projected financials
- Go-to-market strategy
- And much more
Depending on the complexity of the idea, a POC may be more or less intricate and detailed. Ideally, though, it shouldn’t take longer than a few weeks or months to complete.
Although similar to a pitch, a POC is actually much more than that. It’s not just trying to entice investors with marketing hype. Rather, it means to prove to all stakeholders that there is a need in the market and that the idea is ROI positive.
The POC process varies greatly depending on the type of product, the complexity of the development phase, the intended target audience, and more. For example, the POC for a business-to-business (B2B) software solution must show the capabilities of the technology and its features, and how it fits with the specific client’s systems and requirements. This is clearly very different than a POC for a new toy or other B2C product.
Regardless of niche or vertical, every potential business idea should follow these essential steps for a thorough POC:
Prove there’s a need or a gap in the market
The first stage of a POC is proving that the idea fills a need or gap in the market. If it does, it’s far more likely to find a customer base and succeed.
The best way to do this is by identifying potential customers and understanding their pain points. How does the business idea or product solve the customer’s problem? What is it about the product that would entice people to buy it? The answers to these and more questions can be found by engaging directly with customers and getting their feedback. This can be done with the help of online market research tools, such as Survey Monkey and Recollective. Focus groups and face to face interviews are also an effective way to accurately assess customer sentiment.
Any business or product must have a large or loyal customer audience in order to succeed. According to a PwC Innovation study, 35% of companies say that customers are their most important innovation partners. The power of customer feedback in the earliest stages of the proof of concept should not be underestimated.
For more on identifying potential customers and their pain points:
Create a demo and test It
Before jumping in and developing a fully-fledged prototype, now is the time to create a basic version of the product and test it on a focus group of potential customers. Based on feedback garnered from the experience of the test group, the product demo can be developed further according to the needs of the market. This incremental approach saves a lot of time and effort, enabling minimum use of resources to get maximum effective feedback. The demo can undergo a number of iterations based on repeated adjustments and testing, until arriving at a Minimum Viable Product (MVP) that’s more likely to lead to success in the commercialization stage.
If there are budget and time constraints, consider using social media to validate your product idea.
Create a roadmap
Once the demand for the idea in the market is validated and the demo finalized, the next step is outlining in detail the step-by-step strategy of how to get the idea to market. This will require research and planning of the technical aspects, including manufacturing, logistics, distribution, marketing, and sales, as well as a breakdown of the financials involved. The roadmap must demonstrate that the commercialization process is lean, optimized, and a worthwhile investment. Besides the technical aspects, it’s also crucial to engage the hearts and minds of potential investors or decision-makers. That’s the next step.
Don’t sell; tell a story instead
On the one hand, a POC is not a sales pitch. It’s a feasibility study that provides investors with the proof they need to feel secure and to commit to the necessary funding. However, investors are human like everyone else, and the best way to capture their attention (and investment) is to go beyond the dry financials and technical proof, and weave it all into a compelling and engaging story. Whether a document, report, or presentation, the POC should incorporate classic storytelling techniques so investors don’t get bored and lose interest. This can be achieved with the use of personas that add the human dimension, and always remember to focus on the larger question — how does the product or idea change the world/ improve humanity/ make the customer’s life better? This is the key to a convincing POC.
For storytelling tips:
Why is Proof of Concept Necessary?
In their eagerness to get to market, many businesses rush through the POC process or skip it altogether. This is a big mistake. Taking the time and resources to develop a POC is an important part of the development process and can help prevent a product from becoming one of the vast majority that ends up in the dustbin.
Here are several reasons why a solid POC is necessary:
It validates an idea
The primary aim of a POC is to test whether an idea can be realized as a marketable, profitable product. Is there a need or gap in the market? Who’s the potential customer base? Is it a worthwhile investment? Will it be ROI positive? The POC provides answers to these questions and validates the idea before investing money, manpower, and time.
It helps gain investors
Every investor wants to know that they are backing a winner. However, no serious investor will fund an “idea.” A POC provides proof that the concept is financially sound, and is vital to attracting interest and funding from investors, senior managers, and other decision-makers.
It resolves issues and obstacles before committing
A POC provides a clear picture of the problems that may arise during the development and marketing phase. For example, a POC can show that the pain point being addressed isn’t actually the right one for the target customer base. This kind of problem can be identified during the surveying stage, based on focus groups and customer feedback, and the concept altered to better match the real consumer need.
It saves money in the long run
The testing stage may reveal that the MVP needs a major adjustment in order to meet the needs and expectations of the end-user. Resolving these issues is far easier during the POC process than during the development or commercialization phase, and the costs involved are negligible compared to the costs of redesigning a prototype or re-issuing a new, updated product.
It increases the chances of commercial success
A POC provides an opportunity for a theoretical “dry run,” testing the costs, time frames, parameters, and requirements of product development without any of the risks. Developing a product is hugely time consuming and expensive. A POC sets out the entire process in advance, providing much opportunity for the crucial preparation stage that helps boost the chances of commercial success.
When there’s just a 5% chance that a new product will succeed, and a 10% chance that a new startup will survive, the importance of the POC becomes crystal clear. There’s no end to the “good ideas” hitting store shelves every day, and most will certainly fail. The POC process is all about building a case and showing investors the idea’s true value. In the court of approval, the difference between “yea” and “nay” will come down to the rigor and quality of the evidence presented in the POC. If a company is serious about getting investors on board and getting their product to market, a POC is not a choice — it’s a necessity.