Testing a business idea? Do it with a PoC to reduce risks
In the last few decades we have seen that coming up with innovative, and brilliant ideas for the next best solution is what is driving the startup sector. It doesn't matter what stage the startup is at, one thing that cannot be missed is overlooking critical aspects that may cause them to fail. The important things to consider here are that the idea:
- has potential,
- is useful,
- is commercially viable,
- and is worth spending on.
Lean startup is a name given to methodology that helps businesses to shorten the development cycles and quickly discover if a business idea is viable or not. The methodology emphasizes on setting the idea with real customers over intuition and flexibility above planning. Lean startup methodology can be used to develop proof of concept, MVP, or prototype.
Thinking about what is the difference between MVP, PoC or prototype. Read our blog here.
Bringing Innovation to business
AirBNB, Uber, Google, Netflix, WhatsApp are all examples of how businesses utilized innovation to resolve issues faced by the end user. Each of their idea was new, pathbreaking, and it would have been difficult to succeed if it didn’t appeal to the right audiences.
But how can a startup do that?
The answer is through a proof of concept (PoC). PoCs have proven to help businesses, especially startups to successfully launch an innovative idea.
Here are three specific reasons why:
1. Helps to pinpoint potential risks and obstacles
Developing a PoC helps startups pinpoint risks and obstacles they may face in implementing the proposed product.
Rather than uncovering those obstacles during or after the product launch, startups can foresee them and plan their projects accordingly while still in the development phase. Examples of these risks and obstacles are contracted parties’ failure to fulfill their deliverables, disputes during project implementation, and many more.
It’s worth noting that while the PoC doesn’t guarantee smooth implementation of project management basics, it can increase the likelihood of the product’s success.
For instance, once PoCs unveil the potential obstacles, startups can then record them in the risk register, also considered one of the best project management practices, for appropriate planning, budget coverage, and other actions.
Project leaders can also find ways to eliminate, mitigate, and address the risks and assure their investors about the project’s success.
2. Helps to determine the chances for scalability
When startups propose to create a product, the business as well as its investors likely expect it to be scaled.
That’s why, through PoCs, startups can verify not only the feasibility of the idea but also its scalability, whether immediately or over time.
PoCs can help the startup management and stakeholders see how to go about growing and scaling the product in terms of systems architecture, human resources, and workflow standardization, amongst others.
In this way, companies can determine their capacity for working with additional production. PoCs can even help startups, SMEs, as well as established businesses address scope creep while they’re still in the idea phase.
Scope creep refers to how a product’s requirement realistically tends to multiply or escalate over the project life cycle.
For instance, a proposed product that begins with five essential components can then have 10 as the company scales it. Another is when startups need to spend on sudden product changes that can go beyond the project budget.
If a startups can prove its ability to handle scope creep during scalability, they can note it in their project management tools, as well as present their proposal to stakeholders more convincingly.
3. Offers proof to stakeholders for investment
Before startups can request resources for their proposal, they should show their stakeholders that the investment will be worth it.
PoCs give project managers that opportunity. Through PoCs, they can illustrate the usability and profitability of the idea. They can show the product idea in detail with illustrations and visuals to provide the presentation with sufficient data.
They can thoroughly explain the advantages of the proposed product to the company’s operations, brand image, customer relations, and more.
By doing so, a startup can better convince the investors to commit the needed resources to develop the idea. PoCs also allow a startup to assess the idea giving them a varied form of win-loss or cost-benefit analysis.
If the concept doesn’t prove to become as practicable or profitable as formerly assumed, and the losses outweigh the potential returns, venture capitalists or investors can decide not to invest. Building a new product, after all, isn’t cheap. If the proposed venture fails, tons of resources could go to waste that could have been invested in more productive initiatives.
If startups can prove that they have an airtight idea and the right measures to mitigate possible losses, they can better compel stakeholders to accept their proposal.
Final words on PoC
A PoC helps startups see if a proposed idea is practical and attractive for the target market and achievable for the company.
Through the PoC, project teams can explore the planned components and functionalities of the ideated product, along with the costs, resources, and capacities required to make it work.
From these details, startups can better assess the readiness of the newly developed solutions for adoption on a wider scale, approve of the idea, and decide to invest in its implementation.