Using Proofs of Concept to Increase Your ROI

Not so long ago, R&D departments had to fight for internal resources and justify capital expenditures in order to explore new technologies. Developing on premise solutions was expensive and time-consuming, and decisions were focused on ensuring success and avoiding failure.

In the past 5 years, cloud platforms have radically sped up the pace of innovation, offering companies of all sizes the ability to build, test, and scale solutions at minimal cost. Technology is now a tool to differentiate yourself from your competitors, increase your margins, and open up new markets.

Small investments, big payoffs

By committing only a small portion of your budget to R&D, you can now leverage plug and play cloud services to experiment and test Proofs of Concept (POCs) with potentially huge bottom line payoffs. For large companies, utilizing POCs requires a shift away from risk-averse waterfall development to an agile approach that embraces failure as a path to innovation.

Enterprise organizations can learn from entrepreneurs, who’ve been natural first adopters when it comes to cloud solutions. Startups aren’t afraid of using pay-as-you-go services to build quick POCs for validating markets, testing technical features, and collecting customer feedback. Far more comfortable with agile development, successful early stage companies like Effectual customer Warm Welcome are adept at taking calculated risks and viewing failure as an invitation for learning.

In contrast, enterprise customers may struggle at first to embrace an agile approach and accept failure as an opportunity for insight. As established businesses, they also make the mistake of assuming reputation alone will ensure successful outcomes and often downplay the importance of customer feedback. However, this changes quickly after companies gain experience with POCs and understand the value of testing their assumptions before committing to building out final solutions.

POC vs MVP: What’s the difference?

A Proof of Concept is the first phase of designing a software application. A POC allows you to quickly solve a business challenge for a specific use case in order to:

  • Evaluate tradeoffs
  • Measure costs
  • Test technical functionality
  • Collect user feedback 
  • Determine market acceptance

POCs are timed-boxed (defined by # of hours), with clear KPIs (key performance indicators) for measuring your results. This keeps costs low and provides rapid insights into what changes need to be made before you invest significant resources to scale it.

POCs are rolled out to a controlled, focused group of users (“friends and family”) with the goal of quickly figuring out cost and technical issues. It’s not uncommon to go through 3-4 POCs before finding the one you’re ready to advance. Failure is an accepted and necessary part of this process.

For example, one of our large retail customers has dedicated $4k/month to its backlog pipeline for R&D. At the beginning of the year, we sat down with their team to identify 4-5 business problems the company wanted to tackle. For one particular POC, we developed and tested two different POCs (one cloud-based, one on-premise) before finding a hybrid solution that was the right compromise between cost and functionality.

To minimize risk, they rolled out their hybrid POC to a single store location in order to collect user feedback. Only after making recommended changes did the company commit to moving forward with an MVP at multiple locations across several states. Within 18 months, they have seen a significant return on their investment in both higher sales and increased customer retention. 

A Minimum Viable Product (MVP) is a featured-boxed solution that turns your proven concept into a functional basic product you can test with a wider user base. While it resides outside of a critical business path, an MVP usually requires greater investment and takes longer to evaluate. The goal of an MVP is to:

  • Increase speed to market
  • Establish loyal users
  • Prove market demand
  • Collect broader customer feedback

Organizations of any size can use Proof of Concept to ensure the fast delivery of a final product that meets the needs of customers and provides a measurable return on investment. Learn more about how a POC can drive your business forward.

Have an idea or project to discuss? Contact us to learn more.

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