"Skate fast over thin ice", Getting the most out of a Proof of Concept (PoC)
The dreaded Proof of Concept (PoC), how did we get in this mess! The word tends to bring initial joy and then pain to smaller companies trying to partner with larger ones. The concept is simple, a big company has the customer base and wants to find some new tech. A small company needs to prove that these customers will like and use their software when offered by the corporate. This issue, especially for the small company is what happens next.
After that initial joy stage, where you see your firm finally getting to the magic scale state where your margins really start to cover the fixed costs, there is the PoC. The main issue here is that a large PoC is going to pull resources and energy that could have been used to improve the product or grow other channels. I always counsel small companies to think hard about some of the downsides of doing a PoC (multiple meetings, extra paperwork, extra risk assurance, new staff, change of strategic focus and possible conflicts with other potential customers). But there is that possible elusive big deal at the end…
So you want to give it a go, well you might as well maximise the effort! A few things to keep in mind as you embark on this to get the most out of the PoC.
Know the game and play it well: This is a test for everyone. Both sides are in the dating stage looking to see how this might play out should they move forward. The trick is getting past this test and onto the next stage. Don't try to do too much!
Key outcomes:
Do customers care, will they buy/use it?
Are there any major personality problems on both sides?
Are there any “show stoppers” with the company/software?
Who are the key executives that will make the decision to move forward?
Things to avoid
Scope creep, keep it simple. More scope, more chance for slip-ups
Dragging on too long, similar to scope creep a long PoC squanders momentum. People lose interest and move to the newer, sexier PoC.
Oversharing, there is a tendency to want to share your kit across the whole company. Try to avoid this as you may open yourselves to new questions that you don’t want to answer at this stage.
End-game commercials, you are trying to see if customers care at this point, avoid getting into commercial discussions at this stage, these will come but don’t show your hand too early.
Tech integration discussions, again these will come down the road but you really don’t want to spend weeks talking to IT folks about ETL, APIs, AWS and Single Sign-On. All of these will derail the purpose of moving fast.
Doing PoCs for free, there is a temptation to give it away and then try to recoup the costs later. It is better to ask for some money to cover your costs. This gets you past the procurement process and sets the proper tone that you are a potential partner.
Build the business case during the PoC: You are ultimately going to need a proper business case to get the deal going. Use the PoC to build the business case together with your sponsor in the firm.
Key outcomes:
Define the “size of the prize”, why is this PoC more important than others. If we get this right, what is the potential impact on the business?
What are key assumptions that we need to test (Conversion rates, paid vs. free, customer profiles etc.)?
Who is actually going to sign this off, what is the process, how long will it take?
Things to avoid:
Elaborate financial models: keep the conversations very simple, don’t let a spreadsheet get in the way of good business discussions at this point.
Getting locked in: Don’t agree to any volumes, potential revenues etc. Push back by saying “These are the kinds of questions that we will be testing together during the PoC”.
Expanding too fast: There is an obvious tendency to think that if we can do this for one area of the company, we can do this across many more. Technically this is pretty easy but don’t forget the stakeholder management.
For many reasons, the PoC is the tool of choice for large companies to have initial engagements with small tech companies. Having said that, try to make the most out it and remember. The trick is to get to the next stage!
