Proof of Concept
Good idea? Prove it!
There's a reason people put their toe into the water of a swimming pool to assess the temperature before they dive in. It prepares them for what's to come. In business, the same approach often saves business opportunity seekers from the shock of unmet expectations.
To validate the fruits of your business, you should use entrepreneurial resources to collect information, and look objectively at yourself, and your existing commitments and resources. Take the pains to collect authentic information, and avoid the temptation to assume that things will work out somehow. Instead, work it out now to ensure you have the ability to meet all requirements.
Call it what you want - but try it small.
There are many expressions that describe the practice of putting your toe into something unknown. Proof of concept, prototype, due diligence, and market testing are but a few terms commonly used but the idea is the same: before you take a major risk, or before you make a big investment in something - try it out. The idea is to try something on a small scale to demonstrate that it will work on a big one.
Proof of concept in everyday business.
One small business owner once said that there are only two mistakes you can make in business: not testing your ideas and not believing the results of the test. Here's a few example of decisions that are best proven before being implemented:
- The new product. Before investing in inventory, test market the product to your existing customers. See what happens.
- The new market. Before opening a new market to your products, consider using a focus group or small direct mail test to 1000 recipients see if the new market responds well enough. Examine the competitors within the market (preferably with financial statements or with a Dun & Bradstreet report) to see what kind of numbers they get in the marketplace. Then ask yourself why you think you can do the same or better.
- The new price. Before effecting the new price, if higher, try promoting it to a small segment of your market first. If sales drop, do the math and see whether you can still survive with the new price at a lower volume. If testing a lower price, test it as a time-limited promotion first. See what happens before you back yourself into a pricing corner.
- The new business. Before launching the new business make sure you've modeled it on paper first. Sure, you can breakeven quickly with the hockey-stick sales projections you've made. But what happens when you shift key sales or costs up 20%? or down 20%? A business model can do wonders for identifying what the important aspects of a new business are.
Many business owners fail to "test" important decisions first because they believe that they "know" the market. Imagine their surprise when they find out that they don't know as much as they thought! The wise business opportunity seeker will always dip their toe into the water to assess the result before they dive in.
