Part 3 of 3:Constructing the Optimal Industrial IoT Proof of Concept
April 4, 2018
Beyond the PoC
Juan Muldoon | Principal @one_muldoon April 2018
Our goal with this series is to help the sales and business development teams of software companies structure proof of concepts that lead to higher likelihoods of success with industrial and energy companies. In our first piece, we covered Aligning for PoC Success. The second part delved into finding the right budget and Pricing the project. Finally, in this third installment of our 3-part series we will cover transitioning from PoC to contracts.
One of the most difficult parts to achieve PoC success is “scaling down appropriately”. From a technical / product / solution perspective, the vendor should make the pilot simple enough to integrate with the customer’s systems and specific enough to solve a problem effectively. This balancing act between scope and strength can be difficult, especially against the need to broaden the funnel of potential use cases for your product. Parts 1 and 2 should help you scale down. Now, let’s talk about scaling up and moving from a successful Proof of Concept to revenue generation.
First, a word of caution. Over the last few decades, one malady has plagued many promising startups in the energy and industrial sectors: Death by Pilot. In this familiar chain of events, one promising (but unpaid or underpaid) proof of concept sparks the customer’s interest in another use case and gives way to another pilot program with vague success metrics. Combined with a long sales cycle for each customer and each use case, costs incurred with every pilot, no promise (and little prospects) for a more formal revenue-generating relationship, and little progress made with other potential customers given limited bandwidth issues, this is a recipe for disaster. Don’t mistake a pilot (or a long string of pilots) for a partnership.
While it is understandable if your customer wants to try several PoC’s to find the right fit between your technology and their needs, make sure that you are getting closer to full contract, that you are not drifting too far from your business model, and that you are being paid appropriately. If not, move on and focus on customers that are going to be closer to your business’ core.
Before full roll-out (and ideally before or as part the pilot), it’s important to qualify the potential. Spend some time and resources with market research and customer interviews along the way to vet the potential value of a pilot: there’s a big difference between a $100K pilot, a $1M contract and a $10M contract.
With that in mind, here are four keys we’ve learned are crucial to go beyond proof of concept to successful commercial relationships in energy and industrial IoT:
1. Communicate progress: The path from proof of concept to contract is paved with metrics. Hitting the previously-defined milestones for success during the PoC — and delivering the type of value that turns your customer’s “lightbulbs” on — will fuel the process. The best PoC integrations set a clear cadence for communicating that progress. While you don’t want to overburden your potential customer with constant check-ins (especially if the progress is
marginal), nobody wants the outcome to be a surprise. Remember that you have two key stakeholders (IT & business side), and that both will want to see relevant results.
2. Be flexible, but keep your eyes on the prize: If all goes well, your customer will want to broaden the scope of the deployment / reach / impact of your technology on the organization. As these conversations come up, your customer may want you to offer more and more — from tweaks and edits to new functionalities, plugins, features, and automations. There is great value to building a product map so close to your customers’ needs… however, remember that the pilot’s goal is to lead to a paying customer, not necessarily to redefine your business or your re-engineer your product. How to solve these seemingly at odds priorities? Leave crumbs along the way. Remain flexible with your product and enable the full deployments to encompass additional features. Focus on proving immediate value through the proof of concept stage (even with less “bells and whistles”), and be prepared to deliver a premium service with formal adoption.
3. Begin planning for next steps early: After a successful pilot program, you will need to lean on your champions to navigate the next steps: negotiating pricing, setting the structure for the ongoing relationship, laying the groundwork for operational and systems integration, and coordinating with legal teams (which takes time). If you are diligent about communicating progress as we outline in #1 above, you have a better chance of building the “on-ramps” as you go so that you are ready to scale more effectively when you cross the PoC finish line. As we mentioned in the first piece, many pieces of the organization need to be aligned. Coordination with your champions (on both business and IT / OT fronts) goes a long way.
4. Seamless transition and integration: There is nothing more frustrating than a great pilot that works at a micro level but would never work at scale. The energy and industrial verticals are built on scale, complexity, nuances, and proprietary systems. Dedicate resources to integrate and scale seamlessly: they will be increasingly valuable as they reduce your “pilot to revenue” friction, shorten your overall sales cycle, and accelerate your momentum. From data ingestion to hardware integration, seamless transitions between PoC and full scale deployment can be a significant differentiator in the quest to prove value.
If you have a great product that can address a significant pain point or demonstrably create value for your customer (and your pricing is reasonable), your company should be able to present attractive proof of concept opportunities for many energy and industrial companies. That being said, it is very difficult to deliver value through the PoC and scale effectively to a commercial relationship beyond the initial “testbed” use cases. You must communicate progress, balance immediate value and longer term potential, and maintain engagement from your champions to reach a full commercial relationship.
Above all, remember that the goal of your PoC is to prove value and ultimately turn sales into revenue. Remain focused on execution — everything else rests on that.