Are sports organisations really doing POC? And why should they pay for it?
It has become a common trend among (leading) sport organisations to set up innovation strategies to further develop their activities and bring the organisation at a higher level. One of the steps that usually comes along with an innovation strategy is the integration of external solutions and collaborations with companies & startups. To do so, sports organisations often require service providers to start with a proof of concept in order to demonstrate that the solution they are testing is viable and add value to their business. A proof of concept is a common practice in the innovation world, and many early stage startups build their credibility in specific markets by taking part in POCs with high-profile client(s). Such democratized practice requires a lot of time and investment on the start-up side that by nature has limited resources; and these efforts rarely pay off. This is why startups end up struggling to land on their feet.
Should a POC be free of charge or paid? Organisations across industries tend to opt for free-of-charge POCs because it appears natural and sometimes irrelevant to pay for a solution that does not prove valuable in the end. At LaSource, we truly believe that a POC should not be free of charge and that by covering part or full of the start-up’s resources and commitment to the project, the benefits one organise may expect from a POC is way more valuable.
What is a POC (Proof Of Concept)?
According to Collins dictionary, a proof of concept is “the stage during the development of a product when it is established that the product will function as intended.” What does it mean exactly? Basically and for every entrepreneur that wants to create his own business, he/she will first need to prove that his/her idea is feasible and viable in the real world. A proof of concept will serve to meet the following objectives:
verify that the solution solves the problem one is attempting to address,
confirm that the solution is valued by future customers
determine whether or not people will pay for the solution and if they will pay, how much can they pay based on the added value of the solution.
Having said that, a proof of concept should be amongst the very first steps of the solution creation process. It will also enable entrepreneurs to identify potential blocking points and efforts to be done in order to adjust the value proposition and to create the right solution that will fit in the targeted market.
Before POCs: main steps to build business ideas
Ideas do not come from nowhere. Most of the time, they are emerging thanks to problems and issues that have been identified on a defined market. And before working on the idea, the problem has to be found and well analysed to come up with the best idea to solve it. Here are the most important steps one should consider before thinking of the idea:
Define a clear and precise customer segment. Precision is really important. If the segment is too large, the problem might not be applicable to everybody.
Spot a problem for this segment: it is the problem identification and definition. Not every solution has a problem; but every problem has a solution.
Collect insights and confirm the assumptions with problem interviews and different talks with the end consumer.
Problem size estimation - is the problem identified and confirmed worth solving (strategic and resources fit)?
These first steps are mandatory to create valuable, viable and relevant ideas that will become a POC, prototype MVP etc.
A Proof of Concept is not a prototype or an MVP (Minimal Viable Product)
Too many people tend to confuse a PoC with a pilot or a MVP. In fact, they are all linked and part of the same process which is the product creation but they appear at different times of the process.
If we imagine the product creation process as a ladder, then the PoC is the very first step of it. It means that the product concept is feasible and viable. The second step will be the development of a prototype, built to make first tests of the proof of concept. Usually, the prototype is a very simple version of the product that will be tested in order to be modified based on user feedback. In other words, a prototype brings in more tangible specifications and moves the product from a theoretical approach to a more practical one. The third step will be the MVP: once the practical approach has been validated and feedback managed, there will be the first development of the solution in a working and market-ready environment. The product version will be very simple but will reflect the core value of the product to the final users.
Are sports organisations really doing POC?
Considering the real definition of a proof of concept, it appears that most sports organisations are not asking startups to do a POC, but rather a testing of the product or the MVP, depending on the maturity of the startups. But one thing is certain: if we stick to the true definition of a POC, an organisation can’t ask an existing startup with a commercialized solution to do a POC. And this is the main point we want to highlight here:
With the time there has been a misuse of language about what is really a POC (see paragraph above) and it is often heard: “Let’s make a POC first and let’s see how it goes”. The reality is different: the organisation is just asking to test the solution first. In some cases there will be minor changes and some customization to adapt the product to the customers’ needs. But one thing is sure: this is more of a free trial than a proof of concept.
Nowadays, very few sports organisations have skills, time, resources and the adequate culture to launch real proof of concepts. The simple reason for this is that it goes against everything sports organisations have known and have been built upon over the last decade, with the two additional elements of being fully risk-averse by nature and not being a necessity or a priority. POCs are part of a genuine innovation strategy and is all about innovation capabilities. It often comes with a multi-year plan, fundings and relies on a dedicated business unit to work on supporting the development of new solutions that will be beneficial for their organisation. As of now, sports organisations lack appropriate skills and don’t have the resources to push for such initiatives. If they need to remain in the driving seat, the reality is that they rely on third parties and external providers to deliver the rights and the value proposition they are getting the money from. This alternative is risky even though it requires less efforts and it is less time consuming. And when it comes to testing an external solution (whether it is called a POC or not), doing it for free is not a viable option.
Why should sports organizations pay for what they call a POC?
This is a very dividing questions.
At LaSource, we are deeply convinced that organisations within the sports industry (clubs, leagues, federations etc.) should pay startups if they want to test their solution. We have identified three main reasons for this:
The first reason is because sports organisations are not really doing POCs, with all related risks and resources required. They are testing existing products and this is something they should pay for.
The second reason is because startups founders and/or employees will dedicate time and expertise for the sport organisation. A convenient middle ground is to pay for the workforce and third party costs, and not necessarily starting to pay for a software licence. Of course this can be minimized if the solution is on the shelf with very low degree of customization but there will always be time spent on integration, on-boarding, Q&A, and this knowledge and amount of work need to be covered. As we are working daily with startups, we know that they crucially need to generate cash. If they already proved that their solution brings value to big clients, it seems reasonable to charge them for using it.
The third reason lies more on the sport organisation commitment and the added-value it will get from such POC. When identifying a relevant solution for their business, a business unit will never be as involved as they should be and put the adequate time and focus if they are trying it for free. It is really important to have the client’s commitment to ensure that it will work on the product and see the real value. Then the questions around the fair amount for such a test and/or the timeline to execute is something different. At the end, what we usually experience is that should the product drive value on both sides, both parties will always reach a compromise.
To conclude, there is definitely a need for each sport organisation to have an innovation unit to make the interface with the world of startups because most of the time they don’t understand each other and this is where challenges around POC arise. They have to start addressing their “innovation debt” by slowly identifying relevant solutions in the market and by investing to test them. This is the best way to get the most out of it. And little by little they will gain innovation maturity and will be able to come up at an earlier stage to better shape the final product that meets their core needs.
On the startups side, if there is the question of principle - no matter how you do it but you have to get reward from what you deliver - they should not necessarily be rushing towards sports organisations at a very early stage. Perhaps they should make sure to be mature enough, structured and properly equipped from a resource perspective to engage with sports organisations and so getting the necessary credibility and brand positioning they are seeking.