Proof of Value vs Proof of Concept: Understanding the Key Differences

Why PoC and PoV Matter Today like Never Before

The current business environment is characterized by speed, uncertainty and a rise in customer expectations. A product that requires excessive time to be proven might be obsolete before it is launched. The digital transformation project that on paper seems to be a good idea can fail in the implementation stage because the assumptions are not tested in the initial stage.

This urgency to be able to validate ideas more quickly is one of the reasons why PoCs and PoVs have become a very indispensable tool.

An answer to the question is a Proof of Concept:

“Can this be built?”

A Proof of Value provides the answer to the question:

“Is it worth building?”

One of them is concerned with technical feasibility, whereas the other is concerned with business impact.

Both are used by companies to speed up innovation and significantly minimize risk. Their absence or both usually results in stalled projects, budgets squandered, or products that the customers never uptake.

According to the great thinker in management who is Peter Drucker:

• There is no form of doing anything efficiently that should not be done at all.
• A Proof of Value is a way to make sure that you are doing the right thing.
• A Proof of Concept guarantees that you are doing it right.

What Is a Proof of Concept (PoC)?

A Proof of Concept is a small-scale, limited experiment that is intended to answer the question of whether something in particular, technology or feature can really work in practice.

It is not concerned with design, usability, revenue, and customer experience. Rather, a PoC aims at experimenting technical assumptions.

2.1 Purpose of a PoC

The key goals of a PoC are:

• Authenticating the feasibility of underlying technology.
• Finding the optimal technical design or architecture.
• Early detection of technical risks.
• Making sure that it can be integrated with the existing systems.
• It is possible to execute important functions with no failure.

To illustrate, when a retail company is interested in the application of AI to automatically sort products by image, a PoC may determine whether an AI model is capable of achieving a target accuracy of 80 percent using a dataset of a company.

The PoC does not construct an entire AI product or workflow. It merely responds: “Can the AI do this job?

2.2 What a PoC usually consists of.

• A small module or component
• One of the simplest prototypes of the basic technology.
• Experimentation under a limited or mediate environment.
• Characteristics of technical documentation of challenges and dependencies.

2.3 What a PoC does not include

• A polished UI/UX
• Scalability testing Full-scale load testing
• A complete product workflow
• ROI measurement
• Training or induction strategies.
• PoC is an exercise that is entirely technical.

2.4 PoC When to use a PoC by a company.

A PoC is ideal when:

• Technology is untested or new.
• Integration is questionable.
• The team should understand limitations of the system.
• Budgeting must be done using technical validation by the stakeholders.

The features you are developing are very reliant on complicated algorithms, APIs, or hardware.

Indicatively, a PoC may be needed to scale and test latency using a serverless architecture to support an enterprise application.

What Is a Proof of Value (PoV)?

A Proof of Value transcends the feasibility, and is concerned with business outcomes, ROI, user adoption and quantifiable benefits.

A PoV will provide the final question:

Would this solution be worth creating value in investing in?

PoV is even more significant in product strategies in the modern world than PoC because most projects fail not because of technology but because of the absence of actual, proven business value.

3.1 Purpose of a PoV

A PoV aims to:

• Confirm that the solution is a solution to the correct problem.
• Show measurable improvements (less time, less money, more money)
• Determine KPIs at business level.
• Make sure that the stakeholders are aware of quantifiable results.
• Judicate investment and scaling.

3.2 What usually is contained in a PoV.

A constrained version of the solution in real world conditions.

• Comparison of data before and after.
• User feedback
• ROI calculations
• Efficiency or productivity indicators.
• A case on the case of future investments.
• A PoV is more similar to a small-scale deployment, as opposed to a prototype.

3.3 What a PoV does not include

• PoC (that is deep architectural experimentation).
• Full production features
• Corporate branding or marketing interfaces.
• Optimization of final performance.

3.4 In what instances companies ought to apply a PoV.

A PoV is ideal when:

• The stakeholders do not know whether the project is worth investing in.
• Hard data is needed to achieve executive buy-in.
• You need to establish value to investors or partners.
• It may take a lot of change management to solve.
• Market risk is greater than the technical risk.

In the following case, to evaluate the fuel savings and the time reduction in delivery, a logistics company that tests a route-optimization tool may put a PoV on the test with 10 delivery vehicles over two weeks.

Important Disagreements between PoC and PoV.

Despite the fact that PoC and PoV have the same aim of trying to prove their ideas, there are major differences between them in terms of concentration, implementation, and anticipated results.

4.1 Objective

PoC: Technical feasibility: Check.

PoV: Validate business value

4.2 Risk Being Reduced

PoC: Technical risk

PoV: Financial risk and strategic risk.

4.3 Stakeholders

PoC: Technical leaders, architects, engineering team.

PoV: Business leaders, investors, customers, product managers.

4.4 Metrics

PoC: Accuracy, performance, stability of architecture.

PoV ROI, efficiency, customer satisfaction, cost savings.

4.5 Duration

PoC: Typically 1-4 weeks

PoV: 412 weeks based on data and deployment.

4.6 Cost

PoC: Lower cost, limited scope

PoV: More expensive as deployed in the real world.

4.7 Outcome

PoC: Determination on the workability of the technology.

PoV: Decision on the scaling of solution.

The difference can be easily remembered by the following:

PoC proves you can build it.

PoV demonstrates that you must make it.

Real-World Example: PoC vs PoV

We will consider a real-life example of a healthcare analytics platform.

5.1 PoC Example

A hospital desires to develop an AI model on predicting patient readmission.

A PoC might:

• Train a model on the existing patient records.
• Test according to whether predictions are 70% accurate.
• Determine some technical issues.
• Authenticate the sufficiency of the data.

Outcome:

There is technology, but not any business choice.

5.2 PoV Example

Then, the hospital operates a PoV in which:

• The model is implemented with regard to a small population of doctors.
• They incorporate predictions into their day-to-day jobs.
• The hospital has a metric of reduction in readmission cases.
• User feedback is collected

Outcome:

Value can be demonstrated when the number of readmissions is reduced by 15 percent or higher.

• The reasons why companies think these are mistaken.
• It is common in many organizations to consider PoC and PoV as synonymous. This confusion leads to:
• Developing PoCs that attempt to quantify ROI- something that can not be done.
• Operating PoVs without determining feasibility.
• Wasting money on PoCs which were to be mere experiments.
• Creating un-businessed prototypes.

According to a McKinsey study, approximately 70 percent of the digital transformation initiatives fail, not because they were not technology-based, but because of the absence of proven value and inadequate planning regarding the adoption.

This is the significant fact:

Technology does not necessarily bring success alone. Value does.

The Question of When You Need an PoC or PoV

The following is a fast decision-making model:

Choose a PoC when:

• This is an experiment with a new technology.
• You team is not clear on how to construct something.
• You will have to test algorithms, APIs or integrations.
• You have a need to confirm assumptions prior to investing.

Choose a PoV when:

• The technology has been proven already.
• The stakeholders require a demonstration of quantifiable value.
• You desire to have funds or concession.
• This is a strategic and not a technical problem.

Sometimes You Need Both

An average to highly complex project will usually have both a PoC and a PoV, usually in that sequence.

Benefits of Running a PoC

A well-executed PoC can:

• Minimize unforeseen technical problems.
• Introduce sanity in architecture decisions.
• Save teams months of rework
• Develop trust in the tech decision-makers.
• Enhance the quality of estimation.
• Eliminate expensive errors at the initial stages of development.

A PoC will assist organizations to avoid risk and in the long run, the chances of successful execution of a product will be enhanced.

Benefits of Running a PoV

A PoV gives deeper understanding that is necessary to:

• Securing budget approvals
• Decreasing the strategic uncertainty.
• Giving evidence of actual changes.
• Develop confidence with shareholders or management.
• Knowledge of the actual potential of the product.
• Getting all the stakeholders on similar business objectives.

A PoV is what causes the difference between the project that appears valuable and the one that demonstrates its value.

The role of TAV Tech Solutions in supporting companies that have PoCs and PoVs

At TAV Tech Solutions, we assist organizations in different industries in organizing their innovation paths with properly designed PoCs and PoV.

We treat PoCs in the following manner:

• Rapid prototyping
• Controlled environments testing.
• Deep technical assessment
• Architecture recommendations
• Feasibility analysis

The way we do PoVs involves:

• Little actual implementation.
• KPI and ROI tracking
• User adoption planning
• Continuous evaluation
• Strategic recommendations

Our opinion is that to be successful in digital transformation, it is necessary to have technical and business clarity, which is exactly what our processes are created to provide.

Common Mistakes to Avoid

• Error 1: PoC as a Mini Product.

Teams take unnecessary time on UI, branding or features, this wastes resources.

• PoVMistake 2: Operating a PoV without a PoC.

This results in deployment failure whereby technical feasibility had not been tested.

• Mistake 3: Confusing Metrics

There are no technical metrics that can demonstrate business value, or business metrics that can demonstrate technical feasibility.

• Attack 4: Failure to engage the correct stakeholders.

A PoC will require engineers and a PoV will need product managers and business owners.

• Mistake 5: Failure to specify the criteria of success.

Both PoC and PoV have to possess quantifiable results.

Strategic Reasoning of Being Aware of the Difference

In a business environment where there is an increasing demand to shorten the innovation cycle, as well as reduce budgets, one of the smartest decisions a business can make is differentiating PoC and PoV.

Steve Jobs once said:

You have to begin with the customer experience and go backwards to the technology, rather than vice versa.

The technology is the beginning of a PoC.

A PoV begins with the customer and the company.

They are both important, however, their functions vary.

Concluding thoughts: PoC and PoV in one to be the most effective

Being innovative does not imply speculation. It concerns regulated validation.

Proof of Concept will make you sure that the technology will work.

A Proof of Value makes you sure that the investment will be successful.

Performed correctly, they make a formidable alliance that would lead the organizations to successful digital transformation.

At TAV Tech Solutions, we assist corporations to find their way through these phases in a clear, accurate and very practical manner. No matter what you are trying to prove: a new AI solution, modernization of an old system, or a brand-new digital product, finding the right direction (PoC or PoV) can save months of work and get significant value.