Thursday, February 26, 2009

The pilot test stage

The next “stage” in the product development cycle, and perhaps the most discussed, is the pilot test. At this point you’ve fleshed out your new product idea and concept, and done some basic financial analysis to ensure you can actually deliver the product sustainably. Now it’s time to stick your toe in the water and test that product idea.

The first step in the pilot test is developing a pilot test plan. The MFI must decide which criteria or targets it will use to determine if the test was a success or failure. The criteria or targets chosen will depend on the product. They may include volume of loans in clients or portfolio value, profitability, productivity and efficiency of loan officers, portfolio at risk, time to disburse the loan, etc.

The test plan also delegates responsibilities for actions among members of the pilot test team, which usually includes people from different departments. An illustrative example can be seen in Figure 7. The new product (or product redesign) will affect multiple departments – from audit to finance to credit to human resources.

The plan also describes in writing how the test will be run – i.e., the test protocols. There may be two sets of protocols – pre-test and pilot test. Pre-test protocols may include:

  • Where the test will occur
  • Deadlines for key steps before the test takes place
  • Who is responsible
  • Objectives

Pilot-test protocols may include:

  • Dates of assessments of how the test is running
  • Dates of monitoring checks and evaluation meetings, where criteria projections/targets are measured against actual results
  • Reporting (when and to whom)
  • Dates of go/no-go decision points

One commonly asked question is how long should a pilot test last? In microfinance, defaults tend to come towards the end of the loan term, so ideally a pilot test would last the length of a loan term. Of course, if the MFI is proposing a 5-year housing loan, that isn’t feasible, and a compromise must be made – perhaps a one year test.

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