For startups and scaleups, demonstrating your solution’s validity is crucial to success in the marketplace.

You’ve likely heard terms such as “testbed” and “living lab” thrown around when people discuss innovation. While both serve as proper validation environments, they’re different tools designed to answer different questions at different stages of your startup’s growth journey. Choosing the wrong validation approach (or skipping validation entirely) can cost your startup months of development, thousands of dollars in wasted resources, and the competitive edge you need to scale.

The stakes are even higher for startups targeting enterprise customers or seeking significant investment. Investors need proof that your solution performs as required in the market. Enterprise organizations also won’t risk their operations on unproven technologies either. This is why validation is vital, as it ensures credibility in your solution, speeds up your sales timeframe, and supports your organization’s growth (Source: TrustRadius).

Testbeds can be seen as a blanket term in many regards, encompassing any infrastructure used to test technology, even living labs. So in many cases, the lines between the two can be quite blurred. In this article, we are differentiating a testbed from a living lab by defining a testbed as access to data centre environments.

This article defines the differences between testbeds vs living labs to help you understand when to use each approach and how to fit it into your solution’s roadmap. By doing so, you’ll be able to make smarter decisions about where to invest your startup’s resources.

Let’s begin with the key differences.

Key Differences: Testbeds vs Living Labs

Although testbeds and living labs help support a solution’s validity, reliability, and scalability, these environments provide different aspects in their approach, scope, and the type of insights/data they offer. Understanding these differences will help you choose the right testing environment for validating your solution’s support.

Environment

Testbeds operate within a controlled environment, where variables within the test can be easily managed and manipulated. Think of your standard R&D lab. The lab itself is a highly controlled environment that offers minimal opportunity for outside variables to affect the outcome of the test. For example, suppose an IoT-based startup wanted to test their sensor’s ability to work in a specific network condition. In that case, a testbed environment reduces the amount of exposure to unpredictable scenarios in the real world. It can provide the exact network conditions needed.

A living lab, however, takes your solution and deploys it in a real-world environment with all the potential unpredictable outcomes. Looking back at the same IoT sensor company, if they were to test their devices in a real-world environment, they would be installed in actual warehouses or smart buildings. Daily, these sensors would be used by real employees in real-world settings, often with spotty Wi-Fi. This doesn’t sound like the best testing environment, but the unpredictability here is precisely the point, as it reveals how your solution performs within real-world operating conditions.

User Involvement and Feedback

One of the key differences between testbeds vs living labs is how users participate in the testing process.

Within a testbed environment, there’s little to no user involvement. A startup would often run scripted tests and utilize automated testing protocols, as the focus is on the technical performance of the solution rather than user experience testing. In fact, most testing involves simulated user scenarios in a testbed environment. Take, for example, a fintech startup testing its payment processing algorithm. In this example, the startup stress tests their solution to gain an understanding of how much their payment processing algorithm can handle by simulating thousands of transactions.  This testing doesn’t involve real customers (because obtaining thousands of customers for this purpose would be complex). It focuses solely on the technical performance of the solution.

Living labs, on the other hand, engage with real end-users during the testing process. Real customers would use your product throughout the testing, providing your startup with ongoing feedback about usability, revealing potential pain points and unexpected use cases that you may not have considered. Let’s say the same fintech startup is now in a living lab. They might partner with a small business to process actual transactions over a longer period, learning how transaction behaviours differ from the fintech’s original assumptions. They might also collect feedback on how employees use the interface and engage with the payment processing solution.

Stage of Product Development

Your solution’s maturity often determines which validation approach is most suitable.

Testbeds are often better for early-stage development when you’re proving technical concepts. At this stage, your startup may be trying to determine if the core technology works, and you’re fixing bugs, optimizing algorithms, and verifying your engineering assumptions before exposing the product to real users.

Living labs are designed more for solutions that have cleared the technical hurdles and are ready for market validation. At this stage, a startup knows its solution works from an “engineering” perspective. Now, they need to determine if it can perform in real-world environments, if people will use it, how it can connect with existing workflows and/or solutions, and which business model makes sense. For example, a health tech startup would use a testbed to prove the accuracy of their diagnostic algorithm, then move their solution to a living lab to understand how doctors, nurses, clinicians, and healthcare IT teams integrate it into their patients’ care and internal operations.

Types of Data and Insight Outputs

What you learn from each environment differs between testbeds vs living labs.

Testbed environments focus on generating technical and quantitative data such as performance metrics, processing speeds, accuracy measurements, scalability limits, and resource costing. In this environment, your startup will receive clean datasets that demonstrate whether your solution meets the technical requirements. A cleantech company developing a water purification solution may utilize a testbed to conduct endurance testing to determine if its software solution can operate continuously without failure or a decline in performance.

Living labs, in contrast, provide a more complex dataset that combines technical performances with behavioural, qualitative, and contextual insights. In a living lab environment, your startup would figure out how people use your product, what barriers are preventing adoption, how your solution fits within an organization’s operational processes/tech stack, and if any unexpected value propositions emerge. For example, the water purification startup mentioned might learn that their technology works great in a living lab, but the installation is too complicated, maintenance schedules don’t align with current routines, or that a different market segment shows more interest.

Risk Levels and Resource Commitment

Testbeds provide lower-risk validation and more controlled expenses. Given that you’re working in a controlled environment with very little to no external exposure, any failures are contained and easy to address, as you’re not dealing with potential liability or reputational risk. With the right guardrails set up limiting data centre usage, the investment required for a testbed project is minimal compared to a living lab and typically requires access fees, equipment, and technical support, making testbeds an attractive option for startups at the proof-of-concept stage.

Living labs bring higher stakes with higher rewards. Testing in a real-world environment with real users may require additional liability coverage, clearly outlined terms with participants, effective project management, on-site technical support, increased access fees, and the proper infrastructure to complete the testing. However, the information gathered while doing a living lab project is far more valuable for investors and potential customers. A successful living lab project is a powerful sales tool that provides demonstrated credibility and increases future customer adoption.

Timeframes

Given that the environment is controlled, testbeds provide rapid iteration cycles. A startup can run multiple testing scenarios, adjust, and retest all within a few days. This speedy testing is valuable during early development when startups are still exploring different approaches and need quick technical feedback to optimize their solution.

Living labs need longer engagements to generate helpful insights. Real-world testing takes time as end-users need to adapt and integrate a startup’s solution into their operational routines. A living lab test may take 3-12 months or more to bake fully. However, this extended timeline produces information about long-term usage, any maintenance needs, and new user requirements that shorter-term testing couldn’t provide.

Testbeds vs. Living Labs

When to Use Each Approach: Testbeds vs Living Labs

Deciding between a testbed and a living lab needs to align with your startup’s current development stage and the problems you need answered.

When a Testbed Environment Makes Sense

Proving Technical Validation

Suppose your startup is still answering general questions about whether your solution works at all. In that case, a testbed environment provides the controlled environment you need. For example, a robotics company designing an autonomous navigation system needs to demonstrate that its collision avoidance algorithm has no latency issues before deploying it in a real-world environment.

Testing Software Performance

Working within a testbed environment allows startups to validate their software solutions with ease and at scale. From simulating users to ensuring scalability, testing software performance is crucial in the early stages of development, before scaling and testing in a real-world environment.

Learn more about CENGN’s Software Validation Services.

Optimizing Performance Before Market Testing

Even if your solution works, validating it in a testbed helps you sharpen its performance before real-world exposure. For example, a cybersecurity startup may stress-test its threat detection algorithm against hundreds of simulated attacks to measure response times. With this data, they can then identify ways to further improve the algorithm’s performance, ultimately providing the best solution possible before presenting it to real customers.

When a Living Lab Makes Sense

Ensuring Market Fit and User Adoption

Once technical performances are proven, it’s about ensuring proper market fit and adoption. Testing in a living lab environment truly reveals how easily users can adopt your solution and whether they believe it solves their problem(s). An AI-scheduling platform may have met the technical specs in a testbed environment, but a living lab test could reveal that employees avoid using it because it doesn’t integrate with existing calendars.

User Experience Refinement

Real people often interact with products in unforeseen ways that may never emerge in a controlled test environment. A fintech app that seemed intuitive to your development team may not be so intuitive to actual small business owners, employees, or other end users. Living labs catch where users get confused, what features they ignore, and if there are any unexpected ways of using the solution.

Testing Hardware or Physical Systems

It’s one thing to test if a hardware solution works in a controlled environment, but it’s another to see how it’ll operate in a real-world environment. Living labs enable you to test where your hardware solution will be deployed to understand how it’ll operate. For example, a drone delivery startup could have tested its drones in a controlled lab, but that’s not the same as testing them in a real environment with various weather conditions, temperatures, and obstacles.

Demonstrating Marketplace Readiness

For startups targeting enterprise customers, a successful living lab project becomes an incredibly powerful sales tool. Buyers want proof that your solution works in environments similar to theirs and need to ensure that it will integrate with existing systems and operations. A living lab partnership with a recognized organization presents an opportunity to enhance your sales and marketing efforts.

When a Hybrid Approach Makes Sense

For most startups, a hybrid approach is usually the optimal strategy if used in the correct sequence. Use a testbed environment to prove technological validity, then transition to a living lab to prove market fit, user adoption, and that any hardware or physical systems work as required in a real-world environment.

Benefits for Business Growth

Investing in proper validation with testbeds and living labs isn’t just about proving your technology works. It’s also about building sustainable and scalable growth. Here’s how smart validation translates into business advantages.

Speeding Up Funding and Investments

Most investors want to minimize risk as much as possible, and validation data provides them with exactly that. Testbed results demonstrate technical performance against traditional benchmarks, giving deep-tech investors confidence that your solution is worth investing in. Meanwhile, living lab projects that demonstrate solid user adoption, engagement, and real-world applications address common market risk questions that general venture capitalists typically prioritize. For example, a cleantech startup that can demonstrate several months of living lab data, proving 30% energy savings and a net promoter score of 9/10, has a much stronger pitch than competitors who offer only projections. Validating and proving your solution works means higher valuations, better investment/lending terms, and quicker deal closings.

Shortening Sales Cycles

Many enterprise buyers move slowly because they’re risk-averse and prone to “defensive decision making” (Source: Forrester). However, when you can provide proof that your solution has been validated in an accredited testbed or living lab environment, you can increase your sales cycles. This essentially eliminates the “proof of concept” phase from your sales process. Instead of spending 6-12 months in a pilot with each potential customer, you can start conversations with demonstrated results. An ag-tech company that has completed a living lab project on a real-world farm can approach other agricultural organizations or farms with documented outcomes, case studies, and references from past customers. This proof collapses sales cycles and improves win rates.

A Foundation for Market Credibility, Differentiation, and Premium Pricing

In more competitive marketplaces, providing credibility differentiates you from other solution providers. Being able to say that you validated your solution in a CENGN Testbed or through the CENGN Living Lab Initiative signals to buyers that your startup is serious about growth and is capable of providing results. These credentials can be featured in marketing materials, press releases, sales collateral, and conversations to help establish trust with buyers. For B2B companies, credibility is key and often justifies premium pricing, as buyers are more likely to pay more for de-risked solutions (Source: ScienceDirect).

Don’t think of validation as an expense, but rather an investment in your technology’s technical capability and business opportunities.

Testbeds vs Living Labs: Your Validation Journey with CENGN

Understanding the differences between testbeds and living labs is only the beginning. Now, it’s time to act. CENGN offers Canadian startups and scaleups access to both validation approaches to help you prove your solution is reliable and scalable for future growth.

CENGN’s Testbed Environment for Controlled Validation

If you’re ready to validate your software solution’s technical performance in a controlled environment, CENGN’s testbed provides secure network, compute, and storage infrastructure. You’ll also get access to customizable testing services and expertise to ensure your solution is optimized and scalable. Whether you’re testing network performances, security measures, or your solution’s ability to scale, CENGN helps you get to market faster while decreasing development costs and risks.

Real-World Validation through the CENGN Living Lab Initiative

When your solution’s technical aspects are proven, the CENGN Living Lab Initiative allows you to validate in real-world environments. Currently comprised of seven living labs targeting five different sectors across Canada, each lab is designed to validate solutions in real-world conditions. You’ll also get access to cutting-edge network infrastructure, testing expertise, and high-end facilities to ensure your living lab project goes smoothly and provides the results you need to talk to potential investors and future customers.

Take the Next Step

Whether you need a controlled testbed environment for your software solution or a real-world living lab environment, CENGN provides the infrastructure, assets, expertise, and funding to help Canadian tech startups and scaleups grow with confidence.

About the Author

Being the Content Marketing Lead at CENGN, Richard researches and shares information on emerging technologies such as 5G, IoT, and Artificial Intelligence.

Through his experience in writing and support for technological growth, he’s always interested in sharing how new technologies are shaping the lives of fellow Canadians.

More by Richard Galazzo