aalto demolish the status quo in entrepreneurial education 090511
TRANSCRIPT
Demolishing the Status Quo in Entrepreneurial Education
I Write a Blog www.steveblank.com
This Talk is Based OnBusiness Model GenerationFour Steps to the Epiphany
The Lean Startup
This Talk
• What’s a Startup?• Search versus Execution• Entrepreneurship As a Mgmt Science• B-Schools = Large company mgmt• Incubators = the transition• E-School = the conclusion
First -What’s A Startup?
Six Types of Startups
Startup
Lifestyle Startups Work to Live their Passion
• Serve known customer with known product
• Pay for their passion
Small BusinessStartup
Small Business StartupsWork to Feed the Family
• Serve known customer with known product
• Feed the family
Small BusinessStartup
Exit Criteria- Business Model found- Profitable business- Existing team< €100K in revenue
Small Business StartupsWork to Feed the Family
• known customer known product
• Feed the family
Small BusinessStartup
- Business Model found- Profitable business- Existing team< $10M in revenue
Small Business Startups
• 5.7 million small businesses in the U.S. <500 employees
• 99.7% of all companies
• ~ 50% of total U.S. workershttp://www.sba.gov/advo/stats/sbfaq.pdf
ScalableStartup
Large Company
Scalable Startup
Goal is to solve for: unknown customer and
unknown features
Search
ScalableStartup
Large Company
Exit Criteria- Business model found- Total Available Market > €300m- Can grow to €50/year
Scalable StartupBorn to Be Big
Search Execute
ScalableStartup
Large Company
- Total Available Market > $500m- Company can grow to $100m/year- Business model found- Focused on execution and process- Typically requires “risk capital”
Scalable Startup
• In contrast a scalable startup is designed to grow big• Typically needs risk capital• What Silicon Valley means when they say “Startup”
Search Execute
ScalableStartup
Large CompanyTransition
Founders depart- Operating executives- Professional Mgmt- Process- Beginning of scale
The Transition – Founders Leave
BuildSearch Execute
ScalableStartup
€3 to 30M Acquisition
Buyable StartupBorn to Be Big
Goal is to solve for: Internet, Mobile, Gaming Apps
Search Sell
ScalableStartup
€3 to e0M Acquisition
Buyable Startup
Goal is to solve for: Internet and Mobile Apps
Search Sell
Sell to larger company
ScalableStartup
Large Company
- Business Model found- i.e. Product/Market fit- Repeatable sales model- Managers hired
What’s A Startup?
A Startup is a temporary organization used to search for a repeatable and scalable business model
Search Execute
Transition Large Company
ScalableStartup
Sustaining Innovation
• Existing Market / Known
customer• Known product feature needs
Large Company Sustaining InnovationInnovate or Evaporate
Large Company Disruptive Innovation
New Division Transition Large
Company
Disruptive Innovation• New Market• New tech, customers, channels
Large Company Disruptive Innovation
New Division Transition Large
Company
Disruptive Innovation• Build• Acquire - IP - Talent - Product - Customers - Business
Large Non-Profit
Social Startup
Social Entrepreneurship Startups
• Solve pressing social problems• Social Enterprise: Profitable• Social Innovation: New Strategies
Each of these startups require different skills
They Can Not Be Taught the Same Way
Search Versus Execution
Why Accountants Don’t Run Startups
ScalableStartup
Large CompanyTransition
Business Model found- customer needs/product features found i.e. Product/Market fit- Found by founders, not employees- Repeatable sales model- Managers hired
The Search for the Business Model
Startups Search and Pivot
ScalableStartup
Large CompanyTransition
- Business Model found- Product/Market fit- Repeatable sales model- Managers hired
- Cash-flow breakeven- Profitable- Rapid scale- New Senior Mgmt~ 150 people
The Search for the Business Model The Execution of the Business Model
Startups Search, Companies Execute
ScalableStartup
LargeCompanyTransition
Traditional Accounting- Balance Sheet- Cash Flow Statement- Income Statement
The Execution of the Business Model
Metrics Versus Accounting
ScalableStartup
LargeCompanyTransition
Startup Metrics- Customer Acquisition Cost- Viral coefficient- Customer Lifetime Value- Average Selling Price/Order Size- Monthly burn rate- etc.
Traditional Accounting- Balance Sheet- Cash Flow Statement- Income Statement
The Search for the Business Model The Execution of the Business Model
Metrics Versus Accounting
ScalableStartup
LargeCompanyTransition
Sales- Sales Organization- Scalable- Price List/Data Sheets- Revenue Plan
The Execution of the Business Model
Customer Validation Versus Sales
ScalableStartup
LargeCompanyTransition
Customer Validation- Early Adopters- Pricing/Feature unstable- Not yet repeatable- “One-off’s”- Done by founders
Sales- Sales Organization- Scalable- Price List/Data Sheets- Revenue Plan
The Search for the Business Model The Execution of the Business Model
Customer Validation Versus Sales
ScalableStartup
Large CompanyTransition
Product Management- Delivers MRD’s- Feature Spec’s- Competitive Analysis- Prod Mgmt driven
The Execution of the Business Model
Customer Development VersusProduct Management
ScalableStartup
Large CompanyTransition
Customer Development- Hypothesis Testing- Minimum Feature Set- Pivots - Founder-driven
The Search for the Business Model The Execution of the Business Model
Customer Development Versus Product Management
Product Management- Delivers MRD’s- Feature Spec’s- Competitive Analysis
ScalableStartup
Large CompanyTransition
The Execution of the Business Model
Engineering Versus Agile Development
Engineering- Requirements Docs.- Waterfall Development- QA - Tech Pubs
ScalableStartup
Large CompanyTransition
Agile Development- Continuous Deployment- Continuous Learning- Self Organizing Teams- Minimum Feature Set- Pivots
The Search for the Business Model The Execution of the Business Model
Engineering Versus Agile Development
Engineering- Requirements Docs.- Waterfall Development- QA - Tech Pubs
ScalableStartup
Large CompanyTransition
Business Plan- Plan describes “knowns”- Known features for line extensions- Known customers/markets- Known business model
The Execution of the Business Model
Startups Model, Companies Plan
ScalableStartup
Large CompanyTransition
Business Model- Unknown customer needs- Unknown feature set- Unknown business model- Model found by iteration
The Search for the Business Model
Startups Model, Companies Plan
The Execution of the Business Model
- Plan describes “knowns”- Known features for line extensions- Known customers/markets- Known business model
ScalableStartup
Large CompanyTransition
Startups Are Not Small Versions of Large Companies
BuildSearch Execute
Yet our curriculums assume they are – we teach that the knowledge is interchangeable
Entrepreneurship as a Management Science
E-School instead of B-School
Business as a Management Science
• 1601 East India Company
• 300 years of companies without MBA credentials
• 1908 Harvard first MBA
ScalableStartup
Large CompanyTransition
- Execution- Strategy- Accounting- Products- Engineering- Management- Administration
Business School
Business School Topics
Large Company
Business School
Business School Courses
Courses- Managerial Finance/Accounting- Managing Groups and Teams- Financial Accounting- Operations- Modeling for Optimization- Global Value Chain Strategies
ScalableStartup Transition
B-School Results?
• U.S. corporations went from local to national then international
• Cadre of experienced managers to match
• Experts on finance and growth (Dupont/GM)
B-Schools made the 20th Century the American business century
Business School Focus on Large Company Strategies
Execution versus Search
Business School Limitations
• Most Professors consult for large corporations
• Most believe startups are just smaller versions of large companies
• Most B-school entrepreneurship programs are side-shows
Irony:21st Century Job Growth will Come
from New Ventures
Incubators a Reaction to the lack of Practical
University Entrepreneurship
• 1959 Josephy Mancuso - Batavia Industrial Ctr.
• 1996 IdeaLab
• 2005 Y-Combinator
• 2011 100+ Incubators world-wide
Startup Incubators
• Hands-on (experience vs. theory)
• Goal: create a company and jobs
• Full-time residential, stipend-based program
• Curriculum: product development + best
practices
What’s Missing?
A Repeatable Methodology Not Just War Stories
Startups Are Not Smaller Versions of Large Companies
Large Companies Execute Known Business Models
Startups Are Not Smaller Versions of Large Companies
Startups Search for Unknown Business Models
E-School
• Complete curriculum with Hands-on emphasis
• Goal: methodology for startup creation
• Can be taught anywhere
- University
- Incubator
- Remotely
• Curriculum: about the search for a business
model
The Business Model:
Any company can be described in 9 building blocks
CUSTOMER SEGMENTS
which customers and users are you serving?
which jobs do they really want to get done?
VALUE PROPOSITIONS
what are you offering them? what is that getting done for them? do they care?
CHANNELS
how does each customer segment want to be reached? through which interaction
points?
CUSTOMER RELATIONSHIPS
what relationships are you establishing with each segment? personal? automated? acquisitive?
retentive?
REVENUE STREAMS
what are customers really willing to pay for? how?
are you generating transactional or recurring revenues?
KEY RESOURCES
which resources underpin your business model? which assets are essential?
57
KEY ACTIVITIES
which activities do you need to perform well in your business model? what is
crucial?
KEY PARTNERS
which partners and suppliers leverage your model?
who do you need to rely on?
COST STRUCTURE
what is the resulting cost structure? which key elements drive your costs?
60images by JAM
customer segments
key partners
cost structure
revenue streams
channels
customer relationships
key activities
key resources
value proposition
sketch out your business model
sketch out your business models
But,Realize They’re Hypotheses
9 Guesses
Guess Guess
Guess
Guess
GuessGuess
Guess
GuessGuess
Customer Development
Get Out of the BuildingThe founders
^
Customer DevelopmentThe Search For the Business Model
CompanyBuilding
Customer
Discovery
Customer
Validation
Customer Creation
Pivot
• Stop selling, start listening• Test your hypotheses• Continuous Discovery• Done by founders
Customer Discovery
CustomerDiscovery
CustomerValidation
CompanyBuilding
CustomerCreation
Test Hypotheses:• Product
• Market Type• Competition
Turning Hypotheses to Facts
Test Hypotheses:• Problem
• Customer• User• Payer
Test Hypotheses:• Channel
Test Hypothese
s:• Problem
• Custome
r• User• Payer
Test Hypotheses
:• Demand
Creation
Test Hypotheses:• Channel
Test Hypotheses:• Product• Market
Type•
Competitive
Test Hypotheses:• Pricing Model /
Pricing
Test Hypotheses:• Size of
Opportunity/Market• Validate Business Model
Test Hypothese
s:• Channel
• (Custom
er)•
(Problem)
Test Hypothese
s:• Problem
• Custome
r• User• Payer
Test Hypotheses
:• Demand
Creation
Test Hypotheses:• Channel
Test Hypotheses:• Product• Market
Type•
Competitive
Test Hypotheses:• Pricing Model /
Pricing
Test Hypotheses:• Size of
Opportunity/Market• Validate Business Model
Test Hypothese
s:• Channel
• (Custom
er)•
(Problem)
Customer Developme
nt Team
Agile Developme
nt
The Minimum Viable Product (MVP)
• Smallest feature set that gets you the most …
- orders, learning, feedback, failure…
The Pivot
• The heart of Customer Development
• Iteration without crisis
• Fast, agile and opportunistic
Pivot Cycle Time Matters
• Speed of cycle minimizes cash needs
• Minimum feature set speeds up cycle time
• Near instantaneous customer feedback drives feature set
The Pivot
A Pivot is the change of one or more Business Model Canvas Components
The Pivot
A Pivot is the change of one or more Business Model Canvas Components
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Strong clinical data
TrainingMaintenanc
eConferences
CME courses
Product DevelopmentClinical trials
Operating CostsMarketing Costs
Capital Equipment Sales and disposable
itemPer use fees
Product Developmen
tIP
Clinical trialsFDA
Publishing
IP Leading doctors
Technical Expertise
Leading doctors
Key Opinion Leaders3rd party
manufacturersDistributors
Breast Cancer Foundations
ACOGACS
Doctors:Earlier
detectionPrice
Accuracy
Patients:Radiation
FreeNon-Invasive
How Does This Really Work?
Stanford Lean LaunchPad Class
How Does This Really Work?
Stanford Lean LaunchPad Class
8 Weeks From an Idea to a Business
Pivot ExampleRobotic Weeding
Talked 75 Customers in 8 Weeks
Our initial plan
Confidential
20 interviews, 6 site visits…We got OUR Boots dirty
WeedingVisited two farms in Salinas Valley to better understand problem
Interviewed:• Bolthouse Farms, Large Agri-Industry in Bakersfield
• White Farms, Large Peanut farmer in Georgia• REFCO Farms, large grower in Salinas Valley• Rincon Farms, large grower in Salinas Valley• Small Organic Corn/Soy grower in Nebraska
• Heirloom Organics, small owner/operator, Santa Cruz Mts• Two small organic farmers at farmers market
• Ag Services of Salinas, Fertilizer applicator
MowingInterviewed:
• Golf: Stanford Golf course • Parks: Stanford Grounds Supervisor, head of maintenance and
lead operator (has crew of 6)• Toro dealer (large mower manufacturer)
• User of back-yard mowing system• Maintenance Services for City of Los Altos
• Colony Landscaping (Mowing service for stadiums)
Business Plan Autonomous Vehicles for Mowing & Weeding
We reduce operating cost
- Labor reduction- Better
utilization of assets (eg mow or
weed at nights)- Improved
performance (less rework, food
safety)
Mowing- Owners of
public or commercially used green
spaces (e.g. golf courses)
- Landscaping service provider
Weeding- Farmers with
manual weeding operations
Dealers sell, installs and
supports customer
Co. trains dealers, supports dealers
- Mowing Dealers
- Ag Dealers
- Innovation- Customer Education
- Dealer training
Dealer discount COGS seek a 50-60% Gross Margin
Heavy R&D investment
- Dealers (Mowing and
Ag)- Vehicle OEMs
(John Deere, Toro, Jacobsen,
etc)
- Research labs
Asset saleOur revenue stream derives from selling the
equipment
Engineers on Autonomous
vehicles, GPS, path-planning
Found weeding in organic crops is HUGE problem; 50 - 75% of costs
Crews of 100s-1000
Back-breaking task
(Ilegal) labor harder to get
1-5 weedings per year/field
$250-3,500 per acre and increasing
Food contamination risk
Decision to make – mowing vs weeding
Application If ROI is < 1 yr they will
buy
Labor costs significant?
Autonomous would solve
problem?
TAM
Mowing of large fields
Yes.Professionally
run organizations
Yes Yes Adjusted up toxxx
Weeding in Agriculture
Agri Industry: YES!
Large Growers: Yes
Small Growers: No
YES! for organic crops
They are spending $500/ac!
Not necessarily
Key need is weed vs. crop differentiation
TAM increased to $2.6 B (Total
organic)
Target Market (organic
specialty) 162 M/yr
18%/yr growth
Autonomous vehicles WEEDING
We reduce operating cost
- Labor reduction (100 to 1)
- Reduced risk of contamination
- Mitigate labor availability
concerns
- Low density vegetable growers
- High density vegetable growers
- Thinning operations
- Conventional vegetables
Dealers sell, installs and
supports customer
Co. trains dealers, supports dealers
- Ag Dealers- Ag Service providers
- Innovation- Customer Education
- Dealer training
Dealer discount COGS seek a 50-60% Gross Margin
Heavy R&D investment
- Ag Dealers- Ag Service
providers
- Research labs
Asset saleOur revenue stream derives from selling the
equipment
Engineers on Machine VisionTwo problems:- Identification- Elimination
1 Week – 1 CarrotBot
Confidential
CARROTBOT
Machine Vision data collection platform Monochrome & Color
Cameras Laser-line sweep
(depth measurement)
Encoders (position/velocity)
Onboard data acquisition & power
CarrotBot 1.0
The Business Plan Canvas Updated
• Research Labs
• Equipment Manufacture
rs• Distribution
Network• Service
Providers
• Technology Design
• Marketing• Demo and
customer feedback
• Cost Reduction
• Remove labor force
pains• Eliminate
bio-waste hazards
• IP – Patents• Video Classifier
Files• Robust Technology
• Farming conventions.
• Demo, demo, and demo!!
• Proximity is paramount
• Organic Farmers
• Weeding Service
Providers• Conventional
Farmers• Dealers
• Direct Service• Indirect
Service• … then
Dealers• Asset Sale
• Direct Service with equipment
rental• … then Asset
Sale
Value-Driven
Visit Highlights
Above: Organic Carrots, 7wks. Top right: Conventional carrots
Bottom Right: Very weedy. Will require multiple passes of hand weeding
Visit Highlights
Carrot vs. WeedsDue to small root systems, carrots have no chance against weeds
Visit Highlights
Organic Broccoli, closely cultivated. Weeds close
to plants are hand-picked
Visit Highlights
State of the Art in Weeding Technology for Organic Crops
Customer Hypothesis
Hypothesis Confirmed• Growers interested in own
equipment • Industrial (10,000s of acres)
• Large (1,000s of acres)• Willing to pay $100k for one unit
• Smaller growers (100s of acres) usually subcontract the labor
services or rent equipment
• All purchases through local dealers• Customer service is essential
Pre-Test
Post-Test
Customer Map #1 – Industrial Growers
Example: Bolthouse Farms – Large Industrial Carrot Producer – 8K acres/yr• Equipment
Operator
• Director, Ag Technology
• Justin Grove, interviewed
• VP, Growing Operations
• CFO, CEO (Jeff Dunn)
• Local Farm Mgr• Cliff Kirkpatrick, visited
Equipment Operator
Cliff, Farm Mgr
Customer Map #2 – Service Providers
Example: Ag Services – Service Provider, Salinas Valley
• Equipment Operator
• Service Mgr
• ?? (service mgr’s boss)
Me (left), Marty (middle, Service Mgr), Doug (right, Grower)
• Grower
The Business Plan Canvas Updated
• Research Labs
• Equipment Manufacture
rs• Distribution
Network• Service
Providers
• Technology Design
• Marketing• Demo and
customer feedback
• Cost Reduction
• Remove labor force
pains• Eliminate
bio-waste hazards
• IP – Patents• Video Classifier
Files• Robust Technology
• Farming conventions.
• Demo, demo, and demo!!
• Proximity is paramount
• Mid/Large Organic Farmers
• Agricultural corporations• Weeding
Service Providers
• Mid/Large Conventional
Farmers
• Direct Service• Indirect
Service• … then
Dealers
• Direct Service with equipment rental
• ($1,500/d; 120d/yr )• Low density:
$1,500/d• High density:
$6,000/d
Value-Driven
World Ag Expo interviews:the need is real and wide spread
• 10+ interviews at show– Everyone confirmed the need– Robocrop, UK based, crude
competitor sells for $171 K
• Revenue Stream– Mid to small growers prefer a
service– Large growers prefer to buy, but
OK with service until technology is proven
– Charging for labor cost saved is OK, as we provide other benefits (food safety, labor availability)
Confidential
The Business Plan Canvas Updated
• Research Labs
• Equipment Manufacture
r• Distribution
Network• Service
Providers• 2 or 3 Key
Farms
• Technology Design
• Marketing• Demo and
customer feedback
• Cost Reduction
• Remove labor force
pains• Eliminate
bio-waste hazards
• IP – Patents• Video Classifier
Files• Robust Technology
• Farming conventions.
• Demo, demo, and demo!!
• Proximity is paramount
• Mid/Large Organic Farmers
• Agricultural corporations• Weeding
Service Providers
• Mid/Large Conventional
Farmers
• Direct Service• Indirect
Service• … then
Dealers
• Direct Service with equipment rental• Low density:
$1,500/d• High density:
$6,000/d
Value-Driven• R&D
• Bill of Materials• Training &
Service• Sales
Autonomous weeding - Final
We reduce operating cost
- Labor reduction (100 to 1)
- Reduced risk of contamination
- Mitigate labor availability
concerns
- Low density vegetable growers
- High density vegetable growers
- Thinning operations
- Conventional vegetables
Direct- Provide high
quality service at competitive price
Direct - Alliance with
service providers- Eventually sell through dealers
- Innovation- Customer Education
- Dealer training
Costs for service provisionCOGS seek a 50-60% Gross Margin
Heavy R&D investment
- Ag Service providers
- Research Institutes (eg UC
Davis, Laser Zentrum
Hannover)
- 3-4 key farms
Service provision- Charge by the acre with modifier according to
weed density - Eventually move to asset sale
Engineers on Machine VisionTwo problems:- Identification- Elimination
MammOpticsFinal project presentation for E 245 Winter 2011
MammOpticsInitial Idea
Breast cancer
Leading cause of cancer in women190,000 diagnosis every year US
41,000 deaths every year USIncreasing diagnosis rates
Mammography
15%-25% false negatives rate25% false positives rateRequires X-ray radiation
Low resolution
Novel technology based on RF-modulated optical
spectroscopy
MammOptics
- Earlier detection- Non-radiative- Non-invasive
MammOpticsTechnology Comparison
RiskInvasiveness
Resolution
False Pos.
False Neg.
Device Cost
Time Require
d
MammOptics
Mammography
High High .6 cm 25% 30% 20-50k 20 min.
MRI Medium Medium .1 cm 70% 5% 1000k 45 min.
Ultra-Sound Very Low Very Low >.6 cm >30% >40% 5-15k 20 min.
I.I.T.Y.I.W.H.T.K.Y
MammOpticsBusiness Model Canvas 1 of 4
Radiation-freeEarlier detection
Non-invasive
Pioneering radiologists
inhospitals
Direct sales to hospitals
Strong clinical data
TrainingMaintenanc
e
Product DevelopmentClinical trials
Operating Costs Capital equipment sales and disposable
item
Product Developmen
tIP
Clinical trialsFDA
IP Leading doctors
Technical Expertise
HospitalsLeading doctors3rd party
manufacturersDistributors
MammOpticsBusiness Model Canvas 1 of 4
Radiation-freeEarlier detection
Non-invasive
Pioneering radiologists
inhospitals
Direct sales to hospitals
Strong clinical data
TrainingMaintenanc
e
Product DevelopmentClinical trials
Operating Costs Capital equipment sales and disposable
item
Product Developmen
tIP
Clinical trialsFDA
IP Leading doctors
Technical Expertise
HospitalsLeading doctors3rd party
manufacturersDistributors
Initi
al guess
Initi
al guess
Initi
al guess
Initi
al guess
MammOpticsBusiness Model Canvas 1 of 4
Test:
Customer segment
Value proposition
Finding the right customerFrom radiologists to gynecologists
MammOpticsExcursions into hospitals
Leading doctors
Patients
Hospital Managers
Technicians
Debra Ikeda Jason Davies
Jafi Alissa Lipson
Sunita Pal6 women >40 8 women <40
Alicia X-ray mammograp
hy
Paul BillingsHolly V. Gautier
MammOpticsHospital purchasing decision tree
MammOpticsHospital purchasing decision tree
Hospitals
Complex purchasing
decision tree. Several
saboteours
MammOpticsPrivate practice purchasing decision tree
MammOpticsPrivate practice purchasing decision tree
Private practice
Faster adoption rate
Attractive value
proposition
✔
Pioneering Doctors
HospitalsOB/GYNs
PCPs
Direct Sales to doctors
Strong clinical data
TrainingMaintenanc
e
Product DevelopmentClinical trials
Operating CostsCapital Equipment
Sales and disposable item
Product Developmen
tIP
Clinical trialsFDA
IP Leading doctors
Technical Expertise
Hospitals (Capital
Spending Committee)
Leading doctors3rd party
manufacturersDistributors
Research Hospitals
Doctors:Earlier
detectionPrice
Accuracy
Patients:Radiation
FreeNon-Invasive
MammOpticsBusiness Model Canvas 2 of 4
Pioneering Doctors
HospitalsOB/GYNs
PCPs
Direct Sales to doctors
Strong clinical data
TrainingMaintenanc
e
Product DevelopmentClinical trials
Operating CostsCapital Equipment
Sales and disposable item
Product Developmen
tIP
Clinical trialsFDA
IP Leading doctors
Technical Expertise
Hospitals (Capital
Spending Committee)
Leading doctors3rd party
manufacturersDistributors
Research Hospitals
Doctors:Earlier
detectionPrice
Accuracy
Patients:Radiation
FreeNon-Invasive
MammOpticsBusiness Model Canvas 2 of 4
How do we get to our customer?
Need sensitivity and specificity
Getting to our customerThe world of direct sales and medical marketing
MammOpticsInterviews
Breast Cancer Advocacy Groups
OB/GYNs
FDA/Clinical Trials
Medical Sales
Be Bright Pink
Jennifer GloverDr. Cindy WooDr. Jags Powers
Dr. Aaron ShuvkanKatrina Bell
Tanay DudhelaJed Hwang
Phyllis Whitely
Carl Simpson
MammOpticsMarketing
Access to ACOG by former
member
Strong influence on doctors via
ACOG Standard of Care Strongly
influenced by KOLs
MammOpticsMarketing
Researchers conducting important
clinical trialsResearcher
s with numerous publication
s
Outsourced survey
research
Researchers with
strong peer recommend
ations
MammOpticsMarketing
Focus on prominent journals Need two big
publications
Choose KOL as Principal
Investigators (PI)
MammOpticsMarketing
Effective method for educating doctors
Doctors required to
attend workshops
Workshop must be
approved by ACOG
Taught by objective medical experts
MammOpticsMarketing
ACOG Annual Clinical
Meeting Miami Breast
Cancer Conference
Opportunity for
feedback from
doctors
MammOpticsMarketing
Trusted information source for patients
Critical opinion
leader for technology adoption
Access to media outlets
MammOpticsMarketing
IndividualDoctors
Purchasing Administrato
rs
High value medical products
(e.g. cardiovascular
stents)
Commodity medical products
(e.g. latex gloves)
• Doctor education• Direct feedback from
doctors• Very expensive
• No doctor education
• No customer feedback
• Inexpensive
Direct Sales
Distributors
MammOpticsChannel Strategies and Costs
Individual Doctors
Purchasing Administrato
rs
Channel Strategies and CostsMammOptics
5 dedicated sales people$150,000 each/year
Hire nurses or technicianswith established
relationships
Early adopter feedback
Continue with core group of sales people
Use women’s healthcare equipment distributor
Already established network of customers
Sales strategy 1 Sales strategy 2
MammOpticsPricing Strategy
Equipment Lease model
Per-use model
Consumable
Cost of the device
Service per year
Per-use fee
Consumable
$50,000
$3,000
0
0
$5,000
$10,000
0
0
$5,000
0
$50
0
$25,000
0
0
$20
MammOpticsPricing Strategy
Equipment Lease model
Per-use model
Consumable
Cost of the device
Service per year
Per-use fee
Consumable
$50,000
$3,000
0
0
$5,000
$10,000
0
0
$5,000
0
$50
0
$25,000
0
0
$20
Approved by
customers and
investors
ACOGACS
Doctor specialty
committee
Hospital Administrati
on
Technician
RadiologistMammography
MammOpticsCustomer Workflow
Current market
Insurance
ACOGACS
Doctor specialty
committee
Hospital Administrati
on
Technician
RadiologistMammography
MammOpticsCustomer Workflow
Current market
But what would happen if we replace mammograph
y?
Insurance
ACOGACS
Doctor specialty
committee
Hospital Administrati
on
Technician
Radiologist
Mammography
MammOpticsCustomer Workflow
Breast Radiologists
Technicians Hospitals
Loss of jobs
Loss of jobs Eliminates loss leader
Puts emphasis on biopsies
Insurance
ACOGACS
Doctor specialty
committee
Hospital Administrati
on
Technician
Radiologist
Mammography
MammOpticsCustomer Workflow
Insurance
ACOGACS
Doctor specialty
committee
Hospital Administrati
on
Technician
Radiologist
Mammography
MammOpticsCustomer Workflow
InsuranceSame cost as mammography
($140)Reduced number of biopsies
($1000)
ACOG/ACSImproved healthcare(mammography weak
technique)
Insurance
ACOGACS
Doctor specialty
committee
Hospital Administrati
on
Technician
Insurance
Radiologist
Mammography
MammOpticsCustomer Workflow
Insurance
Doctor specialty
committee
Hospital Administrati
on
Technician
RadiologistMammography
MammOpticsCustomer Workflow
ACOGACS
MammOptics
Patient
PCPOB/GYN
Insurance
Doctor specialty
committee
Hospital Administrati
on
Technician
Radiologist
Mammography
MammOpticsCustomer Workflow
ACOGACS
MammOptics
Patient
PCPOB/GYN
Hospital Administrati
on
Technician
Radiologist
Mammography
MammOptics
Patient
PCPOB/GYN
PCP OB/GYNsIncreased revenue
More complete patient care
PatientImproved healthcare
Comfort
MammOpticsRevenue
ACOGACS
Doctor specialty
committee
Hospital Administrati
on
Technician
Insurance
Radiologist
Mammography
MammOpticsCustomer Workflow
MammOptics
Patient
PCPOB/GYN
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Strong clinical data
TrainingMaintenanc
eConferences
CME courses
Product DevelopmentClinical trials
Operating CostsMarketing Costs
Capital Equipment Sales and disposable
itemPer use fees
Product Developmen
tIP
Clinical trialsFDA
Publishing
IP Leading doctors
Technical Expertise
Leading doctors
Key Opinion Leaders3rd party
manufacturersDistributors
Breast Cancer Foundations
ACOGACS
Doctors:Earlier
detectionPrice
Accuracy
Patients:Radiation
FreeNon-Invasive
MammOpticsBusiness Model Canvas 3 of 4
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Strong clinical data
TrainingMaintenanc
eConferences
CME courses
Product DevelopmentClinical trials
Operating CostsMarketing Costs
Capital Equipment Sales and disposable
itemPer use fees
Product Developmen
tIP
Clinical trialsFDA
ReimbursementPublis
hing
IP Leading doctors
Technical Expertise
Leading doctors
Key Opinion Leaders3rd party
manufacturersDistributors
Breast Cancer Foundations
ACOGACS
Doctors:Earlier
detectionPrice
Accuracy
Patients:Radiation
FreeNon-Invasive
MammOpticsBusiness Model Canvas 3 of 4
Learned how to reach the customer
How do we build a company based on this?
Building the companyThe backstage of a medical device company
MammOpticsInterviews
FDA Clinical Trials
Manufacturing
Venture Capitalists
Reimbursement
Stanford Statistics Steve
AxelrodMarga Ortigas-
WedekindNick Mourlas
Don Archambault
Shannon BergstedtAli Habib
Dana MeadBill Starling
Doctors/Sales
Dr. Aron Shuftan
Jed HwangMichael J.
Nohr
Manufacturing
MammOpticsPartners
Choose manufacturin
g facility close to home
Manufacturing Reimbursement
MammOpticsPartners
Difficult to get coverage
for new product.
Manufacturing
MammOpticsPartners
Reimbursement PartnersMammOptics
Insurances
CPT Codes$75-$150
MammOpticsPartners
Manufacturing
FDA Clinical Trials
Reimbursement
510K vs. PMALargest cost
Biggest financial risk
Clinical Trials
12/4/2009
Stage 1Pilot trials
50 patients$600K
MammOptics
6 months
FeasibilityComparison
with mammograp
hy
Clinical Trials
12/4/2009
MammOptics
6 months15 months
Stage 1Pilot trials
Stage 2Interim trials
500 patients$7.2M
Prove superior safety-
efficacy & sensitivity
Clinical Trials
12/4/2009
MammOptics
6 months15 months
Stage 1Pilot trials
Stage 2Interim trials
24 months
Stage 3FDA
pivotal trials1500
patients$20.5M
FDA class II, 510(K) w/
trialsFocus on
superiority & economic end-
points
Clinical Trials
12/4/2009
MammOptics
6 months15 months
Stage 1Pilot trials
Stage 2Interim trials
Stage 3FDA
pivotal trials
Stage 4Post-
market studies2000 patients$26.8M
Specific Cat III CPT/ACP CodesMarket traction24 months24 months
Clinical Trials
12/4/2009
MammOptics
6 months15 months
Stage 1Pilot trials
Stage 2Interim trials
Stage 3FDA
pivotal trials$600K
$7.2M
$20.5M
$26.8M
Stage 4Post-
market studies
24 months 24 months
Clinical Trials
12/4/2009
MammOptics
MammOpticsPartners
MammOpticsPartners
Manufacturing
FDA Clinical Trials
Reimbursement
Financial timeline
Funding
$10M
$15M
2012
Series A $3.5
MM
Cash
Reserv
eC
lin
ical
Mil
esto
nes
$5M
Initialize
Desig
n
Mil
esto
nes
Reg
ula
tory
/ IP
M
ilesto
nes
Q1 Q2 Q3 Q4
2013Q1 Q2 Q3 Q4
2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016
Series B $9 MM
System
2017Q1 Q2Q1 Q2 Q3 Q4
2018Q3
Launch
Series C $30.5 MM
$30M
$20M
Regulatory / Clinical
Series D $35
MM
M&A / IPO $50 MM
$40M
151 12/4/2009
Proof of
Concept
Pilot Studi
es
IC and Process
ing Patents
Marketa
ble Product
Provisional
Patent
Beta-Versi
on Testin
g
Application and System Patents
IRB / IDE
Clinical Results
Second Release
Initial Product Launch
Specific Codes (Cat. I CPT /
APC)
Non-Specific Codes
1st Release Test
2nd Release Test
Publication
Post-Market Clinical Studies
Beta Prototype
US Interim Trials
FDA – Class II – 510 (k) with Clinical
Trials
Publication
Financial / Operations Timeline
Cat III
CPT
US Pivotal Clinical Trials
Laboratory
Prototype
Technology
Licensing
MammOpticsMammOptics
Financial timeline
$10M
$15M
2012
Cash
Reserv
eC
lin
ical
Mil
esto
nes
$5M
Initialize
Desig
n
Mil
esto
nes
Reg
ula
tory
/ IP
M
ilesto
nes
Q1 Q2 Q3 Q4
2013Q1 Q2 Q3 Q4
2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016 2017Q1 Q2Q1 Q2 Q3 Q4
2018Q3
$30M
$20M
$40M
152 12/4/2009
Proof of
Concept
Provisional
Patent
Financial / Operations Timeline
Technology
Licensing
MammOpticsMammOptics
$10M
$15M
2012
Series A $3.5
MM
Cash
Reserv
eC
lin
ical
Mil
esto
nes
$5M
Initialize
Desig
n
Mil
esto
nes
Reg
ula
tory
/ IP
M
ilesto
nes
Q1 Q2 Q3 Q4
2013Q1 Q2 Q3 Q4
2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016
System
2017Q1 Q2Q1 Q2 Q3 Q4
2018Q3
$30M
$20M
$40M
153 12/4/2009
Proof of
Concept
Provisional
Patent
Beta-Versi
on Testin
g
Laboratory
Prototype
Beta Prototype
Technology
Licensing
Financial / Operations Timeline
Pilot Studi
es
MammOpticsMammOptics
$10M
$15M
2012
Series A $3.5
MM
Cash
Reserv
eC
lin
ical
Mil
esto
nes
$5M
Desig
n
Mil
esto
nes
Reg
ula
tory
/ IP
M
ilesto
nes
Q1 Q2 Q3 Q4
2013Q1 Q2 Q3 Q4
2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016
Series B $9 MM
System
2017Q1 Q2Q1 Q2 Q3 Q4
2018Q3
$30M
$20M
$40M
154 12/4/2009
IC and Process
ing Patents
Marketa
ble ProductBeta-
Version
Testing
Application and System Patents
IRB / IDE
Beta Prototype
Financial / Operations Timeline
Pilot Studi
es
Regulatory / Clinical
Laboratory
Prototype
MammOpticsMammOptics
$10M
$15M
2012
Cash
Reserv
eC
lin
ical
Mil
esto
nes
$5M
Desig
n
Mil
esto
nes
Reg
ula
tory
/ IP
M
ilesto
nes
Q1 Q2 Q3 Q4
2013Q1 Q2 Q3 Q4
2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016
Series B $9 MM
System
2017Q1 Q2Q1 Q2 Q3 Q4
2018Q3
Series C $30.5 MM
$30M
$20M
Regulatory / Clinical
$40M
155
IC and Process
ing Patents
Application and System Patents
IRB / IDE
Cat III
CPT
Second Release
1st Release Test
US Interim Trials US Pivotal Clinical Trials
Publication
Financial / Operations Timeline
Pilot Studi
es
MammOpticsMammOptics
$10M
$15M
2012
Cash
Reserv
eC
lin
ical
Mil
esto
nes
$5M
Desig
n
Mil
esto
nes
Reg
ula
tory
/ IP
M
ilesto
nes
Q1 Q2 Q3 Q4
2013Q1 Q2 Q3 Q4
2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016 2017Q1 Q2Q1 Q2 Q3 Q4
2018Q3
Launch
Series C $30.5 MM
$30M
$20M
Regulatory / Clinical
Series D $35
MM
$40M
156 12/4/2009
Clinical Results
Second Release
Initial Product Launch
Non-Specific Codes
2nd Release Test
Publication
US Interim Trials
FDA – Class II – 510 (k) with Clinical
Trials
Publication
Financial / Operations Timeline
US Pivotal Clinical Trials
MammOpticsMammOptics
$10M
$15M
2012
Cash
Reserv
eC
lin
ical
Mil
esto
nes
$5M
Desig
n
Mil
esto
nes
Reg
ula
tory
/ IP
M
ilesto
nes
Q1 Q2 Q3 Q4
2013Q1 Q2 Q3 Q4
2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016 2017Q1 Q2Q1 Q2 Q3 Q4
2018Q3
Launch
$30M
$20M
Regulatory / Clinical
Series D $35
MM
M&A / IPO $50 MM
$40M
12/4/2009
Clinical Results
Initial Product Launch
Specific Codes (Cat. I CPT /
APC)
Non-Specific Codes
Publication
Post-Market Clinical Studies
FDA – Class II – 510 (k) with Clinical
Trials
Financial / Operations TimelineMammOpticsMammOptics
$10M
$15M
2012
Series A $3.5
MM
Cash
Reserv
eC
lin
ical
Mil
esto
nes
$5M
Initialize
Desig
n
Mil
esto
nes
Reg
ula
tory
/ IP
M
ilesto
nes
Q1 Q2 Q3 Q4
2013Q1 Q2 Q3 Q4
2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016
Series B $9 MM
System
2017Q1 Q2Q1 Q2 Q3 Q4
2018Q3
Launch
Series C $30.5 MM
$30M
$20M
Regulatory / Clinical
Series D $35
MM
M&A / IPO $50 MM
$40M
158 12/4/2009
Proof of
Concept
Pilot Studi
es
IC and Process
ing Patents
Marketa
ble Product
Provisional
Patent
Beta-Versi
on Testin
g
Application and System Patents
IRB / IDE
Clinical Results
Second Release
Initial Product Launch
Specific Codes (Cat. I CPT /
APC)
Non-Specific Codes
1st Release Test
2nd Release Test
Publication
Post-Market Clinical Studies
Beta Prototype
US Interim Trials
FDA – Class II – 510 (k) with Clinical
Trials
Publication
Financial / Operations Timeline
Cat III
CPT
US Pivotal Clinical Trials
Laboratory
Prototype
Technology
Licensing
MammOpticsMammOptics
MammOpticsBusiness Model Canvas 4 of 4
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Online
Strong clinical data
TrainingMaintenanc
eConferences
CME courses
Product DevelopmentClinical trials
Operating CostsMarketing Costs
Per use fees
Product Developmen
tIP
Clinical trialsFDA
Reimbursement
Publishing
IP Leading doctors
Technical Expertise
KOLs3rd party
manufacturersDistributors
Breast Cancer Foundations
ACOGACS
Clinical trial designer
Doctors:Earlier
detectionPrice
AccuracyImmediate
Results
Patients:Radiation
FreeNon-Invasive
MammOpticsBusiness Model Canvas 4 of 4
Earlier detectionNon invasive
PriceAccuracy
Immediate Results
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Online
Strong clinical data
TrainingMaintenanc
eConferences
CME courses
Product DevelopmentClinical trials
Operating CostsMarketing Costs
Per use fees
Product Developmen
tIP
Clinical trialsFDA
Reimbursement
Publishing
IP Leading doctors
Technical Expertise
KOLs3rd party
manufacturersBreast Cancer Foundations
ACOGACS
Clinical trial designer
Final iteration of our business model
But… need to think about the big picture…
Radiation-freeEarlier detection
Non invasive
Pioneering Doctors
Hospitals
Direct Sales to hospitals
Strong clinical data
TrainingMaintenanc
e
Product DevelopmentClinical trials
Operating CostsCapital Equipment
Sales and disposable item
Product Developmen
tIP
Clinical trialsFDA
IP Leading doctors
Technical Expertise
HospitalsLeading doctors3rd party
manufacturersDistributors
MammOpticsBusiness Model Canvas 1
Radiation-freeEarlier detection
Non invasive
Pioneering Doctors
Hospitals
Direct Sales to hospitals
Strong clinical data
TrainingMaintenanc
e
Product DevelopmentClinical trials
Operating CostsCapital Equipment
Sales and disposable item
Product Developmen
tIP
Clinical trialsFDA
IP Leading doctors
Technical Expertise
HospitalsLeading doctors3rd party
manufacturersDistributors
Research Hospitals
MammOpticsBusiness Model Canvas 2
Pioneering Doctors
Hospitals
Direct Sales to hospitals
Strong clinical data
TrainingMaintenanc
e
Product DevelopmentClinical trials
Operating CostsCapital Equipment
Sales and disposable item
Product Developmen
tIP
Clinical trialsFDA
IP Leading doctors
Technical Expertise
Hospitals (Capital
Spending Committee)
Leading doctors3rd party
manufacturersDistributors
Research Hospitals
Doctors:Earlier
detectionPrice
Accuracy
Patients:Radiation
FreeNon-Invasive
MammOpticsBusiness Model Canvas 3
Pioneering Doctors
HospitalsOB/GYNs
PCPs
Direct Sales to hospitals
Strong clinical data
TrainingMaintenanc
e
Product DevelopmentClinical trials
Operating CostsCapital Equipment
Sales and disposable item
Product Developmen
tIP
Clinical trialsFDA
IP Leading doctors
Technical Expertise
Hospitals (Capital
Spending Committee)
Leading doctors3rd party
manufacturersDistributors
Research Hospitals
Breast Cancer Foundations
Doctors:Earlier
detectionPrice
AccuracyImmediate
Results
Patients:Radiation
FreeNon-Invasive
MammOpticsBusiness Model Canvas 4
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Strong clinical data
TrainingMaintenanc
eConferences
CME courses
Product DevelopmentClinical trials
Operating CostsMarketing Costs
Capital Equipment Sales and disposable
item
Product Developmen
tIP
Clinical trialsFDA
ReimbursementPublis
hing
IP Leading doctors
Technical Expertise
Leading doctors
Key Opinion Leaders3rd party
manufacturersDistributors
Breast Cancer Foundations
ACOGACS
Doctors:Earlier
detectionPrice
Accuracy
Patients:Radiation
FreeNon-Invasive
MammOpticsBusiness Model Canvas 5
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Strong clinical data
TrainingMaintenanc
eConferences
CME courses
Product DevelopmentClinical trials
Operating CostsMarketing Costs
Capital Equipment Sales and disposable
itemPer use fees
Product Developmen
tIP
Clinical trialsFDA
Reimbursement
Publishing
IP Leading doctors
Technical Expertise
KOLs3rd party
manufacturersDistributors
Breast Cancer Foundations
ACOGACS
Doctors:Earlier
detectionPrice
AccuracyImmediate
Results
Patients:Radiation
FreeNon-Invasive
MammOpticsBusiness Model Canvas 6
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Strong clinical data
TrainingMaintenanc
eConferences
CME courses
Product DevelopmentClinical trials
Operating CostsMarketing Costs
Per use fees
Product Developmen
tIP
Clinical trialsFDA
Reimbursement
Publishing
IP Leading doctors
Technical Expertise
KOLs3rd party
manufacturersDistributors
Breast Cancer Foundations
ACOGACS
Clinical trial designer
Doctors:Earlier
detectionPrice
AccuracyImmediate
Results
Patients:Radiation
FreeNon-Invasive
MammOpticsBusiness Model Canvas 7
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Strong clinical data
TrainingMaintenanc
eConferences
CME courses
Product DevelopmentClinical trials
Operating CostsMarketing Costs
Per use fees
Product Developmen
tIP
Clinical trialsFDA
Reimbursement
Publishing
IP Leading doctors
Technical Expertise
KOLs3rd party
manufacturers(local)
Breast Cancer Foundations
ACOGACS
Clinical trial designer
Doctors:Earlier
detectionPrice
AccuracyImmediate
Results
Patients:Radiation
FreeNon-Invasive
MammOpticsBusiness Model Canvas 8
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Strong clinical data
TrainingMaintenanc
eConferences
CME courses
Product DevelopmentClinical trials
Operating CostsMarketing Costs
Per use fees
Product Developmen
tIP
Clinical trialsFDA
Reimbursement
Publishing
IP Leading doctors
Technical Expertise
KOLs3rd party
manufacturers(local)
Breast Cancer Foundations
ACOGACS
Clinical trial designer
Doctors:Earlier
detectionPrice
AccuracyImmediate
Results
Patients:Radiation
FreeNon-Invasive
MammOpticsBusiness Model Canvas 9
Blog Your Progress
How?
• Customer Development– The Process
• Narrative– Interviews– Surveys– Videos– Prototypes
• Business Model Canvas– Scorekeeping
• Real-time Feedback• Physical Reality Checks
– Skype– Face-to-face
We Made Students Blog Their Progress
It Changed Everything
Interview
Photos Videos
Surveys
Interview& Photos
Competitive Analysis
Key Findings
A/B Test Results
Key Question
Strategy
Business Model Canvas as the Scorecard
ScalableStartup
Large CompanyTransition
Business School Versus Entrepreneurship School
Entrepreneurship School
- Hypothesis testing- Business Model design- Customer Development- Agile Development- Metrics- Venture Finance- Design Thinking
- Execution- Accounting- Products- Engineering- Management- Administrative
Business School
ScalableStartup
Large CompanyTransition
Courses- Lean Launchpad- Customer/Agile Development- Business Model Design- Entrepreneurial Management- Creativity and Innovation- Entrepreneurial Finance- User-centric design
Business School
Business School Versus Entrepreneurship Courses
Entrepreneurship School
Courses- Managerial Finance/Accounting- Managing Groups and Teams- Financial Accounting- Operations- Modeling for Optimization- Global Value Chain Strategies
ScalableStartup
Large CompanyTransition
Courses- Lean Launchpad- Customer/Agile Development- Business Model Design- Entrepreneurial Management- Creativity and Innovation- Entrepreneurial Finance- User-centric design
Business School
Business School Versus Entrepreneurship Courses
Entrepreneurship School
I teach this
E-School
• 20th century focus on physical goods
• East coast manufacturing-centric
• East coast B-School-centric
• 21st century focus on virtual and physical goods and channels
• West coast engineering school-centric
One More Thing
Adopted by the U.S. Government
Thanks
www.steveblank.com