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Engineering 245 The Lean LaunchPad Lecture 6: Partners Professors Steve Blank, Ann Miura-Ko, Jon Feiber http://e245.stanford.edu/

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Engineering 245 The Lean LaunchPad. Lecture 6: Partners Professors Steve Blank, Ann Miura-Ko, Jon Feiber http://e245.stanford.edu/. value proposition. key activities. customer relationships. key partners. customer segments. cost structure. revenue streams. key resources. channels. - PowerPoint PPT Presentation

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Page 1: Engineering 245 The Lean  LaunchPad

Engineering 245

The Lean LaunchPad

Lecture 6: Partners

Professors Steve Blank, Ann Miura-Ko, Jon Feiberhttp://e245.stanford.edu/

Page 2: Engineering 245 The Lean  LaunchPad

2images by JAM

customer segments

key partners

cost structure

revenue streams

channels

customer relationships

key activities

key resources

value proposition

Page 3: Engineering 245 The Lean  LaunchPad

KEY PARTNERS

which partners and suppliers leverage your model?

who do you need to rely on?

Page 4: Engineering 245 The Lean  LaunchPad

Test Hypotheses: Key Partners

4

Page 5: Engineering 245 The Lean  LaunchPad

What defines a “Partner?”

5

• Shared economics

• Mutual success / failure

• Co-development/invention

• Common customer

But remember - you’re a startup

Page 6: Engineering 245 The Lean  LaunchPad

Why have partners?

6

● Faster time to market

● Broader product offering

● More efficient use of capital

● Unique customer knowledge or expertise

● Access to new markets

Page 7: Engineering 245 The Lean  LaunchPad

Partners – Physical Channels

7

• Strategic alliances

• Joint new business development efforts

• “Coopetition,” (cooperation between competitors)

• Key supplier relationships

Page 8: Engineering 245 The Lean  LaunchPad

Partners – Strategic Alliances

8

• Reduce the list of things your startup needs to build or provide to offer a complete product or service.

• Use partners to build the “whole product”

• using 3rd parties to provide a customer with a complete solution

• complement your core product with other products or services

• Training, installation, service, etc

Page 9: Engineering 245 The Lean  LaunchPad

Partners – Joint Business Development

9

• Joint promotion of complementary products• Share advertising, marketing, and sales programs

• One may be the dominant player• Intel offered advertising fees to PC Vendors

Page 10: Engineering 245 The Lean  LaunchPad

Partners – Coopetition

10

• Joint promotion of competitive products

• Competitors might join together in programs to grow awareness of their industry

• Tradeshows

• Industry Associations

Page 11: Engineering 245 The Lean  LaunchPad

Partners – Key Suppliers

11

• Outsource suppliers• Backoffice, supply chain, manufacturing

• Direct suppliers• Components, raw materials, etc.

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12

Startup mistakeStrategic alliances and joint partnerships

Not needed for EarlyvangelistsAre needed for Mainstream customers

Usually fail

Page 13: Engineering 245 The Lean  LaunchPad

Traffic Partners – Virtual Channels

13

• Long-term agreements with other companies • deliver long-term, predictable levels of customers • “Cross referral” or swapping basis• Paid on a per-referral basis• Partners drive traffic using text-links, with onsite promotions, and

with ads on the referring site• Partners sometimes exchange email lists

Page 14: Engineering 245 The Lean  LaunchPad

Partnership Disaster: Boeing

14

CollaborativeLooked great on paper.

Worst business decision of the 21st century (so far!)

Page 15: Engineering 245 The Lean  LaunchPad

Mobile Location Based ApplicationsCollaborative Partner

15

Page 16: Engineering 245 The Lean  LaunchPad

Managing partners - risks

• Impendence mismatch• Longest of partners schedule becomes your longest item• No clear ownership of customer• Products lack vision – shared product design• Different underlying objectives in relationship• Churn in partners strategy or personnel• IP issues • Difficult to unwind or end

Page 17: Engineering 245 The Lean  LaunchPad

Why Will a Large Company Partner?

• You give them a competitive “leg-up”• In sales • Or “halo-effect”

• You are on their technology road-map• You’re an economic opportunity for them

• potential customer of large company• can leverage their existing products and sales

• Change agent for the large company

You need to understand their motivation

Page 18: Engineering 245 The Lean  LaunchPad

Should I take an investment from a Large Company?

• They are interested in their bottom line, not yours• Their objectives are not to make you a large company• Who’s the sponsor? What’s the motivation?

• Needs to come from the business side• Not the venture side

• Try to get sales deals not investment• Or try to offer warrants based on sales success

Page 19: Engineering 245 The Lean  LaunchPad

Startup Partner Strategies

19

• Don’t confuse partners for Earlyvangelists vs. mainstream• Don’t confuse big company partnering with startup strategy• Find the one that gives you an unfair advantage

– Air Supply strategy

• Recognize you don’t matter to a large partner

Page 20: Engineering 245 The Lean  LaunchPad

Team Deliverable for Next Week

• What partners will you need?• Why do you need them  • Why will they partner with you?• What’s the cost of the partnership?• Talk to actual  partners

• Summarized in a 5 Minute PowerPoint Presentation

Page 21: Engineering 245 The Lean  LaunchPad

Ground Fluor Pharmaceuticals

This is your brain on fluorine

Team: Kiel Neumann (EL)Stephen DiMagno (PI)Allan Green (Mentor)I-Corps 11/15/11

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23

Key Partners

I-Corps 11/15/11

Manufacture

GMP precursor manufacturesGMP cassette manufacturersRadiopharmacies

Clinical Trials

St. Jude Children’s Research HospitalSloan KetteringUCSF

Page 23: Engineering 245 The Lean  LaunchPad

General methodology for

adding fluorine to lead compounds of

interest

The Business Model Canvas

Accessibility (RCY)PuritySpeedPET/SPECTMultiplatformSensitivity (nca)Specific compounds

IPPoP dataRegulatory planUnderstanding of the regulatory process

Contract cGMP precursor manufactureSalary, RentsClinical trials

SOPs for precursors and drugsRecruit clinical sitesIn vivo animal studiesDevelop regulatory plan for pre IND meetingID cGMP CROFund-raising

Nuclear Medicine and Radiology departments

Technical Assistance (Image Atlas)FDA regulatory support

Radiopharmacies

Equipment producers

Prescribing physicians

Radiologist who perform studies

Sales of intermediates

Technology license

Product license (royalty)

Drug developersPharmaceutical development companies

IPPoP data

Radiologists

Technical assistancecGMP manufacturersRadiopharmacies

Direct sales of precursor

Sales of packaged precursor in cassettes

Cassette manufacturers

I-Corps 11/15/11

Page 24: Engineering 245 The Lean  LaunchPad

Food Chain

25

Reagents

• F-dopa iodonium intermediate• F-dopamine iodonium intermediate

GMP Cassette or Components

•ABX•Eckert & Ziegler•GE MX module for TracerLab•Siemens Explora

GMP Compliant Synthesizer

•TracerLab/ GE•Eckert & Ziegler•Siemens Explora•Neoprobe•Synthra

PET Radiopharmacy

distributor

•Siemens PETNet•GE Amersham•Cardinal Health•AAA• Iason

We provide accessibility

Only want GMP precursor in cassettes without development

Could license precursor synthesis for incorporation in cassettes

Require GMP precursor (or cassette) to develop our product with their synthesizer

I-Corps 11/15/11

Page 25: Engineering 245 The Lean  LaunchPad

I-Corps Presentation 11/15 26

GMPPrecursor

Current Income Model

GMPCassette

Finished Imaging Agent

$10’s per cassette $300 per cassetteFinished Imaging AgentFinished

Imaging AgentFinished

Imaging AgentFinished

Imaging AgentFinished

Imaging Agent

$1700 per dose~100 doses/cassette

One time setup $140,000Revenue neutral

thereafter

Licensing fee or nominal royalty

($50) per cassette

$500 fee per dose at existing price structure

PatientsHospitals

GFP GFPGFP

Page 26: Engineering 245 The Lean  LaunchPad

I-Corps Presentation 11/15

Manufacturing Partners

One time setup $50-140K

Contract Manufacture

GMP Precursor

Albany Molecular

Nebraska GMP Facility

SRIInternational

Richmond Chemical

GFP

Page 27: Engineering 245 The Lean  LaunchPad

I-Corps Presentation 11/15 28

GMPPrecursor

Current Income Model

GMPCassette

Finished Imaging Agent

$10’s per cassette $300 per cassetteFinished Imaging AgentFinished

Imaging AgentFinished

Imaging AgentFinished

Imaging AgentFinished

Imaging Agent

$1700 per dose~100 doses/cassette

One time setup $140,000Revenue neutral

thereafter

Licensing fee or nominal royalty

($50) per cassette

$500 fee per dose at existing price structure

PatientsHospitals

GFP GFPGFP

Page 28: Engineering 245 The Lean  LaunchPad

I-Corps Presentation 11/15

Manufacturing Partners

Precursor use license GMP

Cassette

Synthra

SiemensExplora

Eckert&Ziegler

ABX

GFP

Page 29: Engineering 245 The Lean  LaunchPad

I-Corps Presentation 11/15 30

GMPPrecursor

Current Income Model

GMPCassette

Finished Imaging Agent

$10’s per cassette $300 per cassetteFinished Imaging AgentFinished

Imaging AgentFinished

Imaging AgentFinished

Imaging AgentFinished

Imaging Agent

$1700 per dose~100 doses/cassette

One time setup $140,000Revenue neutral

thereafter

Licensing fee or nominal royalty

($50) per cassette

$500 fee per dose at existing price structure

PatientsHospitals

GFP GFPGFP

Page 30: Engineering 245 The Lean  LaunchPad

Customer/Partners

Fee per doseTechnology license

Finished Drug

Iason

AAA

GE Healthcare

Siemens

Cardinal Health

GFP

Page 31: Engineering 245 The Lean  LaunchPad

32

2.2 million doses per year %10 of the market is 200,000 doses $500 per dose = $100 million

Current sales $2 M/year because production is limited and costs are high. Confidential financial Gannt chart prepared

Potential Market

I-Corps 11/15/11

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36

Product Food Chain

I-Corps 11/15/11

Precursor Sale

• F-dopa iodonium intermediate• Subcontracted manufacture (licensed)• Small profit ($10/cassette)

GMP Cassette Sales

• Current price - $300/cassette. One cassette might provide 50-100 doses of finished drug. License precursor incorporation in the cassette.

Drug Production

• Current sales ~ $1000-$1500/dose. Potential manufacturing cost per dose (FDG) $200/dose.

Page 33: Engineering 245 The Lean  LaunchPad

47

ARKA Thermal SolutionHigh Performance Heat Pipe Technology

Ideation/Consulting Firm that offers design and prototyping solutions in Thermal Management

Scan and respond to market needs and provide innovative product solutions.

Offer solutions to industries and organizations proactively by seeking new avenues to utilize heat pipe technology

Page 34: Engineering 245 The Lean  LaunchPad

Week 6 Canvas

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Communication of Design and PrototypesMoney Flow

Physical Product Flows

Business Model(For First Product Idea – LED thermal management module)

Arka Thermal

Manufacturer(Extension)

Joint Venture

Market

Design Sources

Other Potential Markets

Page 36: Engineering 245 The Lean  LaunchPad

What Partners will we need?

• Our partner in the new model is a Thermal Solutions manufacturer who is looking to extend into the heat pipe market.

• We require partners with production and distribution expertise• The distribution of this product also requires access to a

dedicated sales force.

Page 37: Engineering 245 The Lean  LaunchPad

Why will they partner with us?

• Arka Thermal offers design expertise in heat pipe design• Based on its talent, Arka Thermal proposes to offer novel and

high-efficiency heat pipe solutions proactively to the market.

Page 38: Engineering 245 The Lean  LaunchPad

1st Product Idea

LED Thermal Dissipation Module

Offers higher lumen intensity with a longer life enabled by novel thermal dissipation technology.

Replacement of current high lumen incandescent bulbs with LED equivalents without light quality/output compromises.

Offer a novel thermal dissipation technology module that can be used in different LED product families

Page 39: Engineering 245 The Lean  LaunchPad

Cost and Risks

• Arka Thermal The cost of the partnership lies is the design and prototype creation (for pitching purposes)

– Research and Development costs: we need to provide contemporary design that OEMS can incorporate easily in their systems. – Effectiveness: the products needs to be efficient, meet standards and form specifications. The cost in this case is testing, certification and design

upgrades to reflect OEM needs. – Recruiting and maintaining high level talent in ideation and design

The highest risk comes from not responding proactively to market change, or being first mover. Loss of design exclusivity. It is essential that design be protected.

The Manufacturer may choose to work outside of Arka Thermal’s contracts with in-house or other design agencies that offer more benefits

Page 40: Engineering 245 The Lean  LaunchPad

Cost and Risks

• Manufacturer The initial cost of setup and maintaining a product extension. Risk lies in moving into a crowded established market. The market

might not require our services.

Page 41: Engineering 245 The Lean  LaunchPad

Manufacturer

Incentives• Potential increased sales

through joint venture creation with Arka

• Extended product line with access to Arka Designs, increased product extension development possibilities

• Outsourcing R&D for product extension to Arka (greater efficiency due to specialization)

• Customized solutions for each customer of the Manufacturer

Impediments• Investments in joint

venture is substantial• ROI cannot be established

at this point• Presence of in-house R&D • Solutions from other

providers might be more lucrative

• Standards preclude use of heat pipes/ diminished interest in heat pipes

Page 42: Engineering 245 The Lean  LaunchPad

Benefits of Exclusive Partnership

• Arka Thermal gains a partner with production and distribution expertise in thermal solutions manufacturing

• Manufacturer can extend product line through joint venture and explore new markets

Page 43: Engineering 245 The Lean  LaunchPad

Interviews

Action MotionCustomer Interaction Meetings:1. Regional Senior C/A Client Manager2. Dr. Peter Foller, Former Director of

R&D chemical and Optical, PPG3. Eilis Rosenbaum and Jonathan Levine,

Hydrate Researchers4. Pine Liu, Entrepreneur in Smart Sensor

Monitoring5. Jim Miller, CMU Researcher6. Frank Stienke, Schlumberger Affiliate

Planned Customer Interaction Meetings:1. Two C/A plant visits2. Eilis Jill Rosenbaum and Jonathan

Levine, Hydrate Researchers3. Morty, CMU Facilities

Hypothesis Testing:1. Custom semiconductor grower2. Funding organization

Planned Hypothesis Testing:1. Wayne Meier, Matric Engineering

Services2. Diane L. Magin, BlackBox3. Daedalus Designs

Page 44: Engineering 245 The Lean  LaunchPad
Page 45: Engineering 245 The Lean  LaunchPad

C/A Market

Technology Supplier

[Product Form]1. Bundled into larger product2. Standalone3. SenSevere can make bundle4. Monitoring

Industrial Plants

Plant #1

Plant #2

Plant #3

Internal Pilot Test

APPROVED

Pilot Commercial Customer Test

CONDITIONAL APPROVAL

Page 46: Engineering 245 The Lean  LaunchPad

Pricing

Cell Technologies

Drying Towers Liquifaction

Detection limit of the sensor required is different for each step of the process. Discussions are in cell technologies

Each step process has different risk premium associated

Price the same product differently based on what we protect as opposed to an agglomerate value add.

Tunable sensor sensitivity

#GOAL

Page 47: Engineering 245 The Lean  LaunchPad

US Sensors Industry: $9.8BProjected Growth: 6.1%/year

C/A Market

# of Units

Operating Specifications Cost / cell

Time betw/Incidents

Downtime / incident

Average cost / year from incidents

Price

Market Size: [/year]

$73,250,000

Partner Margin:25%

Prototyping COG

Sales Profit:[/year]

$50,662,996

Year Type % Revenue [/year]

1 Innovators 2.5 $271,500

Operating costs for 1st year projected to be $200,000

2 Early Adopters 16 $8,785,000

3 Early Majority 50 $27,463,500

4 Late Majority 84 $46,141,500

Page 48: Engineering 245 The Lean  LaunchPad

Other Markets!

Laboratory Industrial

1. Hydrate research2. Micro-temperature

measurement and heating

3. Wireless smart building control

1. C/A2. Transformer gas

monitoring3. Wireless smart building

control

Achieve sales in both ends of the spectrum and all other applications fall within possible demonstrated capability

#GOAL

#KILLER APPChlorine production