demolish the status quo in entrepreneurial education 082311

Demolishing the Status Quo in Entrepreneurial Education

And I think I’m liking it

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?

Five Types of Startups

Small BusinessStartup

Small Business Startups

• Serve known customer with known product

• Feed the family

Exit Criteria- Business Model found- Profitable business- Existing team< $1M in revenue

• known customer known product

• Feed the family

- Business Model found- Profitable business- Existing team< $10M in revenue

• 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

Large Non-Profit

Social Startup

Social Entrepreneurship Startups

• Solve pressing social problems• Social Enterprise: Profitable• Social Innovation: New Strategies

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 > $500m -$1B- Can grow to $100m/year

Scalable Startup

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

$5 to 50M Acquisitio

Buyable Startup

Goal is to solve for: Internet and Mobile Apps

Search Sell

ScalableStartup

$5 to 50M Acquisitio

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 Innovation

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

Search Versus Execution

Why Accountants Don’t Run Startups

ScalableStartup

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

- 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

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

Metrics Versus Accounting

ScalableStartup

Sales- Sales Organization- Scalable- Price List/Data Sheets- Revenue Plan

Customer Validation Versus Sales

ScalableStartup

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

Customer Validation Versus Sales

ScalableStartup

Product Management- Delivers MRD’s- Feature Spec’s- Competitive Analysis- Prod Mgmt driven

Customer Development VersusProduct Management

ScalableStartup

Customer Development- Hypothesis Testing- Minimum Feature Set- Pivots - Founder-driven

Customer Development Versus Product Management

Product Management- Delivers MRD’s- Feature Spec’s- Competitive Analysis

ScalableStartup

Engineering Versus Agile Development

Engineering- Requirements Docs.- Waterfall Development- QA - Tech Pubs

ScalableStartup

Agile Development- Continuous Deployment- Continuous Learning- Self Organizing Teams- Minimum Feature Set- Pivots

Engineering Versus Agile Development

Engineering- Requirements Docs.- Waterfall Development- QA - Tech Pubs

ScalableStartup

Business Plan- Plan describes “knowns”- Known features for line extensions- Known customers/markets- Known business model

Startups Model, Companies Plan

ScalableStartup

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

- Plan describes “knowns”- Known features for line extensions- Known customers/markets- Known business model

ScalableStartup

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

- 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

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?

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?

58images 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

GuessGuess

Customer Development

Get Out of the BuildingThe founders

Customer DevelopmentThe Search For the Business Model

CompanyBuilding

Customer

Discovery

Customer

Validation

Customer Creation

• 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:• 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:• 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

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

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,

- 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

Labor costs significant?

Autonomous would solve

problem?

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

- 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

- Dealer training

Dealer discount COGS seek a 50-60% Gross Margin

- 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

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

• Research Labs

rs• Distribution

Network• Service

Providers

customer feedback

• Cost Reduction

pains• Eliminate

bio-waste hazards

• Mid/Large Organic Farmers

• Agricultural corporations• Weeding

Service Providers

• Mid/Large Conventional

Farmers

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

• Research Labs

r• Distribution

Network• Service

Providers• 2 or 3 Key

customer feedback

• Cost Reduction

pains• Eliminate

bio-waste hazards

• Mid/Large Organic Farmers

• Agricultural corporations• Weeding

Service Providers

• Mid/Large Conventional

Farmers

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

- 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

- Dealer training

Costs for service provisionCOGS seek a 50-60% Gross Margin

- 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

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

TrainingMaintenanc

Operating Costs Capital equipment sales and disposable

Product Developmen

Clinical trialsFDA

IP Leading doctors

Technical Expertise

HospitalsLeading doctors3rd party

Non-invasive

Pioneering radiologists

inhospitals

Direct sales to hospitals

TrainingMaintenanc

Operating Costs Capital equipment sales and disposable

Product Developmen

Clinical trialsFDA

IP Leading doctors

Technical Expertise

al guess

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

Paul BillingsHolly V. Gautier

MammOpticsHospital purchasing decision tree

Hospitals

Complex purchasing

decision tree. Several

saboteours

MammOpticsPrivate practice purchasing decision tree

Private practice

Faster adoption rate

Attractive value

proposition

Pioneering Doctors

HospitalsOB/GYNs

Direct Sales to doctors

TrainingMaintenanc

Operating CostsCapital Equipment

Sales and disposable item

Product Developmen

Clinical trialsFDA

IP Leading doctors

Technical Expertise

Hospitals (Capital

Spending Committee)

Leading doctors3rd party

Research Hospitals

Doctors:Earlier

detectionPrice

Accuracy

Patients:Radiation

FreeNon-Invasive

Pioneering Doctors

HospitalsOB/GYNs

Direct Sales to doctors

TrainingMaintenanc

Product Developmen

Clinical trialsFDA

IP Leading doctors

Technical Expertise

Hospitals (Capital

Spending Committee)

Research Hospitals

Doctors:Earlier

detectionPrice

Accuracy

Patients:Radiation

FreeNon-Invasive

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

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

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

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

$5,000

$10,000

$5,000

$25,000

MammOpticsPricing Strategy

Equipment Lease model

Per-use model

Consumable

Cost of the device

Service per year

Per-use fee

Consumable

$50,000

$3,000

$5,000

$10,000

$5,000

$25,000

Approved by

customers and

investors

ACOGACS

Doctor specialty

committee

Hospital Administrati

Technician

RadiologistMammography

MammOpticsCustomer Workflow

Current market

Insurance

ACOGACS

Doctor specialty

committee

Technician

Current market

But what would happen if we replace mammograph

Insurance

ACOGACS

Doctor specialty

committee

Technician

Radiologist

Mammography

Breast Radiologists

Technicians Hospitals

Loss of jobs

Loss of jobs Eliminates loss leader

Puts emphasis on biopsies

Insurance

ACOGACS

Doctor specialty

committee

Technician

Radiologist

Mammography

Insurance

ACOGACS

Doctor specialty

committee

Technician

Radiologist

Mammography

InsuranceSame cost as mammography

($140)Reduced number of biopsies

($1000)

ACOG/ACSImproved healthcare(mammography weak

technique)

Insurance

ACOGACS

Doctor specialty

committee

Technician

Insurance

Radiologist

Mammography

Insurance

Doctor specialty

committee

Technician

ACOGACS

MammOptics

Patient

PCPOB/GYN

Insurance

Doctor specialty

committee

Technician

Radiologist

Mammography

ACOGACS

MammOptics

Patient

PCPOB/GYN

Technician

Radiologist

Mammography

MammOptics

Patient

PCPOB/GYN

PCP OB/GYNsIncreased revenue

More complete patient care

PatientImproved healthcare

Comfort

MammOpticsRevenue

ACOGACS

Doctor specialty

committee

Technician

Insurance

Radiologist

Mammography

MammOptics

Patient

PCPOB/GYN

OB/GYNsPCPs

TrainingMaintenanc

eConferences

CME courses

itemPer use fees

Product Developmen

Clinical trialsFDA

Publishing

IP Leading doctors

Technical Expertise

Leading doctors

ACOGACS

Doctors:Earlier

detectionPrice

Accuracy

Patients:Radiation

FreeNon-Invasive

OB/GYNsPCPs

TrainingMaintenanc

eConferences

CME courses

itemPer use fees

Product Developmen

Clinical trialsFDA

ReimbursementPublis

IP Leading doctors

Technical Expertise

Leading doctors

ACOGACS

Doctors:Earlier

detectionPrice

Accuracy

Patients:Radiation

FreeNon-Invasive

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.

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

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

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 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 3FDA

pivotal trials$600K

$20.5M

$26.8M

Stage 4Post-

market studies

24 months 24 months

Clinical Trials

12/4/2009

MammOptics

MammOpticsPartners

Manufacturing

FDA Clinical Trials

Reimbursement

Financial timeline

Funding

Series A $3.5

Reserv

Initialize

ilesto

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

Regulatory / Clinical

Series D $35

M&A / IPO $50 MM

149 12/4/2009

Proof of

Concept

Pilot Studi

IC and Process

ing Patents

Marketa

ble Product

Provisional

Patent

Beta-Versi

on Testin

Application and System Patents

IRB / IDE

Clinical Results

Second Release

Initial Product Launch

Specific Codes (Cat. I CPT /

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

US Pivotal Clinical Trials

Laboratory

Prototype

Technology

Licensing

MammOpticsMammOptics

Financial timeline

Reserv

Initialize

ilesto

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

150 12/4/2009

Proof of

Concept

Provisional

Patent

Technology

Licensing

Series A $3.5

Reserv

Initialize

ilesto

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

151 12/4/2009

Proof of

Concept

Provisional

Patent

Beta-Versi

on Testin

Laboratory

Prototype

Beta Prototype

Technology

Licensing

Pilot Studi

Series A $3.5

Reserv

ilesto

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

152 12/4/2009

IC and Process

ing Patents

Marketa

ble ProductBeta-

Version

Testing

IRB / IDE

Beta Prototype

Pilot Studi

Laboratory

Prototype

Reserv

ilesto

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

IC and Process

ing Patents

IRB / IDE

Cat III

Second Release

1st Release Test

US Interim Trials US Pivotal Clinical Trials

Publication

Pilot Studi

Reserv

ilesto

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

Series D $35

154 12/4/2009

Clinical Results

Second Release

Non-Specific Codes

2nd Release Test

Publication

US Interim Trials

Trials

Publication

Reserv

ilesto

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 D $35

M&A / IPO $50 MM

12/4/2009

Clinical Results

Non-Specific Codes

Publication

Trials

Financial / Operations TimelineMammOpticsMammOptics

Series A $3.5

Reserv

Initialize

ilesto

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

Series D $35

M&A / IPO $50 MM

156 12/4/2009

Proof of

Concept

Pilot Studi

IC and Process

ing Patents

Marketa

ble Product

Provisional

Patent

Beta-Versi

on Testin

IRB / IDE

Clinical Results

Second Release

Non-Specific Codes

1st Release Test

2nd Release Test

Publication

Beta Prototype

US Interim Trials

Trials

Publication

Cat III

Laboratory

Prototype

Technology

Licensing

OB/GYNsPCPs

Online

TrainingMaintenanc

eConferences

CME courses

Per use fees

Product Developmen

Clinical trialsFDA

Reimbursement

Publishing

IP Leading doctors

Technical Expertise

KOLs3rd party

ACOGACS

Clinical trial designer

Doctors:Earlier

detectionPrice

AccuracyImmediate

Results

Patients:Radiation

FreeNon-Invasive

Earlier detectionNon invasive

PriceAccuracy

Immediate Results

OB/GYNsPCPs

Online

TrainingMaintenanc

eConferences

CME courses

Per use fees

Product Developmen

Clinical trialsFDA

Reimbursement

Publishing

IP Leading doctors

Technical Expertise

KOLs3rd party

manufacturersBreast Cancer Foundations

ACOGACS

Final iteration of our business model

But… need to think about the big picture…

Non invasive

Pioneering Doctors

Hospitals

Direct Sales to hospitals

TrainingMaintenanc

Product Developmen

Clinical trialsFDA

IP Leading doctors

Technical Expertise

MammOpticsBusiness Model Canvas 1

Non invasive

Pioneering Doctors

Hospitals

TrainingMaintenanc

Product Developmen

Clinical trialsFDA

IP Leading doctors

Technical Expertise

Research Hospitals

Pioneering Doctors

Hospitals

TrainingMaintenanc

Product Developmen

Clinical trialsFDA

IP Leading doctors

Technical Expertise

Hospitals (Capital

Spending Committee)

Research Hospitals

Doctors:Earlier

detectionPrice

Accuracy

Patients:Radiation

FreeNon-Invasive

Pioneering Doctors

HospitalsOB/GYNs

TrainingMaintenanc

Product Developmen

Clinical trialsFDA

IP Leading doctors

Technical Expertise

Hospitals (Capital

Spending Committee)

Research Hospitals

Doctors:Earlier

detectionPrice

AccuracyImmediate

Results

Patients:Radiation

FreeNon-Invasive

OB/GYNsPCPs

TrainingMaintenanc

eConferences

CME courses

Product Developmen

Clinical trialsFDA

ReimbursementPublis

IP Leading doctors

Technical Expertise

Leading doctors

ACOGACS

Doctors:Earlier

detectionPrice

Accuracy

Patients:Radiation

FreeNon-Invasive

OB/GYNsPCPs

TrainingMaintenanc

eConferences

CME courses

itemPer use fees

Product Developmen

Clinical trialsFDA

Reimbursement

Publishing

IP Leading doctors

Technical Expertise

KOLs3rd party

ACOGACS

Doctors:Earlier

detectionPrice

AccuracyImmediate

Results

Patients:Radiation

FreeNon-Invasive

OB/GYNsPCPs

TrainingMaintenanc

eConferences

CME courses

Per use fees

Product Developmen

Clinical trialsFDA

Reimbursement

Publishing

IP Leading doctors

Technical Expertise

KOLs3rd party

ACOGACS

Doctors:Earlier

detectionPrice

AccuracyImmediate

Results

Patients:Radiation

FreeNon-Invasive

OB/GYNsPCPs

TrainingMaintenanc

eConferences

CME courses

Per use fees

Product Developmen

Clinical trialsFDA

Reimbursement

Publishing

IP Leading doctors

Technical Expertise

KOLs3rd party

manufacturers(local)

ACOGACS

Doctors:Earlier

detectionPrice

AccuracyImmediate

Results

Patients:Radiation

FreeNon-Invasive

OB/GYNsPCPs

TrainingMaintenanc

eConferences

CME courses

Per use fees

Product Developmen

Clinical trialsFDA

Reimbursement

Publishing

IP Leading doctors

Technical Expertise

KOLs3rd party

manufacturers(local)

ACOGACS

Doctors:Earlier

detectionPrice

AccuracyImmediate

Results

Patients:Radiation

FreeNon-Invasive

Personal Libraries

Insight: No more bookshelves

Printed Books -20% YoY ‘10

eBooks+150% YoY ‘10

Version 1.0: Personal Libraries

Original Idea: Personal Digital Libraries

Import, organize and share thousands of digital papers

something-something-something.com

Original idea

SHORT TERMResearchers

LawyersScientists

LONG TERMAvid book readers

Professionals

Import, organize and share thousands of

papers

FB/TW posts from users you know

Company blog, FB, TW, support forums

Affiliate program

SEO/SEM/SM

IE/FF/Chrome App Stores

Targeted marketing

Product development

Constant iteration & testing

DevelopersMarketers

Libraries, Universities, Research Centers

Bloggers and media targeting customer

segment

Academic Database providers

Affiliate program feesLicensing

Subscription feesAd revenue

AWS InfrastructureSEM

Eng & Marketing OpEx

Invincible Business Model: Version 1.0

Here’s What We DidVersion 1.0: Personal Libraries

Got out of the building

• 100+ Interviews

Professors, Litigators, IP lawyers, Post-docs, PhD researchers, Engineering

Students, Law Students…

• 100+ Interviews• Extensive Surveys

• 100+ Interviews• Extensive Surveys• 33,000+ Adwords

• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review

• 100+ Interviews

• Extensive Surveys

• 33,000+ Adwords

• Compete Review

• Market Sizing

• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review• Market Sizing• 50 bloggers

• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review• Market Sizing• 50 bloggers• 6 Social Networks

• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review• Market Sizing• 50 bloggers• 6 Social Networks• Usability Tests

• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review• Market Sizing• 50 bloggers• 6 Social Networks• Usability Tests• Rapid Iteration

Here’s What We FoundVersion 1.0: Personal Libraries

Here's what we found: Version 1.0

GOOD• Subscriptions Rock

A great business if we had more users…

GOOD• Subscriptions Rock• Pipelines Optimize

Shorter pages raise conversions 80%

GOOD• Subscriptions Rock• Pipelines Optimize• The Web Listens

Sites will feature your service

BAD• Academics = Cheap

Teaching team saw pattern in our data

Run away from this customer as fast as possible.

They don’t want to spend money and will incur infinite support and infinite cost.

BAD• Academics = Cheap• Negative Margins

Working for peanuts, and hitting wild product success leads to economic failure

BAD• Academics = Cheap• Negative Margins• ECM = Boring

No adjacent pivots worked for the team

Version 2.0: Trusted Advice

Original idea

Upwardly mobile young professionals making $2-10K of

discretionary online purchases a year (excluding travel)

Discover online goods recommended by

friends at the lowest possible price from

trusted vendors

Company blog, FB, TW accounts

Affiliate program

SEO/SEM/SM

Developing trusted advice and advisors

Web marketing

Affiliate partnerships

DevelopersMarketers

Content LibraryInstall base

Readership base

Bloggers and Media targeting customer

segment

Retail marketing partners

IE/FF/Chrome teams

Affiliate Program Providers

New Hypotheses

Here’s What We DidVersion 2.0: Trusted Advice

Got out of the building, again

• 40+ Interviews

• 40+ Interviews• Extensive Surveys

• 40+ Interviews• Extensive Surveys• Landing Page Tests

Landing pages tested on affluent, career aged professionals,

approximately 70/30 male/female, N=800+

• 40+ Interviews• Extensive Surveys• Landing Page Tests• Market Research

• Compete Research

• Compete Research• Revenue Analysis

• Compete Research• Revenue Analysis• Two Prototypes

Insidely.com

wantio.com

• Compete Research• Revenue Analysis• Two Prototypes

• Refined Personas

Customer Segment: Professional-class consumers shopping frequently online

Pat the ProfessionalUpwardly mobile professional (some Grad

Students)Salary: $40,000 – 150,000/year

Finance, Consulting, PR, MarketingFollows fashion/technology trends

Spends $1-15K on discretionary items onlinePurchased online in last 30 days

Demographics• Male/female, aged 18-35

• Minimum bachelors from expensive schoolTraits:

• Ideas from blogs & shopping websites • Values celebrity trends & friends’ opinions

• Wants high ticket items at lowest price• Event-driven shopper—new release or sale

Motivation• Craves new products• Hates tedious work

• Identifies as influencer among friends• Fears being cheated online

Behavior• Spends 5 hour+ monthly hearing about

products • Shares online and in person about products he

lovesBudget

• $2-10K+/year in discretionary online purchases

“The XXX is awesome, I really want one. I know I just bought the YYY, but it’s probably time to

upgrade.” Source: US Bureau of Labor Statistics

~5.9M “Pat the Professionals” in USDrawn from top 1/3 of 17.8M frequent online shoppers

17.8M based on 40.2M Professionals (2008 Census) * 0.762 US Internet Penetration (Nielsen 2010Q1) * 0.58 consumers shopping online in last month

(Nielsen 2010Q1)

Online Recommendation Market Opportunity (conservative

strawman #s)Assuming 10% share, 5% affiliate

Top Shoppers (~$7B/year spend): ~ $35M/year

Professional-class frequent shoppers (~$1.8B/year): ~ $9M/year

Other Professional-class shoppers ($0.7B/year): ~3.5M/year

Version 2.0: Trusted AdviceTop ~6M US Influentials (~$9B/year)

Original idea

Upwardly mobile young professionals making $2-10K of

discretionary online purchases a year (excluding travel)

Discover online goods recommended by

friends at the lowest possible price from

trusted vendors

Affiliate program

SEO/SEM/SM

Web marketing

DevelopersMarketers

Content LibraryInstall base

Readership base

Bloggers and Media targeting customer

segment

IE/FF/Chrome teams

Here’s What We FoundVersion 2: Trusted Advice

Findings on "Trusted Advice"

GOOD• Fast Interest

Insidely.comTrusted advice site for Silicon Valley/Stanford

Launched 2/15

425 visitors by 2/28

Ranked #6 by Google for “Stanford Admissions Books”

GOOD• Fast Interest• High Conversion

43% clickthrough on Top Admissions Books for Stanford

MBAs article

Compare to 0.5% clickthrough on ads

~100x difference

GOOD• Fast Interest• High Conversion• Needs Addressed

Positive results on “Trusted Advice” Shopping Add-in testing

See videos at http://factnote.com/c/e245

GOOD• Fast Interest• High Conversion• Needs Addressed Super easy to install and use.

I really did enjoy it!

Great idea! I will keep the extension installed because I do

think this is practical!

I could see myself using this regularly

Positive results on “Trusted Advice” Shopping Add-in testing

GOOD• Fast Interest• High Conversion• Needs Addressed BAD• Missing Features

Some negative results on “Trusted Advice” Shopping Add-in testing

See videos at http://factnote.com/c/e245

• High Conversion• Needs Addressed

BAD• Missing Features

Some negative results on “Trusted Advice” Shopping Add-in testing

I was a little frustrated when it didn’t find the item I was looking

I can find more thorough price comparisons elsewhere…

I usually don’t shop in Chrome, so that’s an inconvenience.

GOOD• Fast Interest• High Conversion• Needs Addressed BAD• Missing Features• SEO Battle

MBA Exchange spams us out of Google

Here’s Where We Ended Up Version 2.1: Trusted Advice

The adventure continues

Trusted Advice 2.0

Protection against SEO-spammers

Next Experiments: • Trusted Lead Gen • Trusted Advice website

powered by Shopping Add-in

Original idea

PAT THE PROFESSIONALUpwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel)

TRUSTED ADVICE Discover online goods recommended by friends at the lowest possible price from trusted vendors

Foil advertorial spammers polluting the Interweb with toxic pseudo-content

Affiliate program

SEO/SEM/SM

Web marketing

DevelopersMarketersContent LibraryInstall baseReadership base

Bloggers and Media targeting customer segment

IE/FF/Chrome teams

Affiliate program feesLicensingSubscription feesAd revenue

AWS InfrastructureSEMEng & Marketing OpEx

What We Learned

• Potential for disruption abounds

What We Learned

• Life is short, focus on big markets

What We Learned

• Life is short, focus on big markets

• All we need is to be relentless

Blog Your Progress

• 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

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

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

Courses- Managerial Finance/Accounting- Managing Groups and Teams- Financial Accounting- Operations- Modeling for Optimization- Global Value Chain Strategies

ScalableStartup

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

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

demolish the status quo in entrepreneurial education 082311

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