The Lean LaunchPad

Lecture 2: Value Proposition

Steve BlankJon FeiberJon Burke

Jerry Engel

#leanlaunchpad

VALUE PROPOSITIONS

images by JAM

what are you offering them? what is that getting done for them? do they

care?

General methodology for

adding fluorine to lead compounds of

interest

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

CustomerSegments

Value Proposition

General methodology for

adding fluorine to lead compounds of

interest

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

CustomerSegments

Value Proposition

Product/Market Fit

General methodology for

adding fluorine to lead compounds of

interest

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 developers

Pharmaceutical development companies

IPPoP data

Radiologists

Technical assistancecGMP manufacturersRadiopharmacies

Direct sales of precursor

Sales of packaged precursor in cassettes

Cassette manufacturers

CustomerSegments

Get, Keepand Grow

Channel

General methodology for

adding fluorine to lead compounds of

interest

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 developers

Pharmaceutical development companies

IPPoP data

Radiologists

Technical assistancecGMP manufacturersRadiopharmacies

Direct sales of precursor

Sales of packaged precursor in cassettes

Cassette manufacturers

Who Are Our Customers?How Do We Reach Them?

CustomerSegments

Get, Keepand Grow

Channel

General methodology for

adding fluorine to lead compounds of

interest

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 developers

Pharmaceutical development companies

IPPoP data

Radiologists

Technical assistancecGMP manufacturersRadiopharmacies

Direct sales of precursor

Sales of packaged precursor in cassettes

Cassette manufacturers

Costs Revenue

General methodology for

adding fluorine to lead compounds of

interest

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 developers

Pharmaceutical development companies

IPPoP data

Radiologists

Technical assistancecGMP manufacturersRadiopharmacies

Direct sales of precursor

Sales of packaged precursor in cassettes

Cassette manufacturers

How Do We Make Money?

Costs Revenue

Where we are…

Key Questions for Value Prop

• Problem Statement: What is the problem?

• Ecosystem: For whom is this relevant?

• Competition: What do customers do today?

• Technology / Market Insight: Why is the problem so

hard to solve?

• Market Size: How big is this problem?

• Product: How do you do it?

Step 1. Spec. the Value Proposition

• Product(s)?• Service(s)?• Ecosystem?

• Is it a company or just a product?

Problem Statement

• What is the problem?

• How do you justify your existence?

Value Proposition – Common Mistake

• Is it just a feature of someone else’s product• Is it a “nice to have” product• Is it a “got to have” product• Can it scale to a company?

Value Proposition - Discovery

• Product – Long term vision– features – Benefits– Minimum Viable Product spec

• For a web/mobile app– Low fidelity MVP live and running

• Understand Customer Problem and Solution• Test Market Type

Product

• Problem Statement: What is the problem?

• Technology / Market Insight: Why is the problem so hard to

solve?

• Market Size: How big is this problem?

• Competition: What do customers do today?

• Product: How do you do it?

Step 2: What’s the Minimum Viable Product – Physical

• First, test your understanding of the problem• Next test your understanding of the solution

– Proves that it solves a core problem for customers – The minimum set of features needed to learn from earlyvangelists

- Interviews, demos, prototypes, etc- Lots of eyeball contact

Step 2: What’s the Minimum Viable Product – Web/Mobile

• NOW “low fidelity” web/app for customer feedback– First, tests your understanding of the problem

• LATER, “high fidelity” web/app tests your understanding of the solution– Proves that it solves a core problem for customers – The minimum set of features needed to learn from earlyvangelists

- Avoid building products nobody wants- Maximize the learning per time spent

Key Questions for Value Prop

• Problem Statement: What is the problem?

• Ecosystem: For whom is this relevant?

• Competition: What do customers do today?

• Technology / Market Insight: Why is the problem so

hard to solve?

• Market Size: How big is this problem?

• Product: How do you do it?

Market Type

Type of Market Changes Everything

Existing Market

Resegmented Market

New Market

Clone Market

Type of MarketChanges Everything

• Market– Market Size– Cost of Entry– Launch Type– Competitive

Barriers– Positioning

• Sales– Sales Model– Margins– Sales Cycle– Chasm Width • Finance

• Ongoing Capital• Time to Profitability

• Customers• Needs• Adoption

• Finance• Ongoing Capital• Time to Profitability

• Customers• Needs• Adoption

Existing Market

Resegmented Market

New Market

Clone Market

Definitions: Four Types of Markets

• Existing Market– Faster/Better = High end

• Resegmented Market– Niche = marketing/branding driven– Cheaper = low end

• New Market– Cheaper/good enough can create a new class of

product/customer– Innovative/never existed before

• Clone Market• Local adapatation

Existing Market

Resegmented Market

New Market

Clone Market

Market Type determines: Rate of customer adoption

Sales and Marketing strategies Cash requirements

Market TypeExisting Resegmented New Clone

Customers Known Possibly Known Unknown Possibly Known

Customer Needs

Performance Better fit Transform-ational improvement

Local version

Competitors Many Many if wrong, few if right

None None

Risk Lack of branding, sales and distribution ecosystem

Market and product re-definition

Evangelism and education cycle

Misjudge local needs

Examples Google Southwest Groupon Baidu

Market Type - Existing

• Incumbents exist, customers can name the mkt• Customers want/need better performance• Usually technology driven

• Positioning driven by product and how much value customers place on its features

• Risks:– Incumbents will defend their turf– Network effects of incumbent– Continuing innovation

Market Type – Resementing Existing

• Low cost provider (Southwest)• Unique niche via positioning (Whole Foods)

• What factors can:– you eliminate that your industry has long competed on?– Be reduced well below the industry’s standard?– should be raised well above the industry’s standard?– be created that the industry has never offered? (blue ocean)

Market Type – New

• Customers don’t exist today• How will they find out about you?• How will they become aware of their need?• How do you know the market size is compelling?

• Which factors should be created that the industry has never offered? (blue ocean)

Market Type – Clone

• Takes foreign business model and adapts it to local conditions– Language– Culture– Import restrictions– Local control/ownership

• Need market large enough >100 million

Competition

• What are customers doing today?• Are competitors threatening to offer

better price or value?• How saturated is our market?

Technology and Market Insight

Technology Insight• Moore’s Law• New scientific

discoveries• Typically applies to

hardware, clean tech and biotech

Market InsightValue chain disruptionDeregulationChanges in how

people work, live and interact and what they expect

Examples of Market Insight• People want to play more involved

games than what is currently offered• Facebook can be the distribution for

such games

Masses of people are more likely to micro-blog than blog

The non-symmetric relationships will allow companies and individuals to self-promote and will impact distribution

European car sharing sensibilities could be adopted in North America

People, particularly in urban environments, no longer wanted to own cars but wanted to have flexibility.

Examples of Technical Insight• Topological analysis enables

highly dimensional data to be analyzed without predetermining number of feature sets

Mass produced components can be used to create a miniaturized fluorescence microscope

Types of Product Value

Comes from Technical Insight Comes from Market Insight

Smaller

More Efficient

Faster Simpler

Lower cost Better

Bundling

Better Branding

Better Distribution

How do I test value proposition hypotheses?

Define Product

• Hardware• Service• Knowledge• Resources• Networks• Data

Minimum Viable Product (MVP)

• A product that solves a core problem for customers

• The minimum set of features needed to learn from earlyvangelists- Avoid building products nobody

wants- Maximize the learning per dollar

spent

The Art of the MVP

• A MVP is not a minimal product• “But my customers don’t know what they want!”• At what point of “I don’t get it!” will I declare defeat?