"Deflationary Economics" and Medical Technology Commercialization

About five years ago, venture capitalist Mark Suster posted a blog titled The Amazing Power of Deflationary Economics for Startups, which applied Clayton Christensen's disruptive innovation concepts to the success stories of the internet.  To summarize (see chart above):  initially lower quality products/services that do one or two things really well at ridiculously lower prices for underserved customers displace overpriced, full-featured competitors that try to please demanding incumbent customers.  Hence:  Amazon, Craigslist, Skype, etc.

Healthcare innovation is just beginning to catch up, as addressed in Dave Chase's recent Forbes article The Amazing Power of Deflationary Economics for Health Ventures.  This perspective is aligned with a key message in our MIN-Corps Lean Launchpad workshops: adoption is much more likely if your product/service is a WHOLE lot better at one or two things that REALLY matter to target customers, in a way that drastically reduces their costs vs. current alternatives.

Why Do Customer Discovery Before Writing the Business Plan?

This is today's Arlo and Janis comic - one plot line follows a young couple's attempt to start an organic farm.  It capsulizes the logic behind Steve Blank's admonition to "get out of the building!" It's so much better to use primary research methods, iterative minimum viable products, and beta testing to discover paying customers earlier rather than later.

What’s the Right Price for a Medical Treatment – Adventures in Market Sizing

The University of Minnesota is a hub in the NIH-funded REACH (Research Evaluation and Commercialization Hub) program.  As program director for MIN-Corps, I collaborate with my colleagues at MN-REACH and our Office for Technology Commercialization to deliver workshops on commercializing medical innovations.  There’s a lot of focus on regulatory and reimbursement issues (often captured in the left side of the business model canvas), i.e. market feasibility.  It’s also pretty straightforward to estimate prevalence, incidence and duration of a condition, which would give a “guesstimate” of total units sold.  But to identify market potential, you also need to postulate a unit price.  

Yes, you can use customer discovery techniques and secondary market research to understand what treatments for the condition currently costs and quantify how customers would benefit from your improvements, i.e. your customer value.  But how much of that value should the business capture?  What’s the dividing line between a value-driven fair price and price gouging?  I can teach my program participants the theory behind value pricing, but “irrational” market realities come into play as well.  Recent reactions to pricing for new Hepatitis C treatments and an older AIDS drug highlight this challenge.

Health Care Business Model Innovation 2: The Seven-Year "Startup"

In my last post, I linked to an interview with Linda Hall, the former CEO who turned around Minute Clinic and ultimately sold it to CVS.  In today's StarTribune, there's an article on the spreading phenomenon of in-store clinics, but Minute Clinic is 15 years old! Especially in health care, innovation adoption seems to take longer than you would expect.  Established health care providers are playing catch-up.  How do they do it? Usually either through acquisition (as CVS did), or through outsourcing to a young company. 

We often think of younger, innovative companies as "startups" even though it can take years for them to hit their stride.  Case in point:  Zipnosis, a seven-year old "startup," which private-labels virtual healthcare for established providers.  Zipnosis was started by a Carlson School MBA student collaborating with medical professionals and won the Minnesota Cup venture competition Student Division way back in 2008.  Its leadership team also currently includes a founder of Minute Clinic as Chief Clinical Officer and my colleague Toby Nord as Chair of the Board.  Zipnosis spent years experimenting with different target markets, and didn't take off until health care systems truly began to value patient convenience and operational efficiency.

Business Model Innovation in Health Care

Linda Hall is the CEO who grew MinuteClinic from a struggling startup to a successful exit to CVS.  She also has been an entrepreneur in residence here at the Carlson School of Management.  In this interview with my colleague Dan Forbes, she shares her insights: https://eiexchange.com/content/104-rx-for-success-former-minuteclinic-ceo-linda-hall-shares-her-stories

What is a Great Startup Idea, Anyway?

NOT an issue for the academic innovators who participate in MIN-Corps programs!

The Cultural Effect of Lean Startup on University Research Commercialization

The logic behind why the University of Minnesota is an NSF-funded I-Corps site is beautifully captured in this interview with the godfather of the lean startup movement, Steve Blank: http://qz.com/502143/why-scientists-make-bad-entrepreneurs-and-how-to-change-that/