The Lean LaunchPad Lecture 5: Customer Relationships Steve
Blank Jon Feiber Jon Burke http://i245.stanford.edu/
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1 Source: http://giffconstable.com/
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2 images by JAM customer segments key partners cost structure
revenue streams channels customer relationships key activities key
resources value proposition
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CUSTOMER RELATIONSHIPS what relationships are you establishing
with each segment? personal? automated? acquisitive?
Retentive??
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We Call Customer Relationships Demand Creation Get, Keep and
Grow How will customers hear about your product? How much will it
cost to acquire a customer using these strategies? How does market
type impact my demand creation strategy?
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Customer Relationship Definition Get Keep Grow
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6 Get Customers
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Who needs to hear about you? Suppliers Channels Government
Partners End User Influencer / Recommender Economic Buyer Decision
Maker
Demand Creation Paying For Users Public Relations Demand
Capture SEM Free products (e.g. widgets) Biz Dev Affiliate
Marketing Market Education Webinars Email marketing Trade Shows
Analyst Reports Direct Sales TV / Radio Demand Creation
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Get Customers Funnel Get Customers Funnel - Physical
Earned and Paid Media Get Customers Keep Customers Customer
check-in calls Customer satisfaction survey product updates Loyalty
Programs Keep Customers Funnel - Physical
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14 Grow Customers
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Earned and Paid Media Get Customers Keep Customers Customer
check-in calls customer satisfaction survey product updates Loyalty
Programs Grow Customers Grow Customers Funnel - Physical
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16 Get Customers
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Get Customers Funnel Viral Loop Get Customers Funnel
Web/Mobile
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Earned and Paid Media Get Customers Funnel PR SEO Advertising
Blogs/Website Tradeshows Viral Mktg SEM/PPC Affiliate Mktg Viral
Loop Demand Creation Feeds the Sales Funnel
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19 Keep Customers
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Contests, events Blogs, RSS, emails Product updates Affiliate
Programs Get Customers Viral Loop Earned and Paid Media Loyalty
Programs Keep Customers Keep Customers Funnel - Web/Mobile
How many come through the first step? How much does that cost?
What is the conversion between each level? How much in revenues can
you get out of each acquired customer?
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Demand Creation by Market Type Create, drive demand into your
sales channel Existing Resegmented New Educate the market about
whats changed Drive demand into channel Educate the market
Identify/drive early adopters into your sales channels Clone Copy a
business
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Market Type ExistingResegmentedNew CustomersKnownPossibly
KnownUnknown Customer NeedsPerformanceBetter fitTransformational
improvement CompetitorsManyMany if wrong, few if right None
RiskLack of branding, sales and distribution ecosystem Market and
product re- definition Evangelism and education cycle
ExamplesGoogleSouthwestGroupon Market Type determines: Rate of
customer adoption Sales and Marketing strategies Cash requirements
How does market type influence demand creation?
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Team Deliverable by Next Week - Web Get a working web site and
analytics up and running Track where your visitors are coming from
(marketing campaign, search engine, etc.) and how their behavior
differs What were your hypotheses about your web site results?
Actually engage in search engine marketing (SEM) Spend $20 as a
team to test customer acquisition cost. Ask your users to take
action, such as signing up for a newsletter. Use Google Analytics
to measure the success of your campaigning. Change messaging on
site during the block to get costs lower, team that gets the lowest
delta costs wins. If you assume virality show viral propagation of
your product and the improvement of your viral coefficient over
several experiments What is your assumed customer lifetime value?
Are there any proxy companies that would suggest that this is a
reasonable number?
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Team Deliverable by Next Week For non-web teams : Get prototype
demo working. Build demand creation budget and forecast. What is
your customer acquisition cost? Did anything change about Value
Proposition or Customers/Users? What is your customer lifetime
value? Channel incentives does your product or proposition extend
or replace existing revenue for the channel? What is the cost of
your channel, and its efficiency vs. your selling price? Everyone:
Update you blog/wiki/journal What kind of initial feedback did you
receive from your users? What are the entry barriers? Present and
explain your marketing campaign. What worked best and why?
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28 Examples
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implantable drug infusion pumps with remote physician control
for chronic pain patients at home the right dose at the right time
and place Christian Gutierrez (EL), Ellis Meng (PI), Carol
Christopher (IM), Tuan Hoang (FE)
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Patients Training Hospitals Unit sales Trade shows Clinicians
Institutions Support Services Pain clinics Clinical data KOLs
Formulary Acceptance FDA IP Advocacy Groups Foundations OEMs
Wireless Developers Manufacturing Costs Product Dev Costs
FDA/Clinical Trials Chronic Pain v3FS Team Payors Marketing Costs
Faster relief Efficient patient management and Dosing flexibility
Access to high-value therapies and pharmacoeconomics Reduce length
of hospital stays and pharmacoeconomics Support Proprietary
knowledge Human Resources
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Patients Training Hospitals Unit sales Trade shows Clinicians
Institutions Support Services Pain clinics Clinical data KOLs
Formulary Acceptance FDA IP Advocacy Groups Foundations OEMs
Wireless Developers Manufacturing Costs Product Dev Costs
FDA/Clinical Trials Chronic Pain v4FS Team Payors/ICA Marketing
Costs Faster relief Efficient patient management and Dosing
flexibility Access to high-value therapies and pharmacoeconomics
pharmacoeconomics Support Proprietary knowledge Human Resources
Electronic records Electronic health record providers Bundled kits
CMS (Medicare)
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Getting out Dr. Stan Louie, Drug Formulation Expert (USC
Pharmacy) Dr. Giovanni Cucchiaro, Anesthesiologist (CHLA) Dr. Diana
Hull, Physician (Group Health in Washington state, formerly at
Kaiser California) Thomas Hsu, Insurance Specialist (Network
Medical Management; a California ICA) Two chronic pain patients
Pump user and creator of support forum User of oral narcotics and
patches Dr. Frances Richmond (Director Regulatory Science Program,
USC) Richard Hull (formerly at company selling Lapband) Clinicians
Institutions/patients Regulatory Entrepreneurs/ Industry
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Patients Product flow/Channel Fluid Synchrony Electronic Health
Records Partners/ OEMS Partners/ OEMS Hospitals (Anesthesiologists
Neurosurgeons) Pain Clinic (Anesthesiologists Neurosurgeons) Pump +
Controller Support Services Bundled Kits Electronic Records
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Channels (Direct) Direct to institutions Some formularies
involved in purchase decisions Some doctors make purchase decision
directly Device company/Doctor relationship is key Heavily
influenced by : Clinical study results Regulatory approval
Reimbursement Hospitals Pain Clinics
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Patient Care Flow (Now) Fluid Synchrony Hospitals
(Anesthesiologists Neurosurgeons) Pain Clinic (Anesthesiologists
Neurosurgeons) Scheduled follow-up Patient Discharged Surgery/Rx/
reprogramming Trial period/ Home setting Weeks/months Key factors:
Reimbursement, state regulations Pump + Controller Support Services
Bundled Kits Partners/ OEMS Partners/ OEMS
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Patient Care Flow (Proposed) Fluid Synchrony Electronic Health
Records Hospitals (Anesthesiologists Neurosurgeons) Pain Clinic
(Anesthesiologists Neurosurgeons) Pump + Controller Support
Services Bundled Kits Electronic Records Scheduled follow-up
Patient Discharged Surgery/Rx/ reprogramming Trial period/ Home
setting Partners/ OEMS Partners/ OEMS Weeks/months Actionable
feedback to doctors/institutions E-prescription / closing loop Key
factors: Reimbursement, state regulations Days
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Regulatory considerations PMA510K Trial size100s of
patients20-100 CostsUp to $100,000 per patient $10-50 MM$1-10 MM
Time ~ 3-4 yrs + post approval follow-on ~ 2-3 yrs PMA approval
with grouping of FDA approved drugs. Clinical trials results used
to obtain CMS (Medicare) approval 510K restricts technology to
predicate devices Can be more difficult to market against
incumbents European CE mark is easier to attain (safety and
performance only)
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Take-aways Channel is direct in this existing market Channel
for e-health is more complex and evolving State-to-state
regulations can impact incentives Can pose problems as electronic
records systems vary across the country Next Steps Understand costs
associated with reaching doctors/institutions directly Understand
structure of e-health channel Develop regulatory pathway (timelines
and cost profile)
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Patients Training Hospitals Unit sales Trade shows Clinicians
Institutions Support Services Pain clinics Clinical data KOLs
Formulary Acceptance FDA IP Advocacy Groups Foundations OEMs
Wireless Developers Manufacturing Costs Product Dev Costs
FDA/Clinical Trials Chronic Pain v4FS Team Payors Marketing Costs
Faster relief Efficient patient management and Dosing flexibility
Access to high-value therapies and pharmacoeconomics
pharmacoeconomics Support Proprietary knowledge Human Resources
Electronic records Electronic health record providers Bundled
kits
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Manufacturing platform for rapid, cost-effective, and scalable
production of therapeutics in tobacco insero = to plant gen = gene
Lucas Arzola (EL) Karen McDonald (PI) Vasilis Voudouris
(Mentor)
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What We Know We have a novel technology platform with numerous
market opportunities Our working hypothesis that we can scale up
and commercialize our platform for production of life-saving
therapeutics Jon Feiber Since you are a platform technology, it
makes sense to engage in market discovery and customer discovery at
the same time during the next weeks Challenging this hypothesis by
speaking with as many experts and customers as we can This week:
explored decision making and distribution channels in the case of a
pandemic
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The Business Model Canvas Speed Cost-Effectiveness Robustness
Scalability Safety Ease of Customization U.S. Supply R&D
Manufacturing Regulatory Approval Licensing Marketing Tobacco
Suppliers Gene Synthesis Companies CMOs - Purification - Fill &
Finish - Packaging - QA/QC CROs - Clinical Trials FDA IP Patents,
Trade Secret Manufacturing Facility Capital Investments
Manufacturing Costs Licensing Costs Marketing Contract
Manufacturing Fully Integrated Manufacturing (Sales) Licensing
(Royalties) U.S. Government - CDC - HHS BARDA - DOD DARPA Foreign
Governments NGOs Vaccine Manufacturers -Established and Emerging
Biotech Distribution through Government and Pharma Companies
Long-Term Contracts with Government and Vaccine Manufacturers
Target Product seasonal & pandemic flu vaccines
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Getting Out of the Lab! Cast a broad net by talking to many
different experts and customers: (1) Executives from large
companies NameTitleInstitution Michael GirardSustainability
ManagerAerojet Michael JacobsonDirector of Corporate
ResponsibilityIntel Joseph KierenDirector of Corporate Real
EstateAT&T (2) Entrepreneurs and angel investors from
Sacramento NameTitleInstitution Andrew HargadonProfessor of
ManagementUC Davis Wil AgatsteinProfessor of ManagementUC Davis
Larry PalleyFormer General ManagerIntel John SelepOperations
ManagerHP Thomas AlbertsConsultantSBDC Cary AdamsHead of MedStart
ProgramSARTA
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Getting Out of the Lab! (4) Experts in vaccine manufacturing
NameTitleInstitution Ann ArvinPCAST Vaccinology Working Group (Key
Opinion Leader on Vaccines) Stanford Misa SuguiAssociate
ScientistMedImmune Floro CataniagLaboratory ManagerMedImmune (3)
Experts in the commercialization of biotech platform technologies
NameTitleInstitution Greg McParlandConsultantDSM Ventures Fernando
GarciaSenior DirectorAmyris
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Channels and Distribution Conversation with Dr. Ann Arvin Key
Opinion Leader on vaccines In the case of a pandemic: Vaccine
manufacturers have to be producing vaccines for seasonal flu
regulatory approval, QA, and validation need to be in place When a
pandemic occurs, the government (BARDA) negotiates a manufacturing
contract with vaccine companies number of doses, formulation,
price, and time are agreed upon CDC provides the elucidated strain
to the manufacturer FDA considers the pandemic flu vaccine to be a
variation of the seasonal flu vaccine new regulatory approval is
not necessary Vaccine manufacturers work with the new strain to
ramp up production as quickly as they can takes 4-6 months
Sterility and quality testing is performed for the produced
vaccines some tests are done in-house and some are done by outside
laboratories Vaccine is released
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Channels and Distribution Getting the vaccines to the patients
Vaccine manufacturers have contracts with wholesalers (i.e.
McKesson Corp.) to distribute the vaccines distribution is not a
cost for the manufacturers, they hand over the product In the case
of a pandemic, vaccines are also distributed through local
contracts with the state health departments They distribute the
vaccines to hospitals and clinics, where they can be administered
to the patients
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Organizational Strategy Conversation with Greg McParland Former
CEO of biotech platform company: the virtual biotechnology company
model Starting out and for as long as you can, you should be a
virtual company. You can have contracts to outsource the downstream
part of the process (purification, fill and finish, packaging,
etc.) Keep your core technology and focus on using your
manufacturing platform for protein production. Common practice in
biotechnology almost every company has contracts with CROs, CMOs,
marketing and distribution arrangements, etc. More flexibility move
quickly from failed avenues of research to more promising projects
Startups partner with big pharma companies to complete clinical
trials and take product to market If you build it, they will come
but only build the essential core that lets you control your
technology platform
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More Feedback Conversation with Dr. Ann Arvin Key Opinion
Leader on vaccines Pain point: Reliability issues with traditional
egg platform - willingness to move away to a different
manufacturing platform Pain point: Current platforms are not fast
enough, cannot have an impact in case of a pandemic - sense of
urgency in finding a manufacturing platform that can produce
vaccines faster and at a large scale Given this landscape, we still
believe our technology can solve a significant problem in the
vaccine market Conversation with Dr. Misa Sugui & Dr. Floro
Cataniag MedImmune Pain point: attenuated virus platform is harder
to work with, safety measures are more stringent would prefer
recombinant subunit vaccines Wish: a faster process for vaccine
production (our technology can help with this) Wish: a faster
process for clinical trials and for approval of new drugs (this we
cant do anything about) MedImmune is a possible partner - always
looking for new vaccine production technologies and new products to
incorporate in their pipeline
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More Feedback Conversation with Fernando Garcia Amyris Biotech
platform technology company First target product: drug for malaria,
partnered with Sanofi to commercialize Change in strategy: they
have transitioned into making biofuels Why have they made this
transition? We will follow up with one of the founders of the
company to find out
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Next Steps We believe we have a good feel for our value
proposition We need to better understand how we can sell to
customers and how to establish these relationships, how partners
decisions are made meeting with Sanofi Head of External R&D
Keep searching for a business model that will allow us to
commercialize our technology looking for meetings with companies
that distribute/sell flu vaccine antigens for research and
diagnostic use, trying to determine market size We need to talk to
many more experts and customers
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Business Canvas
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Interviews ActionMotion Customer Interaction Meetings:
1.Director of R&D of C/A partner 2.NETL Methane Hydrate RG 3.Ed
Faust, Global Marketing, Siemens 4.Former GE Employee 5.Berkeley
sensors group 6.Tim Fogarty, Director of IW Energy Planned Customer
Interaction Meetings: 1.Jeff Farbacher, CEO Accutran 2.Ed Faust,
Global Marketing, Siemens 3.Charles Noll, Marcellus Shale Coalition
Hypothesis Testing: 1.Ed Faust, Global Marketing, Siemens Planned
Hypothesis Testing: 1.Dr. Gilad Kusne, NIST 2.Ann Truschel,
Corporate Insurance Broker 3.Tim Fogarty, Director of IW
Energy
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Direct Marketing Possible Not Possible [Too expensive] -Every
significant market segment has specific marketing agencies directed
towards selling them goods Chemical Chemical, Physical, Thermal
.
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Direct Marketing Possible Not Possible [Too expensive] -Every
significant market segment has specific marketing agencies directed
towards selling them goods Chemical Chemical, Physical, Thermal
.
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Direct Marketing Possible Not Possible [Too expensive] -Every
significant market segment has specific marketing agencies directed
towards selling them goods Chemical Chemical, Physical, Thermal .
Direct sales to plants typically is a very hard way to generate
scalable business in the sensors market. Typically much better to
bundle product into offerings from larger sensors businesses Agrees
with current approach to this first market! Direct sales to plants
typically is a very hard way to generate scalable business in the
sensors market. Typically much better to bundle product into
offerings from larger sensors businesses Agrees with current
approach to this first market!
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Org. Chart Current C/A Partner CEO, CTO, CFO, etc. etc. etc.
Global Director of R&D CEO, Director of R&D Director of
Marketing Director of Product Service Engineers, etc. etc. etc.
Director of R&D