Personal Genomics: Business Model for 23andMe
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Personal Genomics: Business Model for 23andMe

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These slides use concepts from my (Jeff Funk) course entitled Biz Models for Hi-Tech Products to analyze the business model for 23andMe’s personal genomics service. 23andMe provides personal ...

These slides use concepts from my (Jeff Funk) course entitled Biz Models for Hi-Tech Products to analyze the business model for 23andMe’s personal genomics service. 23andMe provides personal health care analysis and ancestry information to individuals that are based on a partial analysis of an individual’s DNA data. Driven by the falling cost of DNA sequencing, 23 and Me provides this information for $99 and a small amount of saliva. While this business model may succeed particularly if the FDA eventually approves the health care portion of the service, we recommend that 23andMe develop a new business model. It should offer the service for free to individuals, particularly those who frequent gyms and nutrition stores and sell information about potential athletes to sports teams.

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    Personal Genomics: Business Model for 23andMe Personal Genomics: Business Model for 23andMe Presentation Transcript

    • Personal Genomics Rethinking the Business Model for 23andMe By: Adrianus Mradipta Chia Dingshan Feng Houyuan Ong Fu Lin Peh TiongSeng Xu Libing
    • 1. Introduction – Genetics – 23andMe 3. The New Frontier – Introduction – Proposed Business Model: DTC & B2B Content 2. Current Business Model & Assessment – Value Proposition, Customer Selection, Value Capture, Scope of Activities, Strategic Control – Assessment & Recommendation
    • What is inside the Genome? OR Source: https://www.23andme.com/gen101/genes/ Y chromosome (From Father) and Mito- chondrial (From Mother) are used for identification process. Cousin
    • Cell Reproduction make mistakes SNPs (single nucleotide polymorphisms) SNP also influence disease susceptibility or response to drugs Source: https://www.23andme.com/gen101/genes/ SNP causes change in physical appearance (e.g. Curly or Straight Hair) Observable traits are known as:
    • DNA Sequencing & Technology Improvements Cost of genome sequencing is dropping • Sub-$1,000 full genome sequencing is around the corner • In January 2014, Illumina announced a machine that could sequence a full human genome for $1,000 Advancements in Genomics Advancements in Computing (Big Data) Ability to Convey Clinical Significance
    • New Opportunities are Opening Up! • 23andMe • Based in Mountain View, CA • Founded in 2007 by Anne Wojcicki, ex-wife of Google co- founder, Sergei Brin
    • 23andMe: How it Works DNA Sequencing & Analysis 23andMe performs SNP Sequencing (vs. full genome mapping) (+) Cheaper, faster (-) Less information
    • • Health Reports * – Carrier Status – Disease Risk – Drug Response * Health reports currently suspended 23andMe: How it Works • Ancestry Reports – Ancestry compositions – DNA relatives – 23andMe family tree tool – Maternal & paternal lineage
    • TIME Magazine Invention of the Year 2008 http://content.time.com/time/specials /packages/article/0,28804,1852747_1 854493,00.html
    • Problems with FDA • Note that the company is currently having issues with FDA • Health reports are currently suspended, as of Dec 2013 Validity? Accuracy? http://www.npr.org/blogs/health/2013/12/06/249231236/23andme-bows-to-fdas- demands-drops-health-claims
    • Current Business Model 23andMe Consumers $99 DNA Report Labs RI Govts Money Service Future Plans As 23andMe grows, business model will shift Business Model http://www.forbes.com/sites/matthewherper/2013/06/13/expect-to-see-23andme- ads-as-the-company-tries-to-take-genetic-tests-mainstream/
    • Current Business Model CUSTOMER SELECTION VALUE PROPOSITION VALUE CAPTURE SCOPE OF ACTIVITIES STRATEGIC CONTROL
    • • Provides a cheap & convenient personal genetics service that produces fast results that will give insights on the customers’ health* & ancestry information • Cheap: $99, cheaper than competitors • Convenient: kit sent directly to customer’s doorstep • Fast: 2-3 weeks for results to be ready • Insights: disease risks especially Current Business Model: Value Proposition
    • Provides a cheap &convenient personal genetics service that produces fast results that will give insights on the customers’ health* & ancestry information Current Business Model: Value Proposition Assessment – Huge part of the value proposition is removed with FDA’s orders – Limitations of Health Reports: • SNP sequencing: 1 million genes sequenced from a total of 3 billion • Nature vs. Nurture: 30-70 • No follow-up data analysis – regarding advise & lifestyle changes needed – Limitations of Ancestry Reports: • Limited by number of people in the database http://venturebeat.com/2014/03/12/23andme-ceo-we-need-to-return-to-delivering- health-information/ http://www.theguardian.com/technology/2014/mar/09/google-23andme-anne- wojcicki-genetics-healthcare-dna
    • Current Business Model: Value Proposition • Recommendations – Sort things out with FDA & restore value proposition through health reports – Link up with physicians/nutritionists/dieticians to add analysis, thus enhancing value proposition
    • Current Business Model: Customer Selection “We’re not really focused on a specific age group or gender or fitness level. It’s the people who have this control mindset” - Neil Rothstein 23andMe Marketing Chief • For health reports: Consumers who want to be proactive about their health
    • Current Business Model: Customer Selection • 23andMe recognizes the importance of building lead users! • Lead Users: Parkinson’s network – Free kit to anyone diagnosed with Parkinson’s – Largest Parkinson’s genetic research network with 10,000 people
    • Current Business Model: Customer Selection • For ancestry reports: – Serve a more niche market – Specialized customer groups, such as adopted children http://ireport.cnn.com/docs/DOC-918630 http://www.fourstateshomepage.com/story/dna-helps-reunite-family/d/story/okB1oVl_ukq5It6zsrUWxA
    • Current Business Model: Customer Selection • Assessment – Good use of lead users – Health reports: No focus Too wide customer selection for a start-up. May stretch resources & difficult to act on • Recommendations – Focus on specific segments – Eg. People who care about their health and buy vitamins or go to the gym – Make it for convenient for these people
    • • Value Chain for genetic reports: DNA Sequencer Manufacturer DNA Sequencing Genetic Data Analysis Database Management Delivery Services Consultancy Services Key to business? Yes Yes Yes Yes No No Sources Outsource None Activity Purchase In-house capability In-house capability In-house capability Outsource None Criteria of selection Out of business scope, Lower cost, Better technology Key capability Key capability Key capability Lowest costs Potential area to explore Current Business Model: Scope of Activities Assessment •Controlled the key capability areas •Consultancy services is a valuable area to explore Recommendations •Link up with consultancy services (eg. Physicians, dieticians, nutritionists, gyms) •Partner with clinics, vitamin stores, gyms as additional source of distributions •Will also enhance value propositions & value capture
    • Current Business Model: Value Capture • Currently, 23andMe generates ALL its revenue through sales of the personalized genetics service • The company has experimented with many models to maximize revenue & generate user base 2007 2008 2009 2010 2011 2012 2013 Product Offerings Health Reports (started with 14 reports at launch) Split into 3 products: Ancestry, Health & complete report Recombined the products 244 Health Reports + Ancestry Report Dec: Health reports suspended Model One-time fee Initial fee + subscription model One- time fee Price $999 $399 $399 + $5/month $299  $99 $99
    • Current Business Model: Value Capture • Assessment – Commend reduction of price & removal of subscription to expand user base – However, still too expensive for the mainstream market – Unable to move to targeted method of value capture: sale of data to research institutes/universities • Recommendations – Quickly further reduce price point to expand user base. Consider: free?  expand user base  move to B2B sale of genetic data – More value capture options: commission and referral fee from consultancy services
    • • Complementary Assets • No hold over complementary assets • Delivery & consultancy services are common, DNA sequencer manufacturer can sell to anyone • Improve relationship with complementary assets, eg. Long contracts with manufacturers/delivery services to reduce price. • Appropriability Regime • Scale & network effects: Larger database will yield better results • Weak patent protection: • “Polymorphisms Associated with Parkinson’s disease” • Designer baby – no relation to main business • Need to strengthen IP portfolio, esp. in data analysis through R&D and open innovation Current Business Model: Strategic Control
    • Proposed Business Model in Healthcare 23andMe Consumers $99 DNA Report Labs RI Govts Money Service DNA Physicians Referral fees & commission Referral Nutritionists Dieticians
    • Recommendations CUSTOMER SELECTION VALUE PROPOSITION VALUE CAPTURE SCOPE OF ACTIVITIES STRATEGIC CONTROL Genetic Services in Sports
    • The New Frontier
    • Yao Ming and His Family A “Natural” Selection • Yao's grandfather, one of Shanghai's tallest men, was discovered too late for basketball but his son, the 6ft 7in (2.01 m) Yao Zhiyuan, soon found himself dragged into the sports system. • There he was paired off with the 6ft 3in (1.90 m) Fang Fengdi, China's women's captain (more than half a foot taller than the average man in Shanghai) • The two were encouraged to marry in a system with undertones of eugenics, the controversial gene-pool manipulation espoused by the Nazis and previously trumpeted by Beijing. • Yao's birth had been anticipated for decades by communist officials - desperate to boost national pride through sports - who had been tracking his family for two generations. No accident … Yao Ming towers over Jason Smith. Photo: AP http://www.smh.com.au/news/basketball/yao-ming-the-basketball-giant-made-in-china-by-order-of-the-state/2006/01/18/1137553645228.html Yao Ming and Shaq
    • “Sports” Genes • In 2003, a seven-scientist team tested some 400 elite athletes for the ACTN3 gene. • Everyone has two copies of that gene, each of which comes in one of two variants, R or X. • The R variant instructs the body to produce alpha-actinin-3, a protein found only in fast-twitch muscle fibres, the kind that contract rapidly and violently to facilitate explosive movement • Genotyping an individual as a XX genotype is positively associated with endurance performance. • Not a single one of the 32 Olympic sprinters in the study had two X variants. http://www.google.com/patents/EP1546403B1Actn3 genotype screen for athletic performance http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1180686/ ACTN3 R X Figure was taken from Yang et al., 2003.
    • Transcended mere chatter • In the wake of the '03 study, the Manly Warringah Sea Eagles of Australia's National Rugby League began testing players so that workouts could be tailored for those apparently more disposed to explosive powerlifting and sprinting Beyond ACTN3 • The Duke football team sought institutional permission to submit players' DNA to a university researcher who will look for genes that predispose players to particular injuries. http://www.sportscotland.org.uk/media/701955/the-speed-gene.pdf http://www.ncbi.nlm.nih.gov/pubmed/23681449 Sports Genetic Screening (1)
    • “Injuries” Genes http://www.academia.edu/3139286/Athletic_performance_and_risk_of_injury-Can_genes_explain_all • Athletes are at increased risk of acute and chronic musculoskeletal tissue injuries as a result of training and/or competition. • Many are polygenic traits, with each individual gene having a small effect on the phenotype, but added together having a significant contribution. • Predisposition to muscle, tendon, ligament, and/or other injuries can negatively impact an athlete’s ability to train optimally and perform during competition • Ultimately ending their competitive careers or preventing them from reaching their full potential.
    • Uzbekistan Is Using Genetic Testing to Find Future Olympians The country is experimenting with "sports selection at the molecular genetic level." Ron Synovitz and ZamiraEshanova Feb 6 2014, 12:59 PM ET • Rustam Muhamedov, director of the genetics laboratory at Uzbekistan's Institute of Bioorganic Chemistry, announced the program for "sports selection at the molecular genetic level" on January 5 in the government-owned Pravda Vostoka newspaper • Muhamedov says that after the 50 genes of a child are tested from a blood sample, "their parents will be told what sports they are best suited for"— such as distance running or weightlifting. • Muhamedov's announcement marks the first time any country's Olympic Committee has been officially linked to a program using genetic tests to recommend specific sports programs for children. Sports Genetic Screening (2) http://www.theatlantic.com/international/archive/2014/02/uzbekistan-is-using-genetic-testing-to-find-future-olympians/283001/ Uzbek weightlifter Ruslan Makarov at the London 2012 Olympic Games. (Reuters/Dominic Ebenbichler)
    • Nature vs. Nurture (1) A Conversation with David Epstein, author of “The Sports Gene” Published on September 3, 2013 by Jonathan Wai, Ph.D. in Finding the Next Einstein • A mantra of football coaches is that “You can’t train speed.” • A study today that followed Oklahoma State football players over four years of strength training in college football • Improved their strength immensely in the weight room, but they didn’t improve in running speed at all. • Ideally you want an Achilles tendon that is both long and stiff, and stiffness you actually can change to a degree through training. But the length is purely a function of the distance between your calf and your heel bone, and that’s something you’re born with and you can’t change. “You Can’t Train Speed”—Slow Kids Never Make Fast Adults Nike http://www.businessinsider.com/16-revelations-about-sports-and-genetics-2013-8?IR=T&op=1
    • Nature vs. Nurture (2) A Conversation with David Epstein, author of “The Sports Gene” Published on September 3, 2013 by Jonathan Wai, Ph.D. in Finding the Next Einstein • Eye sight is more important than reaction time when it comes to hitting a fastball • Our brains recognize the ball as it leaves the pitcher's hand and predicts where the ball will go based on visual information. Eye sight is the most important genetic aspect of hitting, and 58% of MLB players have superior depth perception • Albert Pujols is only in the 66th percentile of reaction time compared to college students http://www.businessinsider.com/16-revelations-about-sports-and-genetics-2013-8?IR=T&op=1 Albert Pujols Getty Images/Jason Miller
    • Nature vs. Nurture (3) A Conversation with David Epstein, author of “The Sports Gene” Published on September 3, 2013 by Jonathan Wai, Ph.D. in Finding the Next Einstein • Only two players in the NBA in 2010-11 didn't have unusually large wingspans. • Humans typically have a height to wingspan ratio of 1 : 1 • It's 1 : 1.063 among NBA players http://www.businessinsider.com/16-revelations-about-sports-and-genetics-2013-8?IR=T&op=1 Stephen Dunn/Getty Images
    • A Conversation with David Epstein, author of “The Sports Gene” Published on September 3, 2013 by Jonathan Wai, Ph.D. in Finding the Next Einstein • Your ability to get better with practice is genetic • Scientists have found that practice isn't created equally for everyone. • Different people can do the same exercises for the same amount of time and their improvement over time will be totally different. For instance some people's aerobic capacity won't get better even with deliberate training. • That's part of the reason why it will take some people 3,000 hours of practice to achieve mastery, and others 10,000. http://www.businessinsider.com/16-revelations-about-sports-and-genetics-2013-8?IR=T&op=1 Michael Steele/Getty Images Donald Thomas won the high jump world championships after 8 months of training Nature vs. Nurture (4)
    • Unexploited Market SPORTS GENETICS (DATA) SCOUTING
    • 23andMe Private TrainersNutritionistsPrivate Health Practitioners Health and Wellness Clinics Government Laboratory MoneyService ( Data ) Research and Development Pharmaceutical Companies Reputation Hospitals BasketballFootball Baseball Professional Sports Leagues & Training Academies Businesses Money Reports and updates to individual accounts DNA Kit Existing Consumer New Consumer Referrals Genetic Screening Service Saliva Subscription Credits per Referral Experience Intellectual Property Protection Subscription ( Annually ) Health Products and Consultancy Services Money (Data Privacy Rights) Sports Traits Data Questionnaires Exposure (Referrals) Commission Patents Money Patents Filing / Infringements Money Exposure from Sponsorship Sponsorship (Merchandise) Data (Referral of sport talents) Genetic Screening Education Courses SPORTS GENETICS (DATA) SCOUTING SPORTS
    • Customer Selection Direct to Consumers (DTC) 23andMe Reports and updates to individual accounts DNA Kit Existing Consumer New Consumer Referrals Saliva Subscription Credits per Referral Experience Subscription ( Annually ) Money (Data Privacy Rights) Sports Traits Data Questionnaires Direct-To-Consumers • Young individuals with interest to predict and discover their athletic strengths / sports niche • Sports career options to attempt and pursue • Prospects of turning into Elite Professionals o Weekend athletes and sports enthusiasts devoted to tailor workouts / diets to their body types o Keep in shape
    • Value Propositions (DTC) • Easy to use DNA Test Kits at the comfort of own home • Competitive/affordable pricing for personal genome test with State-of-the-art technology • Global Exposure to wide range of Professional Sports Leagues as compared to specific ones • Subscription fee credits for new customer referrals • Fast and reliable services o All tests done in CLIA-Certified Laboratory • Accurate and detailed data analysis (interpretation) o through the company’s network of qualified practitioners and nutritionists 23andMe Reports and updates to individual accounts DNA Kit Existing Consumer New Consumer Referrals Saliva Subscription Credits per Referral Experience Subscription ( Annually ) Money (Data Privacy Rights) Sports Traits Data Questionnaires
    • Value Capture (DTC) • Sales of the personalized genetics service o DNA Test Kits o DNA Reports with specific sport traits analysis • “Sports Scouting Service” (S3) Subscription Fee o Option to include oneself into Company’s “Sports Scouting Database” o Consumers opted in will be tagged as “Talents” o Database accessed by Businesses 23andMe Reports and updates to individual accounts DNA Kit Existing Consumer New Consumer Referrals Saliva Subscription Credits per Referral Experience Subscription ( Annually ) Money (Data Privacy Rights) Sports Traits Data Questionnaires
    • Customer Selection Business to Business (B2B) Business to Business Sports Market Segment – “Talent Data” • National Olympic Committees • Professional Sport Leagues • Talent Identification Companies • Training Academies R&D Market Segment – “Health Report Data” • Universities / Colleges • Hospitals • Government / Commercial Healthcare Market Segment– “Health Report Data” • Nutritionists • Dieticians • Physicians / Physiotherapists
    • Value Propositions (B2B) • Ease of data usage and Interpretation o Customised report for the different market segments o In-house education and training • Highly reliable data o Sports talent recruitment o Laboratories R&D o Healthcare services • Competitive/affordable pricing o Increase rate of diffusion o Build-up installed base
    • Value Capture (B2B) • Subscription fee Sports Market Segment o Access to the “Sports Scouting Service” o Access to the talents’ videos, audition, records etc. R&D Market Segment o Access to anonymous health database • Commissions Sports Market Segment o Certain percentage of transfer fees for successful drafts into Pro-Team/National Teams Healthcare Market Segment o Certain percentage of sales collected from successful consultancy referrals
    • Scope of Activities DTC & B2B DNA Sequencer Manufacturer DTC Personal Genomics Services Sports trait Genome Patent Database Management Exclusive Sales Team Consultancy Services Key to business? Yes Yes Yes Yes s Yes No Sources Hybrid Outsource Activity Purchase In-house capability 1. In-house capability (primary) 2. Purchase (secondary) In-house capability House -house capability In-house capability Partnership Criteria of selection Out of business scope, Lower cost, Better technology Key capability Key technology Key capability asset Exclusive resources Out of business scope
    • Strategic Control o Invest in making brand stronger and build brand equity o Uphold reputation through  Deliver high standard of services and products  Deliver company’s promises to customers  Ensure customers privacy/ confidentiality Company Brand
    • Strategic Control Complementary assets o Secure long-term commitment DNA kit manufacturers (printing, containers) Distribution channels (FedEx, DHL, delivery companies)
    • Strategic Control o Outsource to contractors o Achieve low cost through economy of scale Bulk manufacturing of DNA kits Bulk distribution of DNA kits Accessories Products
    • Strategic Control o Enhance Public Awareness  Conferences/Seminars/Talks  TVs shows/ Radios/ Newspapers/Magazines  Training and courses o Specialized in-house trained sales forces to direct promote Services Marketing
    • Strategic Control o Patent key technologies developed though their R&D o Build up and patent genes which correspond to sports traits IP Protection
    • • DNA Sequencing technology is advancing o Cost reducing but throughput increased • Increasing interest in sequencing o More research groups using the technologies o Companies working on future technologies • Next Generation Sequencing (NGS) o Data will be more easily to be interpreted • A Big Business Opportunities for 23andMe o To leverage on the two pillars “healthcare” and “sports” business to drive growth o “healthcare” as the foundation, “sport” industry as the high payoff business. Conclusion: Future on DNA Sequencing Opens to New Business Models