Accelerating Medical Innovation - from Penn to Pathfinder


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Pathfinder Founder and President Bernhard Kappe on what he learned about innovation during his time at Penn and through application of the lean startup approach, and howe he applies it to enterprise innovation in the FDA regulated medical space. Delivered to Penn and Wharton Alumni in Chicago.

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  • We design and build medical software products. We work mostly with large medical device companies and payors, as well as some startups that are looking to take advantage of wireless sensor technologymobile and cloud computing, and analytics to improve health outcomes. We help them accelerate product timelines and reduce risk through lean, agile and ux methods. Do this in a way that’s compliant with FDA and HIPAA regulations.
  • It might be easiest to show you an example. The VG Bio Heart Monitoring System. VG Bio is a Chicago area startup we work with. They have wearable sensors – an ear piece and a chest strap – that collects multiple vital signs.
  • The device is connected via bluetooth to a smartphoneWhich sends that data via private data network to the cloudWhere the system does realtime analytics to predict heart attacks. And that information is presented to clinicians and patients. In trials at the Veterans Administration, so far they’re able to predict heart attacks up to 7 days in advance.
  • I didn’t study innovation at Penn – I didn’t even know that was something I was interested in. But one of the things I did learn there was that lots of innovation happens at the intersections, where different ways of thinking and doing get together. This is something that Penn excelled at. A lot of courses that I ended up taking were cross listed Math, Linguistics, Philosophy, Computer Science. It helped me get three degrees in 5 years while I was there.Second, I learned about the importance of mentors. Through the Benjamin Franklin Scholars program I got faculty mentors, which helped me navigate. Other people have walked in the same paths before – and their advice can be invaluable.
  • I was also in a group called the Philomathean Society – occupies the 4th floor of College Hall, just celebrated it’s 200thaniversary this past fall. Rich tradition, founded the daily pennsylvanian and 4 departments at the university.
  • Back in 1856, before Penn moved to West Philadelphia, the Philomathean Society was downtown, next to the American Philosophical Society. The postman had a package, meant for the American Philosophical Society, and delivered it to Philo by mistake. It was a copy of the Rosetta Stone, sent by the British Museum, asking for help in translation. So of course they returned it.
  • So rather than give it to the American Philosophical Society, three Philo undegraduates translated it themselves and published the first complete english translation of the Rosetta Stone. The British Museum has honored it as one of the most imporatnat works ever published on the Rosetta stone.What I took out of that – if you want to do something, don’t wait for permission. Do it. That copy of the Rosetta stone is still in the Philo halls by the way.
  • As I was searching for ways of making our clients more successful I came across this Lean Startup concept – and in particular the Four Steps to the Epiphany by Steve Blank, that described the typical “Path to Disaster” that I’d seen all too often, and a way to address that.
  • What you really have is a business model. How a company creates value for itself while delivering products or services to customers. 9 components - … When you’re doing a business plan – assumptions for this.
  • When you’re doing a new product, or starting up a new business – these things are all guesses, and some of them are wrong. If you build on incorrect assumptions – you end up with a lot of waste, and having to make changes at scale, which is expensive.
  • The fundamental insight is that you search first, and scale later.
  • A fancier way of saying guess is Hypothesis. The way the lean startup deals with reducing this uncertainty and risk – build-measure learn loops. When a hypothesis is invalidated – form new ones.
  • So we started applying this process to our own business. Get out of the building.
  • Once you’ve figured out that you have the right problem, customer segment and solution – you start testing customer acquisition.
  • So we’ve been applying it to ourselves, and for startups with single products. But most of our customers are large enterprises – can we apply it to them?
  • You can think of your product portfolio in terms of a two by two matrix, existing customers and products, new products for existing customers, taking existing products and customizing them for new markets, and new products. If you only concentrate on the bottom quadrant, you’re at higher risk of declining with your products. Opportunities for innovation and growth in all of these areas, with the biggest long term rewards in the top quadrant. . You need to balance your portfolio. There’s a lot of uncertainty the further out you go from your existing customers and products. Increased likelyhood of failure.
  • The problem is that enterprises are really bad at this.
  • We’ve put together a process and have been working together with a few large enterprises, including United Health Group (Fortune 17) and Allstate (Fortune 92) and a few others that I can’t mention.
  • Think about this as management of a portfolio. You invest some of your portfolio in new projects, and some for follow on.
  • And the metrics –
  • So as I was getting into the lean startup, I discovered a local group on meetup, called the chicago lean startup circle, where other practitiioners were. Monthly meetups, lots of great folks. I ended up organizing the group. Got the word out via Startup Digest, and then later participated in Built in Chicago. We were able to host it at the Illinois Technology Association, until we ran out of space. Luckily, then 1871 came about – the 50,000 sf. Incubation space. Meanwhile the group grew from 150 members to over 3500 members.
  • So from there we started a lean startup based competition (with left over money) and turned that into a lean startup teaching program, where every summer we teach 80 to 100 teams how to apply lean startup, and hook them up with mentors.
  • Lots of folks pitched in – ITA, enerspace, the coop and 1871 provided space, troy henikoff from techstars provided pitch coaching, as did dave culver from ventureshot, chuck templeton from impact engine and open table did mentoring and teaching on n-sided market places, tom stevens did provided startup legal advice, etc. Mentors from big companies and small, from VCs, etc.All part of a thriving ecosystem that keeps growing, helping each other out. By the way – parlayed that in to work with folks like UHG and Allstate.
  • Brad Feld on Startup EcosystemsMichael Porter’s work on industrial clusters.Look at chicago – may not be #1 in any one vertical – but top 5 in most of them. The next step is moving from the tech base to integrating upwards into verticals. It’s happing in a bunch of verticals. Healthcare – the one we’re looking at. Matter – similar model to 1871, moving in right next door, $4 million from the state. Tied to the backbone.
  • That’s where the magic happens – cross polination, between … If we go back to VG Bio, the company that I mentioned at the beginning – they’re a great example of what happens when you get these cross polination from these different verticals. The algorithms they use to predict heart attacks are actually derived from algorithms for predicting wing failure in aircraft.
  • Sign up for Built in Chicago – see what’s going on. Participate in discussions. Go to a meetup, - there’s lots of them. Go to a free event at 1871. Go to startup weekend or lean startup machine – form a team with some strangers and build something. Do the lean startup challenge. Or – give back. Give a talk at a meetup. Do office hours at 1871. Be a mentor in the Lean Startup. It’s pretty fun and rewarding.
  • One of Steve’s students, Eric Reis – coined the term Lean Startup and wrote a book, … I prefer Steve’s books – we use them, more actionable.
  • Accelerating Medical Innovation - from Penn to Pathfinder

    1. 1. ©2014 Pathfinder Software 1 Accelerating Medical Innovation Pennovations – Penn/Wharton Alumni Bernhard Kappe, Founder and President, Pathfinder Software
    2. 2. ©2014 Pathfinder Software Mobile and Cloud User Engagement Regulatory and Compliance Big Data – Analytics and Insights Wireless Devices and Sensors Accelerated Product Timelines Accelerating Medical Innovation
    3. 3. ©2014 Pathfinder Software Heart Monitoring System
    4. 4. ©2014 Pathfinder Software Heart Monitoring System
    5. 5. ©2014 Pathfinder Software What I’m Going toTellYou 1. What I Learned About Innovation at Penn 2. Finding Lean Startup 3. Lean Startup in the Enterprise 4. Help from the Chicago Entrepreneurial Ecosystem 5. Next Steps in the Ecosystem’s Evolution 6. How to Get Involved
    6. 6. ©2014 Pathfinder Software What I Learned About Innovation at Penn
    7. 7. ©2014 Pathfinder Software Penn Philomathean Society – translated Rosetta Stone, started a number of departments – can do, try it.
    8. 8. ©2014 Pathfinder Software Philomathean Society – translated Rosetta Stone, started a number of departments – can do, try it.
    9. 9. ©2014 Pathfinder Software
    10. 10. ©2014 Pathfinder Software Product Development at Pathfinder
    11. 11. ©2014 Pathfinder Software Lean Startup/Customer Development
    12. 12. ©2014 Pathfinder Software More startups fail from a lack of customers than from a failure of product development
    13. 13. ©2014 Pathfinder Software All I Need to Do is Execute the Plan
    14. 14. ©2014 Pathfinder Software All I Need to Do is Make the Forecast
    15. 15. ©2014 Pathfinder Software Plan Meets First Contact With Customers
    16. 16. ©2014 Pathfinder Software Previous 5-Year Plans
    17. 17. ©2014 Pathfinder Software No Business Plan survives first contact with customers
    18. 18. ©2014 Pathfinder Software Business Models
    19. 19. ©2014 Pathfinder Software 9 Guesses Guess Guess Guess Guess Guess Guess Guess GuessGuess
    20. 20. ©2014 Pathfinder Software Customer Development
    21. 21. ©2014 Pathfinder Software 21 Turning Guesses into Facts
    22. 22. ©2014 Pathfinder Software
    23. 23. ©2014 Pathfinder Software
    24. 24. ©2014 Pathfinder Software Lean Startup Data Driven Process to Find a Scalable Business Model Reduce RiskThrough Rapid HypothesisTesting Get Out of the Building (Genchi Genbutsu) Eliminate Waste through Minimal Experiments (Build-Measure-Learn Loops) Growing Body of Knowledge, Lots of Techniques
    25. 25. ©2014 Pathfinder Software Enterprise Innovation
    26. 26. ©2014 Pathfinder Software
    27. 27. ©2014 Pathfinder Software The Effect of Product LifecycleCompression? Fortune 500 Turnover
    28. 28. ©2014 Pathfinder Software Your Product Portfolio Share of Wallet Rev/Customer New Product Development Loyalty Churn LTV New Customers New Customer Revenue Customers/Markets Products Existing New Existing New High Uncertainty Low Uncertainty
    29. 29. ©2014 Pathfinder Software Lean Startup in the Enterprise • Need Lots of “Shots on Goal” • Enterprises are Bad at Funding, Bad at Killing New Products – Lots of HIPPOs • Need to protect the startup from the enterprise … and the enterprise from the startup.
    30. 30. ©2014 Pathfinder Software Lean Startup in the Enterprise: Lean Portfolio Management
    31. 31. ©2014 Pathfinder Software Lean Portfolio Management Example $1MM total portfolio $300K for initial funding ($75K/quarter) If an EIR costs $100K, you could fund 3 new projects/quarter. This ratio would be adjusted based on failure rate. 31
    32. 32. ©2014 Pathfinder Software Lean Innovation Stages Brainstorming, Business Model Generation, Hypotheses Problem Interviews, Landing Pages Stage Activities Solution Interviews, Wireframing, Proto typing, MVP, Channel Testing, First Sales Improve product - make it indispensable Validate UVP, Full User Lifecycle Funnel (AAARR), test channels, messaging, scaling Test pricing plans, optimize/reduce customer acquisition costs, increase LTV, improve NPS Scale sales and marketing, build organization
    33. 33. ©2014 Pathfinder Software The Four Ps of Lean Portfolio Management Pivot - change hypotheses, go back and validate Persevere - keep optimizing, stay in stage Punt - Kill the project Promote - Move up a stage/investment level
    34. 34. ©2014 Pathfinder Software Managing the Funnel with the 4 Ps Projects 100 50 25 12 8 6 3 Stage PuntPivot Persevere Promote
    35. 35. ©2014 Pathfinder Software Portfolio Management Goals/Metrics - Get projects to move from idea to handoff as quickly and inexpensively as possible - When they fail, fail fast - Ultimately, IRR  But that takes 3-5 years - Average throughout by stage and overall  Use cohort analysis for this - Mean time to failure - Mean cost of failure Goals Metrics 35
    36. 36. ©2014 Pathfinder Software Help from the Chicago Ecosystem
    37. 37. ©2014 Pathfinder Software 37
    38. 38. ©2014 Pathfinder Software 38
    39. 39. ©2014 Pathfinder Software 39
    40. 40. ©2014 Pathfinder Software What’s Next
    41. 41. ©2014 Pathfinder Software
    42. 42. ©2014 Pathfinder Software Heart Monitoring System
    43. 43. ©2014 Pathfinder Software Getting Involved
    44. 44. ©2014 Pathfinder Software Lean Startup/Customer Development
    45. 45. ©2014 Pathfinder Software 45 T: 877.548.7248 F: 312.803.1941 Accelerating Medical Innovation