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Lecture 4 distribution channels 120411

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  • 1. The Lean LaunchPadClass 4: Distribution Channels Steve Blank Jon Feiber John Burke Ann Miura-Ko Jerry Engel Jim Hornthal Oren Jacob
  • 2. CHANNELShow does each customer segment want to be reached? through which interaction points?
  • 3. Test Hypotheses: Channel 2
  • 4. Two Critical Channel Questions How do you want to sell your product? 1 is subtle, but more important than the 2 first: How does your customer want to buy your product? 3
  • 5. How Do You Want Your Product to Get to Your Customer?  Yourself  Through someone else  Retail  Wholesale  Bundled with other goods or services 4
  • 6. How Does Your Customer Want toBuy Your Product from your Channel?  • Same day  • Delivered and installed  • Downloaded  • Bundled with other  products • As a service  • … 5
  • 7. Web Channels 6
  • 8. Physical Channels 7
  • 9. Types of ChannelsDirect Indirect Licensing – OEM – VAR – Reseller – Distributor 8
  • 10. The Channel as a Customer– Some products are embedded in others (OEM)– Some products are resold by others (VARs)– Some products are distributed by others– Who’s the customer? 9
  • 11. Distribution Complexity Global Systems Evangelists Systems Integrators WANs MainframesMarketing Complexity Direct Sales Minis LANs VARs PC Servers Desktop PCs Retail Printers Keyboards Web, Telesales Service Technicians Toner Solution Complexity 10
  • 12. How Are Channels Compensated? – Commission – Percentage of sales price – Discounted pre-purchase 11
  • 13. How Are Channels Motivated or Incented?– Money! – what makes them the most?– Training– Marketing to the channel– SPIF 12
  • 14. Channel Economics: “Direct” Sales List Revenue Price End Consumer Discounts Cost of Goods EU Profit + SG&A + R&D (Supply Chain)Source: Mark Leslie, Stanford GSB 13
  • 15. Channel Economics: Resellers List Revenue Price End Consumer Discounts Cost of Goods EU Profit + SG&A + R&D Reseller (Supply Chain)Source: Mark Leslie, Stanford GSB 14
  • 16. Channel Economics: Distributors/Resellers List Revenue Price End Consumer Distributor Discounts Cost of Goods Profit + SG&A + EU Reseller (Supply Chain) R&DSource: Mark Leslie, Stanford GSB 15
  • 17. Channel Economics: OEM or IP Licensing ListYour Revenue Price End Consumer Cost of Distributor Distributor Discounts Master Goods Profit + SG&A + EU Reseller (Supply R&D Chain) Cost of Goods Profit + SG&A Reseller (Supply + R&D Chain)Your Product Becomes Your Customer’s Cost of Goods Source: Mark Leslie, Stanford GSB 16
  • 18. Example: Book Publishing NationalPublisher Printer Wholesaler Retailer Customer Distributor 17
  • 19. Book Publishing National Publisher Distributor Retailer Customer Wholesaler•Percent of 35% 15% 10% 40% Retail $7.00 $3.00 $2.00 $8.00 $20.00 • You get -35% of retail - the distributor gets 10% - the wholesaler gets 15% - the retailer gets 40% -less any discount they offer the customer 18
  • 20. Book Publishing Economics NationalPublisher Wholesaler Retailer Customer Distributor Allowances Wholesale costs Bills Markup Credit guarantees Payment guarantees Payment guarantees Return rights Credits Payments 19
  • 21. Book Publishing Delivery NationalPublisher Printer Wholesaler Retailer DistributorPrepare film Receive (content)  Schedules  Print Determine Merchandise orders allocations titles  Bundle counts  Film Deliver Sell orders magazines Establish Prepare Print and identity galleys ship Create magazines demand Dispose of Acknowledge returns returns 20
  • 22. Nature of Product Impacts Channel: Physical or Virtual? – Access to customers changes dramatically – Logistics related to product complexity – People as products 21
  • 23. Bits vs. Atoms Channel Web Physical BitsProduct Physical 22
  • 24. Product and Channel Are Bits Channel Web Physical  Rapid Agile and Customer development Bits  Fastest to acquire early customers and scaleProduct Physical 23
  • 25. Web 2.0 - Product/Channel Are Bits Channel Web Physical  Google  Twitter  Facebook Bits  Zynga  Cloud ServicesProduct Physical 24
  • 26. Product Is Bits, but Channel Is People Channel Web Physical  Rapid Agile and  Rapid Agile and Customer Customer development development Bits  Fastest to acquire early  Traditional sales customers and scale channel  May require installationProduct Physical 25
  • 27. Traditional Enterprise Software Channel Web Physical  Google  Microsoft  Twitter  SAP  Facebook  Oracle Bits  Zynga  Cloud ServicesProduct Physical 26
  • 28. Physical Products Sold Over the Web Channel Web Physical  Rapid Agile and  Rapid Agile and Customer Customer development development Bits  Fastest to acquire early  Traditional sales customers and scale channel  May require installationProduct  Rapid Customer development  Logistics, shipping and Physical manufacturing critical  Customer service 27
  • 29. Killing Traditional Storefronts Channel Web Physical  Google  Microsoft  Twitter  SAP  Facebook  Oracle Bits  Zynga  Cloud ServicesProduct  Zappos  Amazon Physical  Cafepress  Netflix  Consumer electronics 28
  • 30. The Factories May Be in China Channel Web Physical  Rapid Agile and  Rapid Agile and Customer Customer development development Bits  Fastest to acquire early  Traditional sales customers and scale channel  May require installationProduct  Rapid Customer  Longer customer development feedback cycle  Logistics, shipping and  May require large Physical manufacturing critical capital requirements for  Customer service scale 29
  • 31. We Still Make Things that Need Salespeople Channel Web Physical  Google  Microsoft  Twitter  SAP  Facebook  Oracle Bits  Zynga  Cloud ServicesProduct  Zappos  Cars  Amazon  Solar panels  Wind turbines Physical  Cafepress  Netflix  Bookstores  Consumer electronics  Consumer electronics 30
  • 32. Team Deliverable by Tomorrow• Talk to 10-15 potential channel partners • (Salesmen, OEM’s distributors, etc.)• What were your hypotheses about who/what your channel would be? Did you learn anything different?• Did anything change about Value Proposition?• Update your Lean LaunchLab & Canvas• Draw your channel diagram• Summarized in a 5 Minute PowerPoint Presentation
  • 33. Examples
  • 34. 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)
  • 35. Chronic Pain v4 FS Team Trade shows Faster relief Training Patients Formulary AcceptanceKOLs Clinical data Efficient patient FDAFoundations management and Clinicians Dosing flexibility Support CMS (Medicare)Advocacy Groups Access to high-valueOEMs therapies and Institutions IP pharmacoeconomics HospitalsWirelessDevelopers Proprietary pharmacoeconomics Pain clinics Payors/ICA knowledgeElectronic healthrecord providers Human Resources Product Dev Costs Unit sales Manufacturing Costs Support ServicesMarketing Costs FDA/Clinical Trials Bundled kits Electronic records
  • 36. Getting outClinicians • Dr. Stan Louie, Drug Formulation Expert (USC Pharmacy) • Dr. Giovanni Cucchiaro, Anesthesiologist (CHLA)Institutions/patients • 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 patchesRegulatory • Dr. Frances Richmond (Director Regulatory Science Program, USC)Entrepreneurs/ • Richard Hull (formerly at company selling Lapband)Industry
  • 37. Product flow/ChannelElectronic Partners/ Health Fluid Synchrony OEMS Records Electronic Support Pump + Bundled Records Services Controller Kits Hospitals (AnesthesiologistsPatients Neurosurgeons) Pain Clinic (Anesthesiologists Neurosurgeons)
  • 38. HospitalsPain Clinics 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
  • 39. Patient Care Flow (Now) Partners/ Fluid Synchrony OEMS Support Pump + Bundled Services Controller Kits Hospitals Surgery/Rx/ (Anesthesiologists Patient Discharged reprogramming Neurosurgeons) Pain ClinicTrial period/ Scheduled (AnesthesiologistsHome setting follow-up Neurosurgeons) Weeks/months Key factors: Reimbursement , state regulations
  • 40. Patient Care Flow (Proposed) Electronic Partners/ Health Fluid Synchrony OEMS Records Electronic Support Pump + Bundled Records Services Controller Kits Actionable feedback to doctors/institutions E-prescription / closing loop Hospitals Surgery/Rx/ (Anesthesiologists Patient Discharged reprogramming Neurosurgeons) Pain ClinicTrial period/ Scheduled (AnesthesiologistsHome setting follow-up Neurosurgeons) Weeks/months Days Key factors: Reimbursement , state regulations
  • 41. Regulatory considerations PMA 510K Trial size 100’s of patients 20-100 Costs Up to $100,000 per patient $10-50 MM $1-10 MM Time ~ 3-4 yrs + post ~ 2-3 yrs approval follow-on• 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)
  • 42. 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)
  • 43. Advanced Chemistry forPharmaceutical Progress Team: Kiel Neumann (EL) Stephen DiMagno (PI) Allan Green (Mentor)
  • 44.  PET is a non-invasive medical diagnostic technique for cardiac, brain, and tumor imaging GFP technology makes new (unknown) and known (but clinically inaccessible) [18F]-labeled radiotracers readily available Fast, multiplatform, high efficiency synthesis of these fleeting, precious agents. Initial target indications: pediatric neuroblastoma, Parkinson’s disease. 44
  • 45. The Business Model Canvas Technical AssistancecGMP manufacturer SOPs for precursors (Image Atlas) RadiopharmaciesRadiopharmacies and drugs Accessibility (RCY) FDA regulatory supportNuclear Medicine and Recruit clinical sites Purity Equipment producersRadiology In vivo animal studies Develop regulatory Speeddepartments PET/SPECT Prescribing physicians plan for pre IND meeting Multiplatform Technical assistance Sensitivity (nca) Radiologist who ID cGMP CRO Pharmaceutical Specific compounds perform studies Fund-raising development companies General Direct sales of IP methodology for precursor PoP data adding fluorine to Drug developers lead compounds of R&D and clinical IP interest studies presented in PoP data journals and meetings Radiologists Regulatory plan Understanding of Sales of precursor the regulatory through global finished process pharmaceutical distributor Sales of intermediates Contract cGMP precursor manufacture Salary, Rents Technology license Clinical trials Product license (royalty)
  • 46.  Face to Face meeting with president of small radiopharmaceutical company Face to face with a clinician at Memorial Sloan-Kettering Face to face with Global Production Manager of Molecular imaging for one of world’s largest radiopharmaceutical companies OncoKinib collaboration between Geurbet, OncoDesign, and Ariana pharmaceuticals Face to face meeting with head of R & D and International Production Manager from Linz, Austria Eckert and Zeigler – German PET modular synthesis provider Face to face meeting with Executive Director and CEO of Scott Tech Center in Omaha, NE Introductory teleconference to CEO of Innovation Accelerator 49
  • 47.  Significant Interest in our technology  Radiopharmacies want GMP product  No interest in GMP reagent preparation  Third-party manufacturers would use our developed synthetic pathways  Internal competition with one world radiopharmaceutical leader  Best to approach one of other two world leaders Scott Tech Center  Willing to offer free advice on startup strategy  Provided introduction to Innovation Accelerator  Offered introduction to Director of Venture Technology of one of world’s leading radiopharmaceutical companies 50
  • 48. The Business Model Canvas Technical AssistancecGMP manufacturer SOPs for precursors (Image Atlas) RadiopharmaciesRadiopharmacies and drugs Accessibility (RCY) FDA regulatory supportNuclear Medicine and Recruit clinical sites Purity Equipment producersRadiology In vivo animal studies Develop regulatory Speeddepartments PET/SPECT Prescribing physicians plan for pre IND meeting Multiplatform Technical assistance Sensitivity (nca) Radiologist who ID cGMP CRO Pharmaceutical Specific compounds perform studies Fund-raising development companies General Direct sales of IP methodology for precursor PoP data adding fluorine to Drug developers lead compounds of R&D and clinical IP interest studies presented in PoP data journals and meetings Radiologists Regulatory plan Understanding of Sales of precursor the regulatory through global finished process pharmaceutical distributor Sales of intermediates Contract cGMP precursor manufacture Salary, Rents Technology license Clinical trials Product license (royalty)
  • 49. • F-dopa iodonium intermediate • F-dopamine iodonium intermediate We provide accessibility Reagents •ABX Could license •Eckert & Ziegler precursor synthesis •GE MX module for TracerLabGMP Cassette or Components •Siemens Explora for incorporation in modules •TracerLab/ GE •Eckert & Ziegler Require GMP precursor •Siemens Explora (or cassette) to developGMP Compliant •Neoprobe Synthesizer •Synthra our product with their synthesizer •Siemens PETNet •GE Amersham Only want GMP •Cardinal Health PET •AAA precursor in modulesRadiopharmacy distributor •Iason without development 52