Lean Startup for Healthcare: Workshop at Healthbox

Lean Startup for Healthcare

Rocket Fuel
For Your Product
Growth Bernhard Kappe
Founder and CEO
Lean Startup Strategy bkappe@pathf.com
User Experience Design 312.372.1058 x 6002
Agile Software Development @bernhardkappe
Customer Acquisition and Retention pathﬁndersoftware.com/blog

http://pathﬁndersoftware.com
Innovate Products Faster with Lean + UX + Agile

Agenda
• Introduction
• Lean Startup 101
• The Lean Startup Path
• Risks in Healthcare
• Mentors and Advisors
• Questions


Pathﬁnder: 300+ Successful Releases


Healthcare Clients


+

• Design Strategy and Research
• Medical Systems Design and Development
‣ Medical Devices
‣ Integration, Analytics and Clinical Decision Support
‣ Web and Mobile Interfaces
• Risk Mitigation and Quality Management


Lean Startup
• A Product Management Approach for New
Products
• Accepts Situation of Extreme Uncertainty
• Focuses on Rapidly Reducing Risks


9 Out of 10 New Products Fail


Why Do They Fail?
• New Product Uncertainty: Unknown Problem,
Unknown Solution, Unknown Customer
• The Path to Disaster
‣ Business Plan Built on Untested Assumptions
‣ Market Research Serves to Support Your Assumptions
Rather than Validate Them
‣ Scale Based on the Business Plan
‣ Lack of Customers and Markets
‣ Change Business at Scale (Slow and Expensive)
‣ Run Out of Money


Product/Market Fit
• The point at which you know you can
scale proﬁtably
‣ The customer is willing to pay for the product.
‣ The Unit Cost Per Customer < Unit Revenue Per
Customer
‣ There’s sufﬁcient evidence indicating the market is large
enough to support the business.
‣ The sales model is repeatable and scalable


Product/Market Fit Benchmarks
• (Sean Ellis) 40% of paying customers
would be very disappointed without your
product
• Net Promoter Score Over 30
• Lifetime Value Per Customer > Customer
Acquisition Cost * 3 (or LTV/3 > CAC)


Steve Blank
• Companies that scaled
before they get to
product/market ﬁt
tended to fail.
• Companies that scaled
after they get to
product/market ﬁt
tended to succeed.


Mark Andreesen

Life Before Product/Market Fit: Your goal is to get to
product/market ﬁt any way you can.

Life After Product/Market Fit: Your goal is to scale.


Your Job as an Entrepreneur:

Discover a Business
Model that works
before you run out of
Money and Time.
(Then scale it.)


Customer Development
Search Execution


Customer Discovery
• Question Your Assumptions
• Engage with your customers in specific ways
that test those assumptions:
‣ “Get Out of the Building” and test your core customer-problem
solution assumptions.
‣ Define and build Minimal Viable Products (MVPs) that test
technological or market risk (the willingness of customers to pay
for a specific set of features)
‣ Document and test your assumptions on the mechanics of your
business ecosystem/business model
‣ Create a value path for mitigating high risk items first in the
hopes of making major pivots as early as possible.


Customer Validation
• Get to Product-Market Fit
• Business Model Validation
• Sales and Marketing Road Map


Lean Startup Principles
• A Business Model, Not a Business Plan
• Fast Learning Loops: Build-Measure-Learn
• Learning Japanese: Genchi Genbutsu
• MVP - It’s Not What You Think


1. A Business Model, Not a
Business Plan


No business plan
survives
the ﬁrst
customer
contact


Questions Your Assumptions

• Is this problem worth solving?
• Who’s problem are you solving?
• How are they solving it now?
• Does anyone care about your solution?
• Will they buy it?
• How do you create value for your customers?
• How will you grow?
• What’s your unfair advantage?
• What channels will you use to get to your customers?
• What are your acquisition costs per customer?
• What is the lifetime value of your customer?
• What’s your unit cost model? Unit revenue model?


Lean Canvas
Problem Solution Unique Value Unfair Customer
Proposition Advantage Segments
Top 3 Problems Top 3 features that
address the Single, clear, Can’t be easily Target Customers
problem compelling copied or bought
message why you
are different and
worth buying
Key Channel
Activities
Path to customers
Activity that drives for marketing and
acquisition/ sales
revenue

Cost Structure* Revenue Model*

•Customer acquisition costs (Unit, per customer) •Revenue Model
•Distribution costs •Lifetime Value (Unit- per customer)
•Hosting •Revenue
•People, etc. •Gross Margin


• Business Model Resources
‣ SteveBlank.com
‣ Osterwalder: Business Model Generation
‣ Maurya: Running Lean
• Business Model Tools
‣ Paper/Whiteboard/Post-Its
‣ Keynote/Powerpoint
‣ Lean Canvas (http://leancanvas.com/)
‣ Business Model Toolbox iPad App
(http://www.businessmodelgeneration.com/)
‣ Lean Launch Lab
(https://www.leanlaunchlab.com/)


2. Fast Learning Loops


Fast Learning Loops


3. Learning Japanese:
Genchi Genbutsu


Genchi Genbutsu =
Go To The Source
(Get Out of the Building)


4. MVP (Minimum Viable Product) -
It’s Not What You Think!


Example MVPs
• Dropbox: Smoke Test
• Egyptian Democracy Movement: Mini
Demonstrations
• GLIF: Kickstarter Campaign, 3D Print +
Video
• eSpark: Paper Instructions and Tests
(Concierge MVP)
• Groupon: Wordpress Blog, Widget from The
Point, PDF Coupons via email.


More on MVP

• Not one snapshot,
but a progression of
experiments


The Lean Startup Path


Customer/Problem Hypotheses
Top 3 features that Proposition Advantage Segments
Top 3 Problems address the Can’t be easily
problem copied or bought
Single, clear, Target Customers

? ?
compelling
message why you
are different and
worth buying

? Key
Activities
Channel
Path to customers ?
Activity that drives
acquisition/
? for marketing and
sales
revenue

? ?
Cost Structure Revenue Model

•Customer acquisition costs •Revenue Model
•Distribution costs
•Hosting
? •Lifetime Value
•Revenue ?


Problem Interviews
• Customer
Demographics
(Discover 1 4
Subsegments)
• Validate Their Top Three
Problems 2
5
• Discover New Problems
• Rank the Problems 3
• How Do They Solve
Them Now?


Guidelines for Interviews
• There are no right or wrong answers
• Ask open-ended questions
• Don’t ask leading questions
• Don’t ask if they will use something/some
feature
• Keep a straight face, always
• Find out why
• Remember to thank them


Personas and Goals Workshop
Who: UXD, PM, Visual Designer, Lead Developer, Client

• Determine the universe
of people that are
using or inﬂuencing
the use of the product
• Persona is a
“representative” for
each type of user
• Allows for easy
reference in future
discussions
• Includes stock photo,
goals, major tasks, etc.


Solution Hypotheses
Top 3 features that Proposition Advantage Segments
Top 3 Problems address the Can’t be easily
problem copied or bought
Single, clear, Target Customers

? ?
compelling
message why you
are different and
worth buying

? Key
Activities
Channel
Path to customers ?
Activity that drives
acquisition/
? for marketing and
sales
revenue

? ?
Cost Structure Revenue Model

•Customer acquisition costs •Revenue Model
•Distribution costs
•Hosting
? •Lifetime Value
•Revenue ?


Solution Design


Workflows Workshop
Who: UXD, PM, Visual Designer, Lead Developer, Client

• Determine all of
the workflows
for each
persona.
• No activity
should reside
outside of a flow.


Prototyping
• Way to get feedback on ideas before they are
completely set
• Much cheaper to modify a prototype than real
code
• People tend to give better feedback if it’s not
completely polished
• Just enough information to get your point
across and test key features
• Don’t focus on colors, layout, low-level
interactions

Types of Prototypes
• Paper prototype
• Clickable pdf
• HTML
• Foam blocks


Solution Interviews
• Recap Demographics
and Problem
• Describe and Show 1 4
Solution (don’t sell it!)
• Does it Resonate?
• What’s most important,
2
5
what’s missing, what can
you take away?
• How do they ﬁnd out 3
about solutions to this 6
problem?
• Will they pay $X?


Drill down to Minimum Viable
Product (MVP)

1 4

2
5
X
3
X 6


Customer Discovery

Business Model Problem
Generation Interviews

MVP

Solution Solution
Design Interviews


When Do You Stop Solution Interviews?

• Not Learning Anything New
• Prototyping takes too long


Development
• It’s Expensive
• Need Developers
• Do cheaper, faster
experiments ﬁrst
• Need to deliver
small experiments


Cowboy Coding
• It’s Fast
• It’s Cheap (for a
while)
• It’s not
maintainable
• Be prepared to
throw it out


Lean Startup: Two Fast Feedback Loops


Customer Validation
The Path to Product Market Fit
9000

Customer Acquisition Cost
You Are Here Customer Lifetime Value/3
6750

4500

You Need to Get Here!
Product/Market Fit:
2250
LTV/3 >= CAC

0
Month 1 Month 2 Month 3 Month 6 Month 5 Month 6 Month ? Month 8 Month 9 Month 16 Month 11 Month 12


Post Launch Goal:
• Increase LTV and Decrease CAC


Post Launch Goal:
‣ Increase LTV


Post Launch Goal:
‣ Increase LTV
• Improve value to customer


Post Launch Goal:
‣ Increase LTV
Add features


Post Launch Goal:
‣ Increase LTV
Add features
Improve Features


Post Launch Goal:
‣ Increase LTV
Add features
Improve Features
Remove features


Post Launch Goal:
‣ Increase LTV
Add features
Improve Features
Remove features
• Find and foster loyalty
behaviors


Post Launch Goal:
‣ Decrease CAC ‣ Increase LTV
Add features
Improve Features
Remove features
behaviors


Post Launch Goal:
• Changes to messaging • Improve value to customer
Add features
Improve Features
Remove features
behaviors


Post Launch Goal:
• Changes to marketing Add features
channels
Improve Features
Remove features
behaviors


Post Launch Goal:
channels
Improve Features
• Does the Experience
Match the Marketing? Remove features
behaviors


Post Launch Goal:
channels
Improve Features
• Does the Experience
Match the Marketing? Remove features

• Changes to Optimize • Find and foster loyalty
Customer Acquisition behaviors
Funnel/Experience for
New Users


Post Launch Fast Feedback Loops

• You have real users and precise usage data
on individuals - analyze it!
• Make small changes fast (hours, not weeks
to get into production)
• When you make changes - A/B test (or do
multivariate if you have big enough
volumes.)


Metrics for Pirates
• Acquisition
‣ Users come to site from various channels
• Activation
‣ Users enjoy 1st visit: "happy" experience
• Retention
‣ Users come back, visit site multiple times
• Referral
‣ Users like product enough to refer others
• Revenue
‣ Users conduct some monetization behavior


Build Metrics Into Your MVP


Tool: KISSmetrics


Feedback
• What are users doing?
• What aren’t they doing?
• Where do they seem to be having
problems?
• What else do they want?
• Why?


Feedback - What users are (& aren’t) doing

• Acquisition and retention funnels,
interventions
• Cohorts
• A/B or multivariate testing


Feedback
• Feature Requests - User Voice
• Net Promoter Score - KISSinsights
• % Who Would Be Very Disappointed
Without Your Product.


Feedback - Why users are behaving as
they are
• Usability testing
‣ what users as they use the product
‣ have them talk out loud
• ﬁnd out why they are doing things
• what they are looking for
• what they expect to see


Feedback
• Continuous Deployment: roll small tests
into production in hours, get feedback
• Bigger feature changes, new features - use
agile
• Consider adding “Validated” to stories
being done


Split Testing Tools:


Split Testing Tools


Feedback Tool


Common Mistakes
• Too Broad a Segment
• Not a Big Enough Problem
• Not a Big Enough Market
• Don’t Test the Riskiest Assumptions First
• Surveys Instead of Interviews
• Mix Problems and Solutions
• Confuse Users and Customers
• Build Too Much (Fat Experiments)
• Don’t Test Revenue Model Early Enough
• Stop Experimenting When You Have Customers (No Metrics and
no qualitative feedback)
• No UX and No Agile


10 types of innovation: move beyond products to win

67


5. Product performance
basic features, performance and functionality

6. Product system
extended system that surrounds an offering

7. Service
how you service your customers

Offering
Product Product Service
performance system

67



6. Product system

7. Service

Process. Offering
Enabling Core Product Product Service
process process performance system

3. Enabling process
assembled capabilities

4. Core process
proprietary processes that add value

67



6. Product system

7. Service

Process. Offering Delivery
Enabling Core Product Product Service Channel Brand Customer
process process performance system experience

8. Channel
how you connect your offerings to
3. Enabling process your customers

9. Brand
how you express your offering’s
4. Core process benefit to customers

10. Customer experience
how you create an overall
experience for customers

67


1. Business model 5. Product performance
how the enterprise makes money basic features, performance and functionality

2. Networking 6. Product system
enterprise’s structure/ extended system that surrounds an offering
value chain
7. Service

Finance Process. Offering Delivery
Business Networking Enabling Core Product Product Service Channel Brand Customer
model process process performance system experience

8. Channel
how you connect your offerings to
3. Enabling process your customers

9. Brand
how you express your offering’s
4. Core process benefit to customers

10. Customer experience
how you create an overall
experience for customers

67

Health insurance and managed care

69

Key value chain areas--healthcare

Patient

70

Physicians and
Key value chain areas--healthcare surgeons

Hospital
systems

Patient

Health insurance
& managed care

70

Physicians and
Key value chain areas--healthcare surgeons

Pharmaceuticals

Hospital
systems
Medical
appliances Patient

Health insurance
& managed care
Medical
equipment

70

Healthcare Challenges
• Complex Ecosystems
• Lots of Complex Knowledge Domains
• Lots of Regulations
• Important Stakeholders Are Hard to Reach
• Getting to Product/Market Fit Can Be Expensive


Mitigation Strategies
• Understand the Landscape
• Lean Hypothesis Testing is Even More Essential
• Go To the Source/Get Out of the Building
• Start with High Risk Items
• Get Advisors and Mentors, and Leverage Them
‣ Domain and Ecosystem Knowledge
‣ Introductions, Access to Customers (for Research)
‣ Regulatory Knowledge
‣ Entrepreneurial Experience


More on Advisors and Mentors
• Get Them
• Use Their Network (But Not To Sell)
• Communicate With Them
‣ Weekly Summary, Asks
‣ Lean Launch Lab


https://www.leanlaunchlab.com/


Startup Scoreboard
How do investors, employees, advisors and partners evaluate a startup?

Prioritized Criteria Risk Traction Metrics Value

Low Proﬁt High

1.Traction Revenues
2.Team Pilot Customers

3.Social Proof Non-Paying Customers

4.Model High Validated Hypothesis Low

Idea/Non-Validated
Too Hypothesis
High


Resources


Resources
• steveblank.com
• startuplessonslearned.com
• chicagoleanstartup.com
• pathﬁndersoftware.com/category/lean-
startups/


Lean Startup for Healthcare: Workshop at Healthbox