Thursday, February 21, 2013

Scientific Method on Entrepreneurial Steroids: A Process for Clinician-Led Value Discovery through Fusion of Pivotal Tracker + Innovation Accounting

Warning: This post is relatively technical and is written for audiences familiar with lean methodology and innovation accounting. To get caught up, read Eric Reis’ “The Lean Startup,” Ash Maurya’s “Running Lean,” or just DM @andreyostrovsky.

My last post explored the risks inherent in creating a hospital-based startup incubator. Assuming hospital leadership recognizes that the reward outweighs the risks of an incubator, the next challenge is addressing a type of risk that is universal to any startup: the risk of investing in a startup that may or may not create any value, social or commercial. In order to mitigate that risk, a process needs to exist to first identify and then measure risk. In my attempt to systematize and simplify a value-discovery process for clinician-innovators, I conducted a survey of technologies and heuristics that would appeal to clinical-scientists. My criteria for these solutions were: 1) grounded in the scientific method, 2) visual, and 3) analytical.[1,2] The conclusion of my review of the technology ecosystem was a fusion of a well designed technology ( and a groundbreaking approach called “Innovation Accounting”. [3-5]

Innovation accounting is a process that keeps track of tests of risk and/or value. [5] It is essentially multiple nested layers of the scientific method. The outer layers are big picture tests that help to define the clinician-innovator’s vision. Deeper layers of testing reveal the strategy needed to achieve that vision. And at the core of this onion of value are many small, fast, inexpensive hypothesis tests that refine the ultimate product or service that executes the vision through the aforementioned strategy.

Ash Maurya describes the purpose of innovation to be the elimination of uncertainty about the riskiest part of a (social or commercial value-generating) business model. With respect to hospital-based innovation, this approach is useful in answering a basic question: is the problem that a scientist is trying to solve actually a problem worth solving?

I apologize in advance for not fleshing out the details or laying sufficient groundwork for such expansive topics, but in the interest of time, I will get straight to the guts of the matter. Pivotal tracker outlines a digital Kanban board (for those QI folks among you, please see “Toyota manufacturing” for more info on the QI corollaries). The Kanban board of Pivotal Tracker can be used to outline what tests need to be performed, when to perform them, and how many of them need to be performed to ultimately discover problem-solution fit (whether a problem is worth solving to the people having the problem) or product-market fit (whether the people having the problem are willing to pay enough for your solution to make a business viable). [6]

The first step in applying innovation accounting through Pivotal Tracker is clarifying the clinician-innovator’s vision, such as cure cancer or eliminate health disparities; big picture stuff! Ash Maurya’s lean canvas is a great tool to efficiently (20 minutes!) codify that vision and transform it into a quick and dirty business model. [5] Next, the biggest risks to achieving that vision need to be identified within the subsections of the lean canvas. Here is where
Pivotal Tracker comes into play! The component parts of the lean canvas (Problem, Solution, Value Prop, etc) become “Epics” within Pivotal Tracker. Each risk within each subsection of the lean canvas business model will become a separate “Story” within each “Epic” of Pivotal Tracker. Then each risk-“Story” is tested through the scientific method to achieve the end result, which results in validated learning.

The really neat intersection of Pivotal Tracker and innovation accounting is how the “Points” systems of Pivotal Tracker can be used to track the progress of innovation. Each risk-“Story” in Pivotal Tracker gets points assigned to it. The number of points assigned to a test depends on the amount of risk that element of the business model bears on the clinician-innovator's strategy to achieving their vision. Pivotal Tracker has a great function where it can calculate how quickly the clinician innovator completes their hypothesis tests about the business model. In other words, the function can determine the velocity of eliminating risk. Not to dork-out and invoke calculus, but the area under that curve is the total quantity of risk eliminated over time. And if the hospital CFO or an external investor is interested in quantifying progress of a startup incubated within a hospital, then what better way other then just gauging how quickly the clinician-innovator is eliminating the risk of their startup failing!

Pivotal Tracker mixed with innovation accounting makes a lot more cool innovation chemistry. But I go on service in four hours and should get some rest. I welcome any feedback. And I hugely thank the makers of Pivotal Tracker and Ash Maurya and Eric Reis for inspiring this post.

1. For the full technology review, please DM @andreyostrovsky.
2. For a review of technology as it applies to community health assessment and strategic planning, please see my 2011 JPHMP article.
3. PivotalLabs. Pivotal Tracker.
4. Eric Reis. The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. 2012
5. Ash Maurya. Running Lean: Iterate from Plan A to a Plan that Works. 2012.
6. Brant Cooper & Patrick Vlaskovits. The Entrepreneurs Guide to Customer Development. 2011.

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