Wednesday, October 2, 2013

Digital Health Startup Entrepreneur’s Cheat Sheet: #CustomerDevelopment #LeanStartup #InnovationAccounting #DesignThinking #PirateMetrics

As a physician, I carry around cheat sheets to condense critical information into an easily accessible stack of pocket-sized, laminated tri-folds. They include important numbers to call, medications to use in a code-blue situation, and antibiograms to help select the right drug for the right bug. This is all information I know how to use but may not be able to regurgitate off the top of my head, especially in life or death situations.

As an entrepreneur, there are no such cheat sheets. There’s no pamphlet or app that condenses the essentials of Customer Development by Cooper and Vlaskovitz, Lean Startup by Reis, Innovation Accounting by Maurya, Design Thinking by McCarthy and Berkowitz, and Pirate Metrics by McClure. Although a startup may not be as tenuous as a critical airway, easily accessible information on startup techniques can help an entrepreneur focus on the process rather than on the technicalities of entrepreneurship.

I heavily borrowed from the above mentioned thought leaders in entrepreneurship to create the following cheat sheet.

The x-axis of this cheat sheet is oriented to the stages of customer development. On the left is the beginning of the value discovery process: problem/solution fit. On the right is scale, every entrepreneur's goal. Of note, I switched the wording order of product/market fit to market/product fit to show an evolution from problem to market and solution to product.

Just above the axis are a series of build-measure-learn cycles from Lean Startup. The build-measure-learn cycles are only valuable in the context of the type of risk they are designed to test and eliminate, which is shown above the build-measure-learn cycles in the risk-matrix.

Based on Maurya’s "Running Lean" and "Innovation Accounting" literature, the three major risks to the business model (product, market, customer) are outlined with their respective “critical questions.” The questions along each type of business model risk are organized based on a progressive sequence of steps including understanding the problem, defining the solution, and qualitatively and quantitatively validating the elements of the business model. Due to space limitations, I did not incorporate the lean canvas, which itself is a very powerful tool. These elements of innovation accounting have corollaries to elements of design thinking such as "empathize", "ideate", etc (italicized above).

As build-measure-learn cycles are completed, the questions about business model risk in the innovation accounting matrix increasingly become answered. The learning from these experiments helps to inform best practices for optimizing the conversion funnel shown at the top of the image.

An important note about this presentation of the conversion funnel is that in enterprise level sales in healthcare, I have found that the “retention” and “revenue” sections appear transposed. When selling into payers or providers, the customer is often retained first for a pilot then they pay some time later. And referrals only come later in the sales cycle.

As startup teams go through build-measure-learn loops to conduct experiments that eliminate risk to the business model and inform the conversion funnel, they will hopefully efficiently move toward the right side of the x-axis.

Moving beyond cheat sheets, startup entrepreneurs would greatly benefit from a set of validated, peer-reviewed best practices in digital health innovation to guide them to creating the next disruptive technology.

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