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Crossing the Rubicon:
Entrepreneurial education at the crossroads
Steve Blank
www.steveblank.com
@sgblank
We’ve learned a lot about entrepreneurship
Perhaps our curriculums should reflect what we’ve learned?
Agenda
1. What we used to believe / What we now know
2. Business Models and Customer Development
3. Class Example
4. The Evolution of the Curriculum
Part 1
What We Used to Believe
What We Now Know
What We Used to Believe
There is one type of startup and entrepreneur
What We Now Know
Startup
Lifestyle Startups Work to Live their Passion
• Serve known customer with known product
• Work for their passion
Small BusinessStartup
Small Business StartupsWork to Feed the Family
• Serve known customer with known product
• Feed the family
Small BusinessStartup
Exit Criteria- Business Model found- Profitable business- Existing team< $500K in revenue- Not venture-backable
Small Business StartupsWork to Feed the Family
• known customer known product
• Feed the family
Large Non-Profit
Social Startup
Social Entrepreneurship Startups
• Solve pressing social problems• Social Enterprise: Profitable• Social Innovation: New Strategies
• Not venture-backable
ScalableStartup
Large Company
Scalable StartupBorn to Be Big
Goal is to solve for: unknown customer and
unknown features
Search Execute
ScalableStartup
Large Company
Scalable Startup
Goal is to solve for: unknown customer and
unknown features
Search Execute
Exit Criteria- Business model found- Total Available Market > $500m- Can grow to >$100m/year- Can be Venture capital funded
ScalableStartup
$2 to $50M Acquisition
Buyable Startup
Goal is to solve for: Internet, Mobile, Gaming Apps
Search Sell
- Sell to larger company- Angel or early stage VC
Transition Large Company
ScalableStartup
Sustaining Innovation
• Existing Market / Known customer• Known product feature needs
Large Company Sustaining InnovationInnovate or Evaporate
Large Company Disruptive Innovation
New Division Transition Large
Company
Disruptive Innovation• New Market• New tech, customers, channels
Large Company Disruptive Innovation
New Division Transition Large Company
Disruptive Innovation• Build• Partner• Acquire - IP - Talent - Product - Customers - Business
What We Used to Believe
Startups are About Vision & Ideas
What We Now Know
Most visions are hallucinations
What We Used to Believe
Startups are a Smaller Version of a Large Company
What We Now Know
Startups Search Companies Execute
What We Used to Believe
Strategy
Start With an Operating Plan and Financial Model
All I Need to Do is Execute the Plan
All I Need to Do is and Make the Forecast
All I Need to Do is Execute the Plan
What We Now Know
Strategy
No Business Plan survives first contact with customers
Planning comes before the plan
Business Models
Business Models
Business Model Hypotheses
Search
Strategy
Execution
Operating Plan +Financial Model
What We Used to Believe
Process
We Built Startups by Managing Processes
Product Management
+
Waterfall Engineering
Product Introduction Model
Concept/Seed
Round
Product Dev.
Alpha/Beta Test
Launch/1st Ship
Tradition – Hire Marketing
Concept/Seed
Round
Product Dev.
Alpha/Beta Test
Launch/1st Ship
- Create Marcom Materials- Create Positioning
- Hire PR Agency- Early Buzz
- Create Demand- Launch Event- “Branding”
Marketing
Tradition – Hire Sales
Concept/Seed
Round
Product Dev.
Alpha/Beta Test
Launch/1st Ship
- Create Marcom Materials- Create Positioning
- Hire PR Agency- Early Buzz
- Create Demand- Launch Event- “Branding”
• Build Sales Organization
Marketing
Sales• Hire Sales VP• Hire 1st Sales Staff
Tradition – Hire Bus Development
Concept Product Dev.
Alpha/Beta Test
Launch/1st Ship
- Create Marcom Materials- Create Positioning
- Hire PR Agency- Early Buzz
- Create Demand- Launch Event- “Branding”
• Hire Sales VP• Pick distribution Channel
• Build Sales Channel / Distribution
Marketing
Sales
• Hire First Bus Dev
• Do deals for FCSBusiness Development
Tradition – Hire Engineering
Concept Product Dev.
Alpha/Beta Test
Launch/1st Ship
- Create Marcom Materials- Create Positioning
- Hire PR Agency- Early Buzz
- Create Demand- Launch Event- “Branding”
• Hire Sales VP• Pick distribution Channel
• Build Sales Channel / Distribution
Marketing
Sales
• Hire First Bus Dev
• Do deals for FCSBusiness Development
Engineering • Write MRD
• Waterfall • Q/A • Tech Pubs
Customer Problem: known
Product Features: known
Waterfall / Product ManagementExecution on Two “Knowns”
Requirements
Design
Implementation
Verification
Maintenance
Source: Eric Rieshttp://startuplessonslearned.blogspot.com
Customer Problem: known
Product Features: known
Waterfall / Product ManagementExecution on Two “Knowns”
Requirements
Design
Implementation
Verification
Maintenance
Source: Eric Rieshttp://startuplessonslearned.blogspot.com
What We Now Know
Strategy
More startups fail from a lack of customers than from a failure of product development
Startups go from failure to failure
Startups go from failure to failureThe ones that win are those that
learn from failure
Customer Development
Business Model Hypotheses
Strategy
Process Customer &Agile Development
Operating Plan +Financial Model
Product Management& Waterfall
Development
Search Execution
What We Used to Believe
Organization
Hire and Build a Functional Organization
What We Now Know
Organization
Founders run a Customer Development Team
No sales, marketing and business development
Business Model Hypotheses
OrganizationCustomer
Development Team, Founder-driven
Customer Development,Agile Development
Operating Plan +Financial Model
Product ManagementAgile or Waterfall Development
Functional Organization by Department
Search Execution
Strategy
Process
What We Used to Believe
Education
Entrepreneurial Education was about execution
Entrepreneurial Education was about execution
What We Now Know
Education
Entrepreneurial Education begins with the Search for a
business model
Business Model Hypotheses
Strategy
Organization Customer DevelopmentTeam, Founder-driven
Process Customer Development,Agile Development
Education Creativity/Innovation, Business Model Design, Customer Development, Startup team building,
Entrepreneurial Finance, Agile Development, Customer Funnel:
Get/Keep/Grow Market
Operating Plan +Financial Model
Product ManagementAgile or Waterfall Development
Functional Organization by Department
Organizational Behavior, HR Mgmt, Accounting,
Modeling, Strategy, Operations, Leadership,
Marketing, Manufacturing
Search Execution
Putting Search first is a radical change
It’s not just one more methodology
What We Used to Believe
Instructional Strategies
Cases and a Business Plans were good entrepreneurial teaching tools
Cases and a Business Plan were good teaching tools
What We Now Know
Instructional Strategies
~100 GOOTB connections
Experiential Immersion
Team-based Simulations
73
Business Model Patterns Replace Cases
Nespresso machines
retail mailorder
Nespresso.com
callcenter
Nespresso
stores
households
business
1 x machinesales
repetitive pod sales
distribution channels
coffeeproduction
facilites
production B2C distribution brand
marketing
brandpatents
machine
manufacturer
production
B2C
distributionbrand
marketing
Nespresso club
brandbrand
Nespresso pods
Business Model Competitions Replace Business Plan Competitions
Business Model Competitions Replace Business Plan Competitions
http://www.businessmodelcompetition.com/
Now imagine these classes virtual and networked independent of location
Business Model Hypotheses
Strategy
OrganizationCustomer DevelopmentTeam, Founder-driven
Process Customer Development,Agile Development
Education Business Model Design, Customer Development, Startup team building,
Entrepreneurial Finance, Agile Development,
Marketing
Instructional Strategies
Experiential, constructivist, learner-centered,
inquiry-based
Search
Operating Plan +Financial Model
Product ManagementAgile or Waterfall Development
Functional Organization by Department
Organizational Behavior, HR Mgmt, Accounting,
Modeling, Strategy, Operations, Leadership,
Marketing, Manufacturing
Case, Lecture, Small Group, Mentorship
Execution
Classes on Entrepreneurial Execution Follows Search
Business Model Hypotheses
Strategy
OrganizationCustomer DevelopmentTeam, Founder-driven
Process Customer Development,Agile Development
Education Business Model Design, Customer Development, Startup team building,
Entrepreneurial Finance, Agile Development,
Marketing
Instructional Strategies
Experiential, constructivist, learner-centered, inquiry-
based
Search
Business Model Hypotheses
StrategyOperating Plan +Financial Model
OrganizationCustomer DevelopmentTeam, Founder-driven
Process Customer Development,Agile Development
Product ManagementAgile or Waterfall Development
Functional Organization by Department
Education Business Model Design, Customer Development, Startup team building,
Entrepreneurial Finance, Agile Development,
Marketing
Organizational Behavior, HR Mgmt, Accounting,
Modeling, Strategy, Operations, Leadership,
Marketing, Manufacturing
Instructional Strategies
Experiential, constructivist, learner-centered, inquiry-
based
Case, Lecture, Small Group, Mentorship
Search Execution
Part 2
Business Models and
Customer Development
What’s A Company?
What’s A Company?
A business organization which sells a product or service in exchange for revenue
and profit
What’s A Startup?
A temporary organization designed to search
for a repeatable and scalable business model
A temporary organization designed to search
for a repeatable and scalable business model
A temporary organization designed to search
for a repeatable and scalable business model
A temporary organization designed to search
for a repeatable and scalable business model
A temporary organization designed to search
for a repeatable and scalable business model
A Startup aims to become a company
How Are Companies Organized?
How Are Companies Organized?
Companies are organized around Business Models
What’s a Business Model?
What’s a Business Model?
Value Proposition
What Are You Building and For Who?
What About My Idea/Technology?
What About My Idea/Technology?
Your idea/ technology is one of the pieces necessary to build a company.
It is part of the “Value Proposition”
Customer Segments
Who Are They?
Why Would They Buy?
What Job are They Trying to Get Done?
Channels
How does your Product Get to Customers?
Customer Relationships
How do you Get, Keep and Grow Customers?
Revenue Streams
How do you Make Money?
Key Resources
What are your most important Assets?
Key Partners
Who are your Partners and Suppliers?
Key Activities
What’s Most Important for the Business?
Cost Structure
What are the Costs and Expenses
images by JAM
CANVAS OVERLAYOFFER
CHANNELS
CUSTOMER RELATIONSHIPS
CUSTOMERSEGMENTS
REVENUE STREAMSCOST STRUCTURE
KEYACTIVITIES
KEYPARTNERS
KEYRESOURCES
But,Realize They’re Hypotheses
9 Guesses
Guess Guess
Guess
Guess
GuessGuess
Guess
GuessGuess
building block
building block
building block
building block
building block buildin
g block
building block
building block
building block
building block
building blockbuildin
g block
building block
building block
Business Model Canvas
Customer Development
Customer Development
The Process for Turning Hypotheses Into Facts
The Four Steps – The Startup Path
Customer Development
Customer Development
Test the Problem, Then the Solution
Hypotheses Testing and Insight
Customer Development
The Pivot
Customer Development is how you search for the model
CompanyBuilding
Customer Creation
Execution
Customer
Discovery
Customer
Validation
Pivot
Search
Customer Discovery
Web/Mobile Versus Physical
• Web/Mobile startups run faster
• Different process steps for web vs. physical
• Customer Relationships are radically different
Customer
Discovery
Customer
Validation
Pivot
Customer Discovery
Customer Validation
Customer Validation
Part 3
How Does this Really Work?
How Does This Really Work?
Lean LaunchPad Class
8 Weeks From an Idea to a Business
Business Model Hypotheses
Strategy
Organization Customer DevelopmentTeam, Founder-driven
Process Customer Development,Agile Development
Education Business Model Design, Customer Development, Startup team building,
Entrepreneurial Finance, Agile Development, Marketing
Instructional Strategies
Experiential, constructivist, learner-centered,
inquiry-based
Search
This Class
dentalOptics
Amit Desai, Aaswath Raman, Ashwin Madgavkar, Alok Vasudev
Interviewed: 72 people
Final Presentation
Revolutionizing dental diagnostics through non-invasive imaging
dentalOptics
The A-Team
Ashwin Madgavkar
MBA/M.S.
BCG, UT Austin
Amit Desai
Ph.D., Mat. Sci
Cambridge, NC State
Aaswath Raman
Ph.D., App. Physics
Microsoft, Harvard
Alok Vasudev
Ph.D., EE
UT Austin
Mentor: Ethan Bloch
dentalOptics
Dental lighting is ripe for innovation
dentalOptics
Original Idea : Inside-Out Dental Lighting
Bring the light-source inside the mouth
Provide better, more consistent illumination
dentalOptics
Overview
I. Understanding our Customers
II. Finding Customer & Value Proposition Fit
III. Building the Business: Channels, Partners & Regulators
IV. Introducing.. periOptics
dentalOptics
Overview
I. Understanding our Customers
II. Finding Customer & Value Proposition Fit
III. Building the Business: Channels, Partners & Regulators
IV. Introducing.. periOptics
dentalOptics
Version 0 The A-Team
• Dentists• Hygienist
s• Specialist
s
• Chains• Dental
schools• Hospitals
• Improved diagnostics
• Better customization
• Superior patient experience
• Lower price
• Personal service
• Training & demos
• Direct sales
• Trade shows
• Dental schools
• Product sales• Licensing (physical &
IP)• Accessory sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
dentalOptics
Getting out of the building
dentalOptics
Three major dentist archetypes
Care providers
“Bentley” dentists
“Chain” dentists
Most typical dentist• Primarily concerned with patient care• Worried about costs• Optimizes lifestyle and income
Uses technology to up-sell additional procedures• Typically in high-income areas• State-of-the-art facilities and technologies• Early adopter of dental devices
Equipment handled by purchasing department• Uses financial metrics to make decisions• Technologies standardized across all offices
dentalOptics
Version 0 The A-Team
• Dentists• Hygienist
s• Specialist
s
• Chains• Dental
schools• Hospitals
• Improved diagnostics
• Better customization
• Superior patient experience
• Lower price
• Personal service
• Training & demos
• Direct sales
• Trade shows
• Dental schools
• Product sales• Licensing (physical &
IP)• Accessory sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
Hypotheses Tested:
• Intra-oral lighting provides value for all dental professionals
• Channels
dentalOptics
Immediate changes• Current lighting was satisfactory for most uses
• However dentists expressed interest in better lighting for particular sets of procedures
dentalOptics
Immediate changes• Current lighting was satisfactory for most uses
• However dentists expressed interest in better lighting for particular sets of procedures
• Redid customer segmentation:
Segment by Procedure Length
dentalOptics
Version 0 The A-Team
• Dentists• Hygienist
s• Specialist
s
• Chains• Dental
schools• Hospitals
• Improved diagnostics
• Better customization
• Superior patient experience
• Lower price
• Personal service
• Training & demos
• Direct sales
• Trade shows
• Dental schools
• Product sales• Licensing (physical &
IP)• Accessory sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
dentalOptics
Version 0+ The A-Team
• Improved diagnostics
• Better customization
• Superior patient experience
• Lower price
• Reduced time
• Product sales• Licensing (physical & IP)• Accessory sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturing• Marketing• Sales• Service
• Stanford• IP• Human• Our network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties &
support• Legal
• Procedure length
- Short- Medium- Long
• Direct sales
• Trade shows
• Distributor
• Personal service
• Training & demos
• Continuing education
dentalOptics
Version 1 The A-Team
• Improved diagnostics
• Better customization
• Superior patient experience
• Lower price
• Reduced time
• Product sales• Licensing (physical &
IP)• Accessory sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Procedure length
- Short- Medium- Long
• Direct sales
• Trade shows
• Distributor
• Personal service
• Training & demos
• Continuing education
Hypothesis Tested:
• Lighting needs differ based on procedure length
dentalOptics
Procedure length learnings
Procedure length
Long (> 2 hrs)
Moderate (1-2 hrs)
Short (< 1 hr)
dentalOptics
Procedure length learnings
Procedure length
Long (> 2 hrs)
Moderate (1-2 hrs)
Short (< 1 hr)
Anesthesia
Patient comfort / movement no longer an
issue
Surgical microscope Loupe light Clamps
Existing lighting solutions
dentalOptics
Procedure length learnings
Procedure length
Long (> 2 hrs)
Moderate (1-2 hrs)
Short (< 1 hr) Root canals Crack detection Color matching
Identified key procedures:
Done by all dentists
Lighting critical
Segment by Procedure Type
dentalOptics
Version 1 The A-Team
• Improved diagnostics
• Better customization
• Superior patient experience
• Lower price
• Reduced time
• Product sales• Licensing (physical &
IP)• Accessory sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Procedure length
- Short- Medium- Long
• Direct sales
• Trade shows
• Distributor
• Personal service
• Training & demos
• Continuing education
dentalOptics
Version 1 The A-Team
• Product sales• Licensing (physical &
IP)• Accessory sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Direct sales
• Trade shows
• Distributor
• Personal service
• Training & demos
• Continuing education
• Improved diagnostics
• Superior patient experience
• Reduced procedure time
• Procedure type
- Root canal- Crack detection- Color matching
dentalOptics
$200 MM/yr US market size
• 180,000 dentists • 2300 visits per year
average• Consumable for each
patient• ~$5 cost per consumable• 10% of visits• $0-100 cost per tool• 20% of dentists
$25 B dental equipment industry
Source: US BLS, ADA, dentist interviews, industry research
$200 M serviceablediagnostic tool
market
TAM: $2B
dentalOptics
$200 MM/yr US market size
• 180,000 dentists • 2300 visits per year
average• Consumable for each
patient• ~$5 cost per consumable• 10% of visits• $0-100 cost per tool• 20% of dentists
$25 B dental equipment industry
Source: US BLS, ADA, dentist interviews, industry research
$200 M serviceablediagnostic tool
market
TAM: $2B
Consumables are key
dentalOptics
Version 1 The A-Team
• Product sales• Licensing (physical & IP)• Accessory sales• Consumable sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Direct sales
• Trade shows
• Distributor
• Personal service
• Training & demos
• Continuing education
• Improved diagnostics
• Superior patient experience
• Reduced procedure time
• Procedure type
- Root canal- Crack detection- Color matching
Key Learning:
• Consumable component drastically improves revenue potential
dentalOptics
Overview
I. Understanding our Customers
II. Finding Customer & Value Proposition Fit
III. Building the Business: Channels, Partners & Regulators
IV. Introducing.. periOptics
dentalOptics
Version 2+ The A-Team
• Product sales• Licensing (physical & IP)• Accessory sales• Consumable sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Direct sales
• Trade shows
• Distributor
• Personal service
• Training & demos
• Continuing education
• Improved diagnostics
• Superior patient experience
• Reduced procedure time
• Procedure type
- Root canal- Crack detection- Color matching
Hypothesis Tested:
• Lighting needs differ based on procedure type
dentalOptics
Segmenting by Procedure Types
Color matching
Crack detection
Root canal
More natural light
Multiple teeth at once
Increased visibility in tight spaces
Dentists
Reduce procedure time
ProcedureIntra-oral light
benefit
Improve Diagnostic Capability
dentalOptics
Best response: Transillumination
Color matching
Transillumination for Cracks
Root canal
Proactive detection vs. waiting for patient pain
Multiple teeth at once
Track crack/defect progress
Dentists
Reduce procedure time
ProcedureIntra-oral light
+ imaging benefit
Improve Preventative Diagnostic Capability
Drive patient loyalty and return visits
dentalOptics
Prototyping
Transilluminated tooth using fiber or LED source
dentalOptics
Prototypes
dentalOptics
Form & Function
formfunction
dentalOptics
Physical prototypes help!• Handing dentists a crude clay mockup got us better, more
actionable feedback
• A great way of gauging whether new functionality satisfies a need
dentalOptics
Interest, but not excitement
Dentists generally liked the prototype Key Takeaways
1
2
3
4
5
Imaging back teeth is essential
Market would be somewhat limited / niche
Dentist #
Interest in prototype
None Very PositiveNeutral
dentalOptics
Version 2+ The A-Team
• Product sales• Licensing (physical & IP)• Accessory sales• Consumable sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Direct sales
• Trade shows
• Distributor
• Personal service
• Training & demos
• Continuing education
• Improved diagnostics
• Superior patient experience
• Reduced procedure time
• Procedure type
- Root canal- Crack detection- Color matching
Hypothesis Tested:
• Lighting needs differ based on procedure type
dentalOptics
Version 2+ The A-Team
• Product sales• Licensing (physical & IP)• Accessory sales• Consumable sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Direct sales
• Trade shows
• Distributor
• Personal service
• Training & demos
• Continuing education
• Crack detection
• Reduced procedure time
• Improve preventative diagnostics
• Increase # of procedures
• Provide a patient record
dentalOptics
We were tipped off to a potentially larger diagnostic market:
Keeping our ear to the ground..
dentalOptics
“This would be a game changer!”
“A new standard of care”
Non-invasive gum disease detection
We were tipped off to a potentially larger diagnostic market:
Keeping our ear to the ground..
dentalOptics
This should get poked into your gums 192 times during a dental visit
…there must be a better way
dentalOptics
Version 2+ The A-Team
• Product sales• Licensing (physical & IP)• Accessory sales• Consumable sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Direct sales
• Trade shows
• Distributor
• Personal service
• Training & demos
• Continuing education
• Crack detection
• Reduced procedure time
• Improve preventative diagnostics
• Increase # of procedures
• Provide a patient record
Customer Insight:
• Periodontal imaging could be a larger market
• Periodontal imaging
dentalOptics
Periodontal care right nowConsiderable undertreatment
70% of offices don’t regularly do a full probe test of all teeth! Time & effort
50% of US population has mild-severe periodontitis, only 5-10% of are treated
“The number-one reason dentists are sued is failure to diagnose periodontal disease”*
30% of patients don’t feel the need for the recommended treatment*
Increases with aging population
*K. Esler, Sidekick (2009)
dentalOptics
Version 3+ The A-Team
• Product sales• Licensing (physical & IP)• Accessory sales• Consumable sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Direct sales
• Trade shows
• Distributor
• Personal service
• Training & demos
• Continuing education
• Crack detection
• Reduced procedure time
• Improve preventative diagnostics
• Increase # of procedures
• Provide a patient record
• Periodontal imaging
Hypothesis Tested:
• Periodontal imaging is of greater interest to dentists
dentalOptics
Version 3+ The A-Team
• Product sales• Licensing (physical & IP)• Accessory sales• Consumable sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Direct sales
• Trade shows
• Distributor
• Personal service
• Training & demos
• Continuing education
• Crack detection
• Accuracy
• Reduced time
• Patient comfort
• Increase # of procedures
• Improve records
• Patient education
• Reduced malpractice
• Periodontal imaging✔
dentalOptics
Version 3+ The A-Team
• Product sales• Licensing (physical & IP)• Accessory sales• Consumable sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Direct sales
• Trade shows
• Distributor
• Personal service
• Training & demos
• Continuing education
• Periodontal imaging
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Insurance companies
• Accuracy
• Reduced time
• Patient comfort
• Increase # of procedures
• Improve records
• Patient education
• Reduced malpractice
New hypothesis:
• Insurance companies could be strategic partners
dentalOptics
Overview
I. Understanding our Customers
II. Finding Customer & Value Proposition Fit
III. Building the Business: Channels, Partners & Regulators
IV. Introducing.. periOptics
dentalOptics
Version 4+ The A-Team
• Product sales• Licensing (physical & IP)• Accessory sales• Consumable sales
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Direct sales
• Trade shows
• Distributor
• Personal service
• Training & demos
• Continuing education
• Periodontal imaging
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Insurance companies
• Accuracy
• Reduced time
• Patient comfort
• Increase # of procedures
• Improve records
• Patient education
• Reduced malpractice
Hypotheses Tested:
• Insurance companies would embrace this technology
• FDA compliance is not prohibitive
dentalOptics
Key Partner: Insurance
“Periodontal probing is the single most inaccurate piece of data we get from dentists. Fraud and abuse are common”
Largest dental insurance provider in California
dentalOptics
Key Partner: Insurance
“Periodontal probing is the single most inaccurate piece of data we get from dentists. Fraud and abuse are common”
Dental Policy Committee • Meets regularly to evaluate new technologies• Determines which technologies will be added to annual
contracts based on efficacy and cost savings to insurance company
Willing to recommend use of new technologyNeed more clinical data, but are enthusiastic about the idea!
Largest dental insurance provider in California
dentalOptics
What we make
DentistDentalOptics
~$2000
Device cost (one time)
~$2.50 per patient
Disposables
dentalOptics
What the dentist normally makes
Dentist Patient
Insurance
Co-pay
Membership
$250
$250
Equipment / Variable Costs
Note: Assumes 50/50 copay-insurance split
dentalOptics
What we’d add for the dentist
Dentist PatientDentalOptics
Insurance
Co-pay
Membership
~$2000
$250
Device cost (one time)
$250
~$2.50 per patient
Disposables
Equipment / Variable Costs
Device creates
additional periodontal procedures
Note: Assumes 50/50 copay-insurance split
dentalOptics
Three classes of FDA Devices
Class I(eg, dental pick,
gloves, toothbrush)
Class II(eg, dental fillings,
ceramics, drills)
Class III(eg, stent,
implantable pacemaker)
Criteria FDA Requirements
Minimal health and safety risks, established precedent
Need to register with FDA but not get approval before putting it on the market
Presents safety and health risks that aren't completely controlled by GMP (good manufacturing processes)
Submit 510-K application to FDA, include detail about device, marketing materials, device safety features, and other paperwork
Invasive, inflammable, or presents other significant significant safety risks. Often times a new type of device
Very thorough process similar to drug approval. Requires clinical trails and mountains of paperwork
dentalOptics
Some regulatory riskDevice key risk:
misdiagnosisProxy suggests our
device will be class II
Intra-oral, non-invasive laser light caries (tooth decay) detector
Approved as class II medical device. Clinical tests conducted to prove accuracy
Device carries little direct risk• Intra-oral, non-invasive
probe • Uses non-harmful
wavelengths of radiationKey risk: misdiagnosis• Clinical evidence required to
establish efficacy
Source: Iowa Dental Supply
dentalOptics
Class II FDA approval process
• Construct device prototype
• Determine device diagnostic capabilities
• Begin FDA 510(k) documentation
• Enroll 1-2 periodontists in preliminary efficacy study
Feasibility study
0 18
93 6 12
15
Month
Class II device FDA trials and approval
• Determine predicate device(s)
• Enroll 4-7 sites and 10+ periodontists in study
• Fix critical end-points based on device capability (eg, 1 mm measurement error)
• Submit 510(k) to FDA and obtain approval
$200 K
30 patients
$200 - 400 K
200-400 patients
$1,000 – 2,000 K
1000-2000 patients
Without a predicate
Costs
Trial Size
dentalOptics
Version 4+ The A-Team
• Product sales• Licensing (physical & IP)• Accessory sales• Consumable sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Personal service
• Training & demos
• Continuing education
• Periodontal imaging
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Insurance companies
✔✔
• Direct sales
• Trade shows
• Distributor
• Accuracy
• Reduced time
• Patient comfort
• Increase # of procedures
• Improve records
• Patient education
• Reduced malpractice
Hypotheses Tested:
• Insurance companies would embrace this technology
• FDA compliance is not prohibitive
dentalOptics
Version 4+ The A-Team
• Product sales• Licensing (physical & IP)• Accessory sales• Consumable sales
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Direct sales
• Trade shows
• Distributor
• Personal service
• Training & demos
• Continuing education
• Periodontal imaging
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Insurance companies
• Accuracy
• Reduced time
• Patient comfort
• Increase # of procedures
• Improve records
• Patient education
• Reduced malpractice
Question asked:
• How do we sell our product?
dentalOptics
Private PracticeDentist
PurchasingDepartment
Big Distributors
InstitutionalDentist
Direct Sales
Channels
dentalOptics
Private PracticeDentist
PurchasingDepartment
Big Distributors
InstitutionalDentist
Direct Sales
Channels
80% Market Share30% Margin
dentalOptics
Private PracticeDentist
PurchasingDepartment
Big Distributors
InstitutionalDentist
Direct Sales
Channels
80% Market Share30% Margin
ContinuingEducationCourses
Magazines& Email
TradeShows
dentalOptics
Version 4+ The A-Team
• Product sales• Licensing (physical & IP)• Accessory sales• Consumable sales
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Direct sales
• Trade shows
• Patterson/Schein
• Personal service
• Training & demos
• Continuing education
• Periodontal imaging
• Manufacturers
• Resellers
• Schein/Patt.
• Marketers
• Trade organizations
• Insurance companies
• Accuracy
• Reduced time
• Patient comfort
• Increase # of procedures
• Improve records
• Patient education
• Reduced malpractice
dentalOptics
Version 4+ The A-Team
• Product sales• Licensing (physical & IP)• Accessory sales• Consumable sales
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Direct sales
• Trade shows
• Patterson/Schein
• Personal service
• Training & demos
• Continuing education
• Periodontal imaging
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Insurance companies
Hypothesis Tested:
• Value Propositions are strong enough to sell products
• Accuracy
• Reduced time
• Patient comfort
• Increase # of procedures
• Improve records
• Patient education
• Reduced malpractice
dentalOptics
Our Sales Pitch
dentalOptics
Patient experience is key
• Accuracy• Reduced time• Patient comfort• Patient education• Reduced malpractice exposure• Up-sell procedures• Improved record keeping
☐
Value Props
Cost Props$1000 $2000 $8000
“I’d write you a check today!”
“This seems reasonable”“We would have the discussion”
“It would be cost prohibitive”
Per patient consumable cost < $5
dentalOptics
Version 4+ The A-Team
• Product sales• Licensing (physical & IP)• Accessory sales• Consumable sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Direct sales
• Trade shows
• Patterson/Schein
• Personal service
• Training & demos
• Continuing education
• Periodontal imaging
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Insurance companies
• Accuracy
• Reduced time
• Patient comfort
• Increase # of procedures
• Improve records
• Patient education
• Reduced malpractice
dentalOptics
Version 4+ The A-Team
• Product sales• Licensing (physical & IP)• Accessory sales• Consumable sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Direct sales
• Trade shows
• Patterson/Schein
• Personal service
• Training & demos
• Continuing education
• Periodontal imaging
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Insurance companies
• Accuracy
• Reduced time
• Patient comfort
• Improved records
• Patient education
dentalOptics
Version 5 The A-Team
• Product sales• Licensing (physical & IP)• Accessory sales• Consumable sales
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Prototyping• Design• Manufacturin
g• Marketing• Sales• Service
• Stanford• IP• Human• Our
network
• Human resources• Manufacturing• Marketing• Sales
• Compliance• Warranties
& support• Legal
• Direct sales
• Trade shows
• Patterson/Schein
• Personal service
• Training & demos
• Continuing education
• Periodontal imaging
• Manufacturers
• Resellers
• Distributors
• Marketers
• Trade organizations
• Insurance companies
• Accuracy
• Reduced time
• Patient comfort
• Improved records
• Patient education
dentalOptics
dentalOptics
dentalOptics
dentalOptics
periOptics
dentalOptics
Our Product: periOptics
dentalOptics
Our Product: periOptics
$2000 per unit$2.50 per silicone sleeve
Distributed through:Patterson Dental & Direct
Imaging Resolution:< 1mm
dentalOptics
$400 MM annual total addressable market for Periodontal Diagnostic Device
Device sales Consumables Total0
50
100
150
200
250
300
350
400
450$400 MM
$320 MM
$75 MM
• Device cost - $2000• Amortized over 4 years
• $2.5 consumables per patient
• 128 MM patients per year
Total addressable market ($MM)
Source: Department of Health and Human Services
dentalOptics
Growth Plan
Feasibility study
Month
Class II device FDA trials and approval
$300 K $1.5-2 MCosts
Regulatory
ProductDevelopmentScale-up Preparation
Early Prototype Dev.
Planning with Manufacturers
Product Cycle I Product Cycle II
0 24
6 12
18
dentalOptics
Growth Plan
Feasibility study
Month
Class II device FDA trials and approval
$300 K $1.5-2 MCosts
Regulatory
ProductDevelopmentScale-up Preparation
Early Prototype Dev.
Planning with Manufacturers
Product Cycle I Product Cycle II
$500*
Unit Economics
Cost of Goods
Margin
$900 $600
Distributor
Revenue
Cost to Dentist:$2000
*At scale: 10K units
0 24
6 12
18
dentalOptics
Next Step: Evaluate Technical Options
Optical Acoustic
function
dentalOptics
Lessons Learned
Physical prototypes engage potential customers
Consumables are key to revenue models in dental devices
Listen to your customers for new directions
Caregivers don’t think exclusively like businesspeople: the patient experience is paramount
“Hi, I’m a Stanford student…” gets you a conversation with pretty much anyone
Lean LaunchPad – Student Selection• Students apply as a team
– Their application is their business model canvas– Interdisciplinary business and engineering teams
• We select for teams, not ideas
Lean LaunchPad - Class Organization• Teams present every week
– Teaching team critiques
• Teams spend tens of hours outside the classroom– They keep a blog of their customer discovery
• Lectures are minimalist• Syllabus and slides on-line
Example of a Lean LaunchPad Team Blog
Lean LaunchPad Class
National Science Foundation
Lean LaunchPad Class
National Science Foundation
We’ll Teach ~175 Teams in 2012
Part 4
The New Entrepreneurship Curriculum
This is Not about One Class
It Changes Everything
It Changes Everything
Undergraduate/GraduateTechnology Startups, Small Business Startups,
Corporate Entrepreneurship
How?
Building the New Curriculum
Step 1:Decide what type of Entrepreneurship
you’re teaching
Step 1:Decide what type of Entrepreneurship
you’re teaching
Small business? Social? Scalable? Buyable? Corporate?
Step 2:Embrace Search Versus Execute
Step 2:Embrace Search Versus Execute
It drives the new curriculum
Step 3:Start By Teaching the
Business Model Canvas
Step 3:Start Teaching the Canvas
It’s the basics for “hypotheses”
Step 3:Start Teaching the Canvas
Undergrads to graduates
Step 4:Start Teaching Customer Development
Step 4:Start Teaching Customer Development
It’s the basics for “search”
Step 4:Start Teaching Customer Development
Level of intensity can vary – but getting out of the classroom is the key
Step 5:Move Teaching the Plan
Step 5:Move Teaching the Plan
Operating Plans come after the search
Step 5:Move Teaching the Plan
Business Plan competitions do not teach real-world skills
Step 6:Teams are more important then the
idea
Step 6:Teams are more important then the
idea
Teach Teamwork via immersion and simulation
Step 7:Get Your Classes On-line
Step 7:Get Your Classes On-Line
This is the year this stuff works
Step 8:Once On-line – Network the Students
We’re Building an E-School
We’re Building an E-School
Our Own Entrepreneurship Curriculum, not a derivative
ScalableStartup
Large CompanyTransition
Business School
Business School Versus Entrepreneurship School
Courses- Managerial Finance/Accounting- Managing Groups and Teams- Financial Accounting- Operations- Modeling for Optimization- Global Value Chain Strategies
ScalableStartup
Large CompanyTransition
Business School Versus Entrepreneurship School
Entrepreneurship School
- Creativity and Innovation- Business Model testing- Customer Development- Agile Development- Startup Metrics- Operating plans & Financial Models
Business School
-Managerial Finance/Accounting- Managing Groups and Teams- Financial Accounting- Operations- Modeling for Optimization- Global Value Chain Strategies
Why Do We Do This?
Make Your Lives Extraordinary