How to apply the lean startup approach, MVP, experimenting, testing hypotheses, pivoting, questioning assumptions, learning and failing fast and finding product-market fit within eHealth's regulative markets?

1. Lean startup
in eHealth
5/2015
Pauliina Smeds, Forum Virium Helsinki
Jaakko Ikävalko, Forum Virium Helsinki

2. The lean startup model aims at
increasing the odds for
success for startups,
by reducing the market
risks

3. The goal is to
eliminate wasteful and
inappropriate traditional
new product development
practices

4. This means among others
not writing elaborate
business plans

5. Also, this signifies
avoiding expensive
product trials,
launches and failures

6. Consequently, one goal is to
diminish the need
for high level of
initial funding

7. The key methods of lean startup philosophy are
• business-hypothesis-experimentation
• iterative product releases
• validated learning

8. The objective for experimentations, iterations & learning is to
guide new ventures to
only launch products that
customers actually want

9. In the lean startup approach, a startup is viewed as
an experiment within
the context of
massive uncertainty

10. a startup doesn’t know
who is the customer or
what is the business model
Extreme uncertainty: in the beginning both the problem and the solution
are unknown. Thus, in the beginning,

11. Yet,
a startup exists only to
create a new sustainable
business model

12. The primary goal is to
discover a business
model that works before
running out of money &
time. And then scale it.

13. The business model or the scaling of a business should not be based
on assumptions but instead be
built on tested
hypotheses and
validated learning

14. In the search for a sustainable business model, it’s crucial
that before running out of money, the startup has the ability to either
pivot or persevere

15. Pivoting is productive failure for a startup.
Pivoting signifies learning something useful.
Pivoting means staying
grounded in the initial vision,
but changing one dimension
of the business at a time.

16. A startup should always consider
how many
opportunities
to pivot is left

17. Therefore, it is especially essential to
reduce time
between pivots

18. This is done by
accelerating validated learning by the
build-measure-learn feedback loop

19. Most startups are drawn apart by two approaches of building a product
when maximizing the chances for success
building the most perfect product
or
releasing early, releasing often

20. minimum viable product
(MVP) is a synthesis
of these two extremes

21. Most startups consider an MVP too big: including too many features.
MVP should
contain only critical
features

22. In order to deliver an MVP
a startup needs to be
willing to iterate and
experiment

23. An easy formula
what you think
an MVP is,
cut it in half

24. Customer feedback loops
during product development
help to eliminate features or
products that the market doesn’t
want.

25. Customer
Discovery
Problem-
Solution fit
Proposed
MVP
Proposed
Funnel(s)
Customer
Validation
Product
Market Fit
Business
Model
Sales & Marketing
Roadmap
Customer
Creation
Scale
Execution
Company
Building
Scale
Organization
Scale
Operations
Customer Development
Source: Steve Blank`s Customer Development by Brant Cooper; custdev.com
Pivot

26. Experimenting means testing the ideas against reality.
experimenting is NOT
about asking the
customers

27. Instead,
experimenting means
testing hypothesis, setting
metrics and measuring
how customers behave

28. Setting up the metrics requires also
identifying what is crucial
in order to establish a
sustainable business
model

29. Questioning the assumptions
• Is the problem worth solving?
• Who’s problem is being solved?
• Does anyone care about the solution?
• Will the customers buy the solution?
• How are the target customers solving the problem now?
• How will the startup grow?
• What is the unit cost model?
• What is the unit revenue model?
• What are the acquisition costs per customer?
• What channels will be used to get to customers?
• What is the startup’s unfair advantage that cannot
be easily copied or bought?

30. Product - market fit:
the point at which the startup can scale profitably
• The customer is willing to pay for the
product
• The unit of cost per customer is smaller
than the unit revenue per customer
• There is sufficient evidence indicating the
market is large enough to support the
business
• The sales model is repeatable and
scalable

31. Unit of progress: validated learning
Problem: unknown
Lean Startup
Solution: unknown
Hypothesses, Experiments, Insights
Data, Feedback, Insights
Customer Development
Agile Development
Customer
Discovery
Customer
Validation
Customer
Creation
Scale
Company
User stories
Architectual Spike Release
Planning
Iteration Acceptance
Tests
Small
Releases
Spike
Requirements
Bugs
Latest Version
Next Iteration

32. Key Partners Key Activities
Key Resources
Value
Proposition
Customer
Relationship
Channels
Customer
Segments
Cost Structure Revenue Streams
Canvas tools, one example
Source: Strategyzer.com

33. Summarizing
the lean startup approach

34. The focus is on
• business model,
not on business plan
• fast learning loops:
build-measure-learn
• avoiding investing in a bad idea:
a quick death is a good death

35. What Lean Startups Do Differently
Lean start-ups don’t begin with business plan but with the search for a business model
Quick rounds of experimentation & feedback reveal a model that works.
Then, lean startups focus on execution.
Lean Traditional
Strategy
Business Model Hypothesis-driven Business Plan Implementation-driven
New-Product Process
Customer Development.
Get out of the office and test hypotheses
Product Management.
Prepare offering for market following a
linear, step-by-step plan
Engineering
Agile Development.
Build the product iteratively and incrementally
Agile of Waterfall Development.
Build the product iteratively, or fully specify the
product before building it

36. Lean Traditional
Financial Reporting
Metrics That Matter.
Customer acquisition cost, lifetime
customer value, churn, viralness
Accounting, income statement, balance sheet,
cash flow statement
Failure
Expected.
Fix by iterating on ideas and pivoting
away from ones that don´t work
Expection
Fix by firing executives
Speed
Rapid
Operates on good enough data
Measured
Operates on complate data
Organization
Customer and agile development teams hire for
learning, nimbleness, and speed
Departments by function
Hire for experience and ability to execute

37. eHealth specific aspects
with the lean startup approach

38. eHealth related aspects
• lots of regulation
• getting to product/market fit potentially expensive: even
MVPs have usually to meet certain standards and often
need approval from administrators & regulators
• important stakeholders can be hard to reach
• health providers can be conservative & reluctant to try
new things, resulting in slow adoption
• often complex ecosystems & value chains

39. Regulative aspects in eHealth
Within eHealth, there are requirements & directives for
• Privacy, security, language support
• SW development process
• Quality management system
• Risk management process
• Clinical investigation
• Validation
• Registration
• Placing on the market
• Incident reporting
• Suitability for the intended use
• Performance and reliability

40. When commercializing an eHealth innovation
if regulation concerns your
product, think for ways to
avoid regulation

41. An example: Case Owlet
avoiding regulation in an eHealth startup
See video on the case: https://www.youtube.com/watch?v=rS6fHW9pRek

42. More info
http://bit.ly/1AA2XHK