Physician Business: The Perfect Model

If you're designing a business as a physician, what will you need?

We all know certain questions will be on the board exams. When it comes time to take the orals for the Board of Physician Entrepreneurs exam, count on this one:

A business model describes the interaction between your suppliers, your custmers and your business and how you will make a profit. The following is an example of a near perfect business model:

1. Alessandra Ambrosio in a push up bra.
2. Mark Wahlberg in his briefs
3. My healthclub
4. Someone sending you certified checks to a post office box

There are several elements to the perfect model.

Network effect

Viral

Natural monopoly

No inventory

No COGs

No supply chain

Your customers do your marketing for you

Your customers do fulfillment for you

http://www.dramatispersonae.org/PerfectBusinessModel.htm

Or how about :

A killer application - Exactly meets the target market’s needs in a way that no other offer does. If possible it is twice as good at half the price of current offerings. e.g. matchmaking sites, email, Instant messaging.

‘Bleeding obvious’ - Obvious benefits to the market prompting the response ‘Why didn’t I think of that?’ - e.g. pre-packaged fresh squeezed juice at railway stations.

Price is not an issue  - Price is not an issue because the target market totally sees the value and have the means to buy the product without hesitation. – e.g. high fashion, plastic surgery.

Price is not calculated based on costs - Huge margins – in a 'bricks & mortar' business you buy for 1 sell for 10. Price is based on what the market is prepared to pay not as a markup on costs – e.g. Fine dining in a top restaurant for an anniversary.

Minimal initial personal investment - Either it is a low investment venture or funders will put up 90% of the money for a 10% stake – e.g. internet business or sell under license.

Pent-up demand - Customers have been waiting for some time for someone to finally offer this product. No need to educate the market with expensive advertising or employ copious sales people – e.g. online airfare booking and payment.

Lasting window of opportunity - Plenty of opportunities for repeat business or there is a steady stream of new customers each year. The product is not a fad or dependant on a technology that will soon be superseded.- i.e. best coffee in the city or education products for school leavers.

Highly addictive - One purchased your customers cannot imagine life without it – e.g. iPOD.

Significant competitive edge - You have something exclusive that no other business has access to. e.g. Patent, exclusive agreement with unique resource (supplier, person, materials), skill & know how, exclusive access to a special market)

Monopoly - You have a monopoly in a target market that is completely supported by your customers. – e.g. only hotel in town with a liquor license.

https://www.quora.com/Business-Models/What-is-the-perfect-business-model

Before the Internet, I would have answered 4. Of course, with PayPal, Groupon, virtual gaming points and instant credit, who needs checks any more? Think about how the healthclub model works.

You are so guilty about slacking off for the entire year, you decide to pay an up front sign-on amount for the privilege of belonging. What's more, you give the club the right to automatically take money out of your checking account and send it to the club whether you use their product or not...which, according to research , you won't by March 1. Is this starting to sound a little like concierge medicine?

One of the top 10 reasons why businesses fail is an inadequate business model. Either you don't get your money after the sale  (fee for service) in time or you have to pay your suppliers in advance (EMR vendors).

Creating a business that has a drop dead value proposition that satisfies a huge unmet need is only part of the equation. You need a business model that works. Just ask the owner of the Cherry Creek Athletic Club parked in his Mercedes in his personal space.

The 12 Steps To Biomedical Innovation

The 12 step path from an idea to a successful innovation or commercial venture.

We’ve all had great ideas. Whether the insight comes to you in the shower, while driving to work, or in a dream, a new concept or thought pops into your mind and begs for attention. Very few ideas, however, actually see the light of day. The difference between an idea and innovation is what happens after you think of the new idea. Innovation is about inventing something that can create economic value in the marketplace. Ideas are commodities, but innovation is about finding and validating the business opportunity that both the leadership of the organization and its culture embrace and commit to and which is connected to its business strategy.   Implementing innovation is the hard work that goes into conceptualizing an idea to take advantage of a market opportunity and executing a commercialization plan that gets results.

 Today in health care, whether it be drugs, devices, diagnostics, healthcare IT or alternative care models,  successful innovation is about both predicting and observing patients’ wants and needs and satisfying them with new products and services.

 Now, more than ever, industry and health care entities need physicians to help them innovate to stay competitive. Our post-capitalist economy is driving leaders to harvest new ideas and the intellectual capital of their knowledge workers. Success depends on using processes for creating and analyzing new ideas.  Limited time and competition for resources requires prioritization.

The 12 Step Roadmap to Innovation

The path from an idea to a successful innovation or commercial venture is lined with mine fields that can sabotage success at any step. At Venturequest (http://www.venturequestltd.com ), my colleague, Courtney Price, and I have worked with multiple organizations in industry, academia and government labs.  We have developed and applied a 12 step process to increase the success rate for implementing innovation and creating new revenue streams. http://www.ncbi.nlm.nih.gov/pubmed/16615405 The process is designed to quickly eliminate ideas that don’t have a high likelihood of market success, that don’t fit with the strategic mission of your health care organization, or that involve too high a level of market, technical, intellectual property or implementation risk for the proposed return on investment. Our 12 Step Innovation Roadmap provides a framework for screening, incubating, commercializing, and benchmarking the success of new ideas and tested including tools and protocols for health care providers.  At each step of the process, a Go or No-Go decision is made about the opportunities. Sometimes the opportunity skips some of the steps based on the market and stage of development.  Below is a brief description of each step.

Idea generation consistent with the strategic plan

Ideas are a dime a dozen.  The challenge is finding ideas that match the business strategy, connect with senior management, and are embraced by the organization’s culture.  Such ideas leverage the core competencies of the organization as well as build on its intellectual assets including intellectual property, branding, new technologies, etc.  They both build upon sustainable core competencies as well as forecast future breakthroughs. Brainstorming or collecting new ideas that don’t match your facilities culture or its strategic plan will have a limited chance of success. 

Concept development and initial testing

Once ideas are selected that meet the above criteria, it is necessary to describe their uniqueness and determine if there could be a sustainable competitive advantage. A clear value proposition, i.e. the worth, importance or usefulness to your customers, should be clear early in the process.  As you obtain more information about the opportunity, the business concept will change over time in response to newly discovered market, competitive, and patient information. The next steps involve a series of iterations designed to refine your idea.

Seven-Step Opportunity Evaluation

After the concept is developed, it is time to quickly assess the potential opportunity by using a quick Seven-Step Opportunity Evaluation which takes less than 30 minutes to complete.  It addresses the problem being solved, the potential opportunity, and the market for the opportunity, potential revenue, required funding, intellectual property creation and protection, and stage of development.  It also identifies potential customers, competitors, and commercialization viability.  This quick analysis will help you define whether the business, industry or markets you propose to enter are appropriate. It will also help you define what kinds of people you will need to make your venture successful.

Model Opportunity

Once the concept is evaluated using the Seven-Step Opportunity Evaluation, it is time to discover the inherent strengths and weaknesses of the opportunity.  This software tool is based on 24 distinctive characteristics to objectively evaluate the opportunity.  The purpose of this protocol is to identify the Achilles’ heel of the concept. It was designed to assist physicians and researchers without a business education to objectively evaluate the opportunity.  As weak areas of the concept are improved, the better chances it has for success. If you identify potential risks or threats that cannot be address, then the idea should be abandoned. 

Business Opportunity Assessment

The  Business Opportunity Assessment is a more in-depth review of the opportunity including market research and due diligence that includes IP analysis, opportunity development timing, legal liability issues, applications of the opportunity, barriers to entry, industry trends, growth potential, market positioning, competitive analysis, financial projections and pricing, resource requirement analysis, and licensing potential to name a few.   These are the important considerations to address if it looks like the opportunity has a strong commercialization potential.  This software tool is designed in a question and answer format which make it easy to complete a 360 degree assessment.

Market Validation

Once you have completed the Business Opportunity Assessment and have decided to proceed, the Market Validation process focuses on obtaining feedback on how the opportunity addresses specific market needs as well as taking a hard look at your competition. This step helps differentiate the opportunity from competing opportunities based on patient needs.  This process maximizes perceived patient benefits and eliminates extraneous features that increase costs.  This experience-based market learning is critical to market success and helps develops better business judgment for a Go or No-Go decision.

Revise Business Opportunity Assessment

Based on the results of the Market Validation, you can now revise your Business Opportunity Assessment and build a commercialization strategy.

Finalize the Commercialization Plan

By this time, you should have a good idea about whether you have a viable innovation. Since your idea will be competing for resources with other ideas, however, you will need to prioritize and decide which has the best odds for success. You will need to carefully hone your business model. You will now write your business plan that succinctly describes the story of your proposed business.   The good news is that by this time approximately 70 % of your business plan has been written.  

Write the Business Plan

Now it’s time to write your final business plan. Unfortunately, most entrepreneurs go immediately to this step first without using appropriate filtering systems.  This results in a business plan that has unvalidated assumptions and is rejected or leads to an enterprise that fails.

Solicit feedback and revise the Business Plan

After the business plan has been written, it is time to solicit feedback from respected advisors who will provide realistic options about the potential of commercializing the new opportunity.  Their opinions and suggestions should be incorporated into the final business plan. 

Present the Business Plan.

It is now time to present the Business Plan and get stakeholder approval and resources to launch new venture.

Execute the Business Plan

Congratulations. You’ve got the go ahead for your new idea. Now the work begins. Fortunately, your winning business plan based on the 12 step pathway will provide an operational road map to track and benchmark the efforts to commercialize the opportunity.  Your plan will provide you with the timelines and metrics for success. A strong Executive Summary should be distributed to the review board before the presentation and a succinct Elevator Pitch should be developed. 

Whether you are considering a product or service or process improvement, the 12 Step Plan is a useful guide to getting your idea to market quicker, for less cost and with more success.

The Physician Entrepreneurs Five Minute Business Plan

The executive summary is the Cliff’s Notes of your business

One of my favorite Saturday Night Live sketches was Father Guido Sarducci’s Five Minute University. The idea was that a 16 week college course could be reduced to one thought in five minutes, like economics is basically the law of supply and demand. To pass the test all you had to do was attend the right class for five minutes.

When you need money for your business, investors will initially want to see an executive summary of your business plan. Nothing elaborate or fancy, pruned of jargon and business buzz-speak, the executive summary is like a Cliff’s notes of your business, quickly identifying the highlights to help them determine whether, in five minutes, your idea is worth a further look.

Here’s an example of what is should look like in PDF form so it can be sent to your favorite smart money source.

OVERVIEW

Our Awesome Company (OAC) is a medical device company with a revolutionary patent pending technology to treat bad breadth.. Our goal is to be the market leader in providing minimally invasive treatments that address the root cause of bad breadth. In 2010, OAC successfully completed its initial human proof of concept study outside the US. OAC is seeking a $500,000 bridge fund right now and  $3 million in funding to perform a Pilot clinical study at a US site beginning in early 2011. An additional $10 million will be required for a Pivotal study in Q4 2011. FDA approval is expected in late 2012. The Company anticipates financial exit via acquisition.

BAD BREATH

Bad breath has multiple causes including gastroesophageal reflux disease, sinus infections and chronic infections of the tonsils and adenoids. The most common cause is gingivitis and bacterial impregnation at the base of the tongue. Treatments to date, including turning your head to the side, oral breath mints and putting your hand over your mouth have proved ineffective over the long term.

MARKET

The current market for bad breath/halitosis products is $6+ billion worldwide. Market growth rate is estimated at 20% per year due to demographic factors , growing awareness of the condition and increasing intolerance of members of the opposite sex. The current standard of treatment for patients are insults, denigraton and criticism.. The current treatment  consists of an air pump and mask that the patient wears while in contact with humans.. The compliance rate for this treatment is less than 50%. The National Institutes of Health has stated that bad breath is a major public health problem and is associated with other chronic diseases like excessive nerdiness, depression and withdrawal..

TECHNOLOGY

Our product, BetterBreath,  is an implanted device inserted into the tongue by a single needle injection under local anesthesia. Once implanted, the device emits a remotely controlled plume of breath freshener into the mouth.  The entire procedure takes 2 to 5 minutes and can be performed in a doctor’s office. The device can be easily adjusted or totally removed in 1 minute without the need for anesthesia. Extensive preclinical and initial human studies show efficacy with excellent safety and patient comfort.

INTELLECTUAL PROPERTY

OAC/BetterBreath’s initial patent application has been filed in the United States, the European Union, Japan, and other important markets. Two other patent applications are also pending.

FDA PATHWAY

Intraoral devices for treatment of halitosis are considered  predicate devices with a 510(k) regulatory approval process.

FINANCIALS

Management is seeking $500,000 in bridge financing to prepare for pilot clinical studies in the US;  $3 million to fund Pilot study clinical trials beginning in early 2010, and an additional $10 million is budgeted for Pivotal study trials leading to FDA approval in late 2012.

TEAM

Bob Dragonbreath is the Chief Executive Officer of OAC. He has 20+ years of product development experience focused in minimally invasive implantable medical devices at Johnson and Johnson, Cordis, and C.R. Bard. He has 10 issued patents and several more submitted. He has lead small and large teams in the areas of concept development, product design, clinically relevant testing, and product commercialization.

I.M. Lookingforanotherjob, M.D.DDS, is founder and currently Chief Medical Officer. Dr. Lookingforantoherjob is a leading authority on the anatomy of the human upper airway as well as a board certified Otolaryngologist and Dentist with 20 years experience in treating patients with really bad breath. He was a faculty member in the Departments of Otolaryngology at Harvard, Cambridge and Oxford for 17 years. During that time he was Principal Investigator on 5 NIH grants researching unique aspects of the human upper airway. He has published over 50 articles in medical journals and received 15 major research awards.

INVESTORS

Big Deal Ventures LLC, a New York-based venture fund, invested $3.5 million in early 2007 to fund product development and the first-in-man trial.

In the words of Father Sarducci, ''There were actually more than ten, but Moses was old and grumpy, and after he broke the tablets he could only remember the negative ones. "Don't do this. Don't do that." The truth is, most of them were more like advice. The Twelfth Commandment, for example, was "Whistle while you work." (People think its from Disney, but Disney stole it from God.)" Even Moses needed to keep it short.

The Pickup Line

A clearly articulated value proposition is something your grandmother could understand.

The story goes an eager entrepreneur walks into the office of a potential investor. Eager to present his pitch, the inventor sits in front of the investor’s desk and gets ready to start his well -rehearsed pitch. Before he could get out the first word, however, the investor throws a match book across his desk and quietly says, “On the back of that, describe your idea”.

While there are unique challenges and characteristics of new bioenterprises, fundamentally the elements of success are the same as any other business.

The first task is to define your position based on the target segment you intend to dominate. Too often, particularly with technologically based companies, the inventor or scientist discovers  or invents something .  They then start the process of a solution looking for a problem. Instead of being problem solvers, a more successful strategy is to be a problem seeker, design a solution that is better than what is presently offered and execute a plan to commercialize it.

Once you identify a large, growing, important, potentially profitable unmet need, the next step is to define a value proposition that describes how you intend to dominate the market  you’ve identified.  Value is the difference between the tangible and intangible benefits of buying a product or service minus (or divided by) the tangible or intangible costs.  Your value proposition is the promise you make to your customers to provide them value if they buy or use  your product.

The third element of success is to construct a business model, i.e.  provide your product or service in such a way that it costs less to make it and sell it than what people are willing to pay for it thus generating a profit and sustaining the business.

Finally, your value proposition and business model will need to be better than the competition. Otherwise, there is no reason for customers to switch or consider your product.

There are several models for articulating your value proposition and they are typically used to create an elevator pitch.

One model , described by Geoffrey Moore in his book “Crossing the Chasm”,  is to use the following template and just fill in the blanks:

• For (describe the target customers-beachhead segment only)
• Who are dissatisfied with (describe the current market alternative)
• Our product is a (new product category)
• That provides (key problem solving capability)
• Unlike (the product alternative or competition)
• We have assembled (key whole product features and benefits )

Another similar model is the NABC model:

• Define the NEEDS of the target segment
• Say what APPROACH you are taking to eliminate the market pain
• State clearly the BENEFITS /Cost of using your product
• Differentiate your product from the COMPETITION

The development of your feasibility, commercialization or business plan should result in a clearer and more precise , compelling value proposition as you go through several iterations of analysis. You’ll know you are getting close when you can tell someone your value proposition in the brief time it takes to go up a few floors in an elevator or on the back of a matchbook.