At BioCity, Customer Obsession Fuels The Next Generation Of Healthcare

Added on by Kavi Guppta.

BioCity is a UK based healthcare and life sciences incubator that’s helping companies in pharma and healthcare to focus on customer-centric strategy and innovation. Managing Director Toby Reid talked to us and explained how Strategyzer’s tools are helping to create next generation life sciences ventures that are customer obsessed. In this post, Toby offers concrete examples for applying our tools to validate customer priorities in your organization.

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Toby Reid is managing director of BioCity--an environment where healthcare, pharma, and life sciences ventures are incubated for success.

Toby sat down with Strategyzer to discuss how our tools are helping to transform the way healthcare, medtech & biotech ventures perform strategy and innovation.

In our conversation, Toby emphasizes the:

  • Need for companies in the pharmaceutical and healthcare industries to focus on validating market risk alongside technology risk

  • Ability for scientists and business leaders to speak a shared language around strategy and innovation

  • Importance of challenging assumptions, getting out of the building to talk to customers, and gathering hard market evidence

Kavi Guppta: What’s going on in healthcare and big pharma? What’s the challenge?

Toby Reid: Big pharma has had a period where all of their internal research simply hasn't delivered the blockbuster drugs and healthcare solutions that they've been looking for. Whilst these large companies are geared up to do large scale trials, get the final approval to go to market, and then market and distribute solutions, I think they will do less R&D in house and consequently acquire more innovation and innovative companies.

The idea of single blockbuster drugs is fading as we move more into an era of stratified medicine and companion diagnostics. You are less likely to find a single bullet cure to particular diseases. It therefore makes it more important for them to just be scouring the network, letting innovations happen elsewhere and then buy it in at an appropriate time, rather than putting all their eggs in one basket.

So  pharma and healthcare are going to be doing less R&D in house, and are going to be more interested in acquiring innovation at a slightly later stage but carrying out that R&D and doing that innovation is expensive for start-ups. So how can you make it affordable and increase the chances of it being successful for the scientists and engineers that are now doing it instead of the large companies?

KG: Is BioCity advocating for a stronger focus on understanding market risk, and not just technology risk?

TR: By nature healthcare is very technology focused. It's difficult sometimes to just step back and say "So what? Who's actually going to pay for this? Who's the customer? How is this going to be adopted? How is it going to be used?" Scientists are much happier just working out "How is the body going to metabolize this? What's the potential toxicity of this?" So yes, we believe we need more time understanding market risk.

Then you get into the realms of designing a way in which to capture that value. I think in the old days people used to say market risk isn't something you need to bother with, because if you find the cure for cancer then there is no market risk, you’ve found a cure for cancer. But as I was saying earlier now, with the concept of companion diagnostics and stratified medicine, and right drug and the right time for the right patient, there is no one single blockbuster drug that's going to cure cancer, it's going the be a whole combination of treatments.

Consequently assessing and working on the market risk is becoming more difficult, more complicated, but therefore even more important. It becomes essential to understand who your end user is, who your payer is, who your customer is, how that's going to work, how it's going to get adopted, how it's going to work in conjunction with other potential treatments and all of those sorts of things as well.

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KG: How are Strategyzer tools (The Business Model & Value Proposition Canvas) being used at BioCity?

TR: Fundamentally we kick off with The Value Proposition Canvas. We start off with customer needs as explored by the Value Proposition Canvas and build that up into the value proposition and the customer segments of the Business Model Canvas. We then start going through the rest of the canvas saying, what are the killer assumptions that you're making in this area? Be it around your price points, your pricing strategy, or how you're going to reach the customers, whatever it happens to be. We use The Business Model Canvas as the framework to challenge these assumptions.

Then we use The Business Model Canvas as a tool to talk about business model innovation, and check that our companies have a business model that is maximizing the chance of capturing the value for the business.

We do a 12 week course where we are forcing early stage ideas to go out and talk to people, and really challenge the assumptions in different areas of the canvas. What that typically then leads to at the end is the question of how do you best capture value? Not just your product market fit, but how is your business model going to capture value? You're now getting evidence that such and such device will help doctors in this way, and the people who pay for it are interested because of X, Y and Z.

KG: Can you elaborate on your 12 week cycle?

TR: We kick it off with just an introduction to the concepts of Lean Startup and The Business Model Canvas. We help people understand how to go about challenging assumptions by accurately highlighting, articulating and defining which assumptions they're making, and therefore which hypotheses they can use to validate or invalidate them.

Once we've versed them in these tools, we give them a couple of weeks to start lining up customer interviews. These customers might be regulatory bodies, potential investors, potential end acquirers, distributors, healthcare companies, whatever it happens to be. It's not just the customer themselves, it's interviews in all areas of the canvas.

Then we have a different focus where we cover effectively customer segments and value proposition. We do a Value Proposition Canvas right hand side, left hand side, and we do that multiple times with different customer segments. That allows them to complete their customer segment and value propositions section. We cover off channels and relationships in a single week. Then we move to revenue streams, and then there is a week's break in which they're trying to make sense of the whole right hand side of The Business Model Canvas and really pin it down, and come up with the validation and the evidence they need to demonstrate the right hand side of The Business Model Canvas hangs together.

Then the participants present that and we review it with them. Then we move over to the left side of the canvas to examine what are the biggest assumptions here. The ones that if they're wrong they're going to kill this business tomorrow, and then we go through that process.

We lump activities and resources into a single week. Then we do partners, and then costs, and then there's a final week at the end for them to complete the interviews that they haven't managed to make, and then try to pull it all together for a final presentation in which they then present the journey, where they've come from, what they've learned, and how they've redesigned their business in response to that, and where their model is now. Then the final thing they talk about is the things that are still to be tested, the next steps they've got to go and work on.

KG: Beyond program participants, BioCity also uses the tools internally?

TR: Yes, absolutely. We have a business here in our Scotland site called BioAscent, and it was started around a facility that exists here on this site. The facility is what's known as a compound management library.

Bit of background - When you're working on drug discovery, the typical process is the biologists create a theory around how the disease acts and what the pathology is, they come up with an idea for how it could potentially be tackled and they create a bioassay to test their theory

You then take chemical compounds and you screen them against that bioassay, and when you get a hit, that suggests that that a particular molecule or chemical compound, has the possibility to be the basis for that particular disease. The chemical compounds for this process can either be synthesised from new or taken from existing libraries. Either way the chemists are then responsible ‘post-hit’ for further developing the chemistry of the compound to help it become an effective drug.

Our compound management library offers access to a range of compounds that can be used for screening against bioassays.

We started off with a Value Proposition Canvas. We segmented our customers into small biotech companies, universities, Contract Research Organisations (CRO’s), and large pharma on the assumption that they would act in very different ways and that they would probably have different financial control and different budgets. We started talking to these different organizations focussing on the individuals within the organizations and examining what are their jobs, pains and gains, and so on, and so forth.

What we began to realize through conversations with biologists and chemists is that it really didn't matter whether they worked for a uni or biotech, large pharma, or CRO. The biologists were giving us one very clear set of ’pains and gains’ and the chemists were giving us a very different but also very clear set of ‘pains and gains’. We ripped up the customer segmentation based on company type and organization type and instead just went biologist or chemist.

This learning by using The Value Proposition Canvas led us to realizing that you didn’t need to segment by organization, but by role within the organization. That was fundamental learning for us. We realized that biologists and chemists are very different people and it isn't just a scientific judgment on whether drug discovery projects move forward. There's a lot of emotion wrapped up in decision making as well as some very practical operational concerns.

KG: So how did all of this evidence reshape the BioAscent offering?

TR: We were able to reposition the description of the BioAscent offering to not be so technical and to actually answer to the social, emotional as well as functional jobs for these 2 types of customer.

We used all of the learning from The Value Proposition Canvas to dramatically change the messaging on our website. Rather than talking about a, "Robotic retrieval, temperature-controlled facility that allows you to bespoke select the compounds that blah blah blah blah," we talk to chemists about ultimate control of the compounds that get screened. We talk to the biologists about being able to buy very small elements, maximizing your budget, and maximizing the chance of your project progressing after screening because of the involvement of the chemists.

And ultimately, we created a new brand called Compound Cloud that we say is analogous to Spotify. As we all know, Spotify offers us affordable, customisable access to a large library of music allowing us to enjoy the music we want, when we want it.

So now we say that, Compound Cloud offers affordable, customisable access to a large library of chemical compounds available in much smaller individual quantities allowing drug discovery companies to potentially discover more quickly, for less.

KG: What kind of reaction do you get from program participants with the tools?

TR: The Business Model Canvas - I know this is probably the number one answer for most people anyway - but it gives us that shared language to be able to talk about the design of the business which we probably didn't have beforehand. It's very useful for that.

The Value Proposition Canvas allows us to examine why people buy, not what they buy. That applies as much to our own business as it does to all the ones that we're coaching.

If you combine the Business Model & Value Proposition Canvases with the concept of challenging assumptions by forming hypotheses, designing experiments, getting the data, and going back and revising your hypotheses accordingly, you've given people a set of tools that allows them to decode a world that was inaccessible, and the tools look just a lot like scientific discovery.

All of a sudden people just feel empowered to go out and start talking to people because they understand why they are doing it, but it looks and feels a lot like what they do within their scientific disciplines as well. It's made the world of business a much more accessible place for scientists. As a result it's been very very well received!

KG: What's your killer argument for these tools to be adopted by other health and pharma organizations?

TR: The cost of getting it wrong. Too many projects have soaked up far too much money, and gone too far down the line of tech development with some fundamental flaws in the assumptions that are being made about how they'll be adopted, whether they'll be useful, and how it's going to work.

That applies in particular to medical technologies and medical devices for which the cost of doing multiple prototypes is prohibitive to small companies. It's so important to be challenging your assumptions and using The Business Model Canvas as a framework for doing that at an early stage. Continuing to progress product development on false assumptions will eventually kill your business.


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