Last weekend I tweeted a lot of links for the
Startup Lessons Learned Conference, and I have often linked to other lean startup articles over the last few weeks. I’m sure many of you are wondering why I keep linking to things that seem so tech-centric. I must admit I probably have an unnatural obsession with the lean startup idea, but this is only because I feel that it has amazing potential to change more than just tech startups. I will attempt to share my ideas relating to a variety of lean principles in future posts, but today I wanted to focus on Steve Blank’s idea of Customer Development.
Steve Blank first began to teach Customer Development at U.C. Berkeley’s Haas Business School in 2004. His ideas have evolved over the years, but the core principles remain the same and were captured in his book The Four Steps to the Epiphany. In the spirit of full disclosure I must admit I haven’t even read this lean startup Bible yet (although it is sitting on my bedside table). Who has time for books right? Thankfully, there a variety of resources to learn about Customer Development in a shorter form, such as Steve’s blog, these slides or this video.
Rather than try to give a full summary of Customer Development, I just want to get you thinking about how focusing on the customer is applicable in a life science startup. Many startups, especially most of those in the life sciences, follow a product development paradigm: come up with an idea, develop the product, test it, and then launch and see if anyone buys it. In other words, it follows the “if you build it, they will come” model. Steve often mentions that this model really only works for true life and death products like a biotech cancer cure. I agree with Steve that there would be very little customer risk with a drug that was truly a cancer cure, but this has yet to become a reality. Even blockbuster cancer drugs like Gleevec and Avastin are not slam dunks when it comes to customers.
For evidence of the perils of focusing solely on product development, one need only look at the
utter failure of Pfizer’s inhalable insulin product, Exubera. Pfizer spent over $1.6 billion to acquire the rights for the technology behind Exubera. They gained FDA approval in early 2006 and had their market launch later that summer. Wall street analysts were projecting that Exubera would bring in $2 billion a year by 2009. What transpired in the year that followed is one of the biggest drug flops in history, resulting in Pfizer ceasing sales of Exubera barely one year after launch and taking a reported $2.8 billion write-off.
What went wrong? They had a relatively effective drug with a novel delivery method and a huge market. They followed the product development paradigm and everyone was convinced that if they built this that the patients (and their money) would come. In reality they found that they hadn’t factored customer risk into the equation. It turned out that physicians and patients didn’t come running for Exubera and the product never gained traction. Patients were put off by the giant inhaler and many of them were so used to injections that it didn’t bother them anymore. Physicians weren’t convinced by the efficacy data or didn’t like the onerous lung-function tests that were required. The product never gained traction and Pfizer decided to pull the plug. Many who read this may be saying that it was Pfizer’s sales and marketing departments that failed. Steve discusses that blame game
here. I think Pfizer was lulled into the “if we build it, they will come” nature of drug product development and ignored the customer.
If a drug company could have benefited from Customer Development, think how much more your diagnostic/research tool/discovery platform/cleantech company could benefit. Customer Development is not a replacement for Product Development, but it is a great complement. I think Customer Development is for more than just web startups and is worth thinking about in life science startups as well. Look for future posts on the different stages of Customer Development and how they might apply in the life sciences.
Are any of you using Customer Development in your life science startups? Do you know anyone else who is? Drop me an
email or leave a message in the comments.
image credit: Pharmalot
The Term Sheet. The pot of gold at the end of the rainbow, the prize that follows hundreds of pitches and endless networking. While this hyperbole may be a bit extreme, to many inexperienced aspiring entrepreneurs the term sheet is viewed with such reverence, and is veiled in about as much mystery. Thankfully, there are a lot of smart, experienced people who have been to the end of the rainbow numerous times and they have shared that knowledge online. Here is an annotated list of some of the best sources of info for demystifying term sheets: