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The Lean LaunchPad Class 4: Distribution Channels

The Lean LaunchPad Class 4: Distribution Channels. Steve Blank Jon Feiber Jon Burke http://i245.stanford.edu /. CHANNELS. how does each customer segment want to be reached? through which interaction points?. Test Hypotheses: Channel. Two Critical Channel Questions. 1.

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The Lean LaunchPad Class 4: Distribution Channels

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  1. The Lean LaunchPadClass 4: Distribution Channels Steve Blank Jon Feiber Jon Burke http://i245.stanford.edu/

  2. CHANNELS how does each customer segment want to be reached? through which interaction points?

  3. Test Hypotheses: Channel

  4. Two Critical Channel Questions 1 is subtle, but more important than the first: How does your customer want to buy your product? 2 How do you want to sell your product?

  5. How Do You Want Your Product to Get to Your Customer? ü ü ü ü ü Yourself Through someone else Retail Wholesale Bundled with other goods or services

  6. How Does Your Customer Want to Buy Your Product from your Channel? ü ü ü ü ü ü Same day Delivered and installed Downloaded Bundled with other products As a service …

  7. Web Channels

  8. Physical Channels

  9. OEM VAR Reseller Distributor Types of Channels Direct Indirect Licensing

  10. The Channel as a Customer • Some products are embedded in others (OEM) • Some products are resold by others (VARs) • Some products are distributed by others • Who’s the customer?

  11. Distribution Complexity Evangelists Global Systems Systems Integrators WANs Mainframes Direct Sales Higher Volume Minis LANs VARs Marketing Complexity PC Servers Higher Value Added Desktop PCs Retail Printers Keyboards ServiceTechnicians Web, Telesales Toner Solution Complexity

  12. How Are Channels Compensated? • Commission • Percentage of sales price • Discounted pre-purchase

  13. How Are Channels Motivated or Incented? • Money! – what makes them the most? • Training • Marketing to the channel • SPIF

  14. Channel Economics: “Direct” Sales ListPrice Revenue Cost of Goods(Supply Chain) Profit + SG&A + R&D EU Discounts End Consumer Source: Mark Leslie, Stanford GSB

  15. Channel Economics: Resellers ListPrice Revenue Cost of Goods(Supply Chain) Profit + SG&A + R&D Reseller EU Discounts End Consumer Source: Mark Leslie, Stanford GSB

  16. Channel Economics: Distributors/Resellers ListPrice Revenue Cost of Goods(Supply Chain) Profit + SG&A + R&D Reseller Distributor EU Discounts End Consumer Source: Mark Leslie, Stanford GSB

  17. Channel Economics: OEM or IP Licensing ListPrice Your Revenue Cost of Goods(Supply Chain) Profit + SG&A + R&D Master Distributor Distributor Reseller EU Discounts End Consumer Cost of Goods(Supply Chain) Profit + SG&A + R&D Reseller Source: Mark Leslie, Stanford GSB Your Product Becomes Your Customer’s Cost of Goods

  18. Example: Book Publishing Publisher National Distributor Printer Wholesaler Retailer Customer

  19. Book Publishing Publisher National Wholesaler Distributor Retailer Customer 35% 15% 10% 40% $7.00 $3.00 $2.00 $8.00 $20.00 • You get • 35% of retail • the distributor gets 10% • the wholesaler gets 15% • the retailer gets 40% • less any discount they offer the customer Percent of Retail

  20. Book Publishing Economics Publisher National Distributor Wholesaler Retailer Customer Allowances Wholesale costs Bills Markup Credit guarantees Payment guarantees Payment guarantees Return rights Credits Payments

  21. Book Publishing Delivery Publisher National Distributor Printer Wholesaler Retailer Prepare film (content) • Receive • Schedules • Print orders • Bundle counts • Film Determine allocations Merchandise titles Deliver orders Sell magazines • Establish identity • Create demand Prepare galleys Print and ship magazines Dispose of returns Acknowledge returns

  22. Nature of Product Impacts Channel: Physical or Virtual? • Access to customers changes dramatically • Logistics related to product complexity • People as products

  23. Bits vs. Atoms • Channel • Web • Physical • Bits • Product • Physical

  24. Product and Channel Are Bits • Channel • Web • Physical • Rapid Agile and Customer development • Fastest to acquire early customers and scale • Bits • Product • Physical

  25. Web 2.0 - Product/Channel Are Bits • Channel • Web • Physical • Google • Twitter • Facebook • Zynga • Cloud Services • Bits • Product • Physical

  26. Product Is Bits, but Channel Is People • Channel • Web • Physical • Rapid Agile and Customer development • Fastest to acquire early customers and scale • Rapid Agile and Customer development • Traditional sales channel • May require installation • Bits • Product • Physical

  27. Traditional Enterprise Software • Channel • Web • Physical • Google • Twitter • Facebook • Zynga • Cloud Services • Microsoft • SAP • Oracle • Bits • Product • Physical

  28. Physical Products Sold Over the Web • Channel • Web • Physical • Rapid Agile and Customer development • Fastest to acquire early customers and scale • Rapid Agile and Customer development • Traditional sales channel • May require installation • Bits • Product • Rapid Customer development • Logistics, shipping and manufacturing critical • Customer service • Physical

  29. Killing Traditional Storefronts • Channel • Web • Physical • Google • Twitter • Facebook • Zynga • Cloud Services • Microsoft • SAP • Oracle • Bits • Product • Physical • Zappos • Amazon • Cafepress • Netflix • Consumer electronics

  30. The Factories May Be in China • Channel • Web • Physical • Rapid Agile and Customer development • Fastest to acquire early customers and scale • Rapid Agile and Customer development • Traditional sales channel • May require installation • Bits • Product • Rapid Customer development • Logistics, shipping and manufacturing critical • Customer service • Longer customer feedback cycle • May require large capital requirements for scale • Physical

  31. We Still Make Things that Need Salespeople • Channel • Web • Physical • Google • Twitter • Facebook • Zynga • Cloud Services • Microsoft • SAP • Oracle • Bits • Product • Cars • Solar panels • Wind turbines • Bookstores • Consumer electronics • Physical • Zappos • Amazon • Cafepress • Netflix • Consumer electronics

  32. Talk to 10-15 potential channel partners (Salesmen,  OEM’s  distributors,  etc.)   What were your hypotheses about who/what your channel  would be? Did you learn anything different? Did anything change about Value  Proposition?     Update your Lean LaunchLab & Canvas Draw your channel diagram Summarized in a 5 Minute PowerPoint Presentation Team Deliverable by Tomorrow

  33. Examples

  34. implantable drug infusion pumps with remote physician control for chronic pain patients at home “the right dose at the right time and place” Christian Gutierrez (EL), Ellis Meng (PI), Carol Christopher (IM), Tuan Hoang (FE)

  35. Chronic Pain v4 FS Team Trade shows Training Faster relief Patients KOLs Formulary Acceptance Clinical data Efficient patient management and Dosing flexibility FDA Foundations Clinicians Support CMS (Medicare) Advocacy Groups Access to high-value therapies and pharmacoeconomics OEMs Institutions IP Hospitals Wireless Developers Proprietary knowledge pharmacoeconomics Pain clinics Payors/ICA Electronic health record providers Human Resources Unit sales Product Dev Costs Manufacturing Costs Support Services Marketing Costs FDA/Clinical Trials Bundled kits Electronic records

  36. Getting out Clinicians Institutions/patients Regulatory Entrepreneurs/ Industry • Dr. Stan Louie, Drug Formulation Expert (USC Pharmacy) • Dr. Giovanni Cucchiaro, Anesthesiologist (CHLA) • Dr. Diana Hull, Physician (Group Health in Washington state, formerly at Kaiser California) • Thomas Hsu, Insurance Specialist (Network Medical Management; a California ICA) • Two chronic pain patients • Pump user and creator of support forum • User of oral narcotics and patches • Dr. Frances Richmond (Director Regulatory Science Program, USC) • Richard Hull (formerly at company selling Lapband)

  37. Product flow/Channel Patients Electronic Health Records Fluid Synchrony Partners/ OEMS Electronic Records Support Services Bundled Kits Pump + Controller Pain Clinic (Anesthesiologists Neurosurgeons) Hospitals (Anesthesiologists Neurosurgeons) .

  38. Hospitals Channels (Direct) Pain Clinics • Direct to institutions • Some formularies involved in purchase decisions • Some doctors make purchase decision directly • Device company/Doctor relationship is key • Heavily influenced by : • Clinical study results • Regulatory approval • Reimbursement

  39. Patient Care Flow (Now) Trial period/ Home setting Surgery/Rx/ reprogramming Scheduled follow-up Fluid Synchrony Partners/ OEMS Support Services Bundled Kits Pump + Controller Pain Clinic (Anesthesiologists Neurosurgeons) Patient Discharged Hospitals (Anesthesiologists Neurosurgeons) Weeks/months Key factors: Reimbursement , state regulations

  40. Patient Care Flow (Proposed) Trial period/ Home setting Surgery/Rx/ reprogramming Electronic Health Records Scheduled follow-up Fluid Synchrony Partners/ OEMS Electronic Records Support Services Bundled Kits Pump + Controller Pain Clinic (Anesthesiologists Neurosurgeons) Patient Discharged Hospitals (Anesthesiologists Neurosurgeons) Actionable feedback to doctors/institutions . E-prescription / closing loop Weeks/months Key factors: Reimbursement , state regulations Days

  41. Regulatory considerations • PMA approval with grouping of FDA approved drugs. • Clinical trials results used to obtain CMS (Medicare) approval • 510K restricts technology to predicate devices • Can be more difficult to market against incumbents • European CE mark is easier to attain (safety and performance only)

  42. Take-aways • Channel is direct in this existing market • Channel for e-health is more complex and evolving • State-to-state regulations can impact incentives • Can pose problems as electronic records systems vary across the country Next Steps • Understand costs associated with reaching doctors/institutions directly • Understand structure of e-health channel • Develop regulatory pathway (timelines and cost profile)

  43. Advanced Chemistry for Pharmaceutical Progress Ground Fluor Pharmaceuticals Team: Kiel Neumann (EL) Stephen DiMagno (PI) Allan Green (Mentor)

  44. Ground Fluor Pharmaceuticals • PET is a non-invasive medical diagnostic technique for cardiac, brain, and tumor imaging • GFP technology makes new (unknown) and known (but clinically inaccessible) [18F]-labeled radiotracers readily available • Fast, multiplatform, high efficiency synthesis of these fleeting, precious agents. • Initial target indications: pediatric neuroblastoma, Parkinson’s disease.

  45. The Business Model Canvas Technical Assistance (Image Atlas) FDA regulatory support SOPs for precursors and drugs Recruit clinical sites In vivo animal studies Develop regulatory plan for pre IND meeting ID cGMP CRO Fund-raising cGMP manufacturer Radiopharmacies Nuclear Medicine and Radiology departments Radiopharmacies Equipment producers Prescribing physicians Radiologist who perform studies Accessibility (RCY) Purity Speed PET/SPECT Multiplatform Sensitivity (nca) Specific compounds Technical assistance Pharmaceutical development companies Direct sales of precursor R&D and clinical studies presented in journals and meetings Sales of precursor through global finished pharmaceutical distributor General methodology for adding fluorine to lead compounds of interest IP PoP data Drug developers IP PoP data Regulatory plan Understanding of the regulatory process Radiologists Sales of intermediates Technology license Product license (royalty) Contract cGMP precursor manufacture Salary, Rents Clinical trials

  46. Out of the Building Face to Face meeting with president of small radiopharmaceutical company Face to face with a clinician at Memorial Sloan-Kettering Face to face with Global Production Manager of Molecular imaging for one of world’s largest radiopharmaceutical companies OncoKinib collaboration between Geurbet, OncoDesign, and Ariana pharmaceuticals Face to face meeting with head of R & D and International Production Manager from Linz, Austria Eckert and Zeigler – German PET modular synthesis provider Face to face meeting with Executive Director and CEO of Scott Tech Center in Omaha, NE Introductory teleconference to CEO of Innovation Accelerator

  47. Key Learnings Significant Interest in our technology Radiopharmacies want GMP product No interest in GMP reagent preparation Third-party manufacturers would use our developed synthetic pathways Internal competition with one world radiopharmaceutical leader Best to approach one of other two world leaders Scott Tech Center Willing to offer free advice on startup strategy Provided introduction to Innovation Accelerator Offered introduction to Director of Venture Technology of one of world’s leading radiopharmaceutical companies

  48. The Business Model Canvas Technical Assistance (Image Atlas) FDA regulatory support SOPs for precursors and drugs Recruit clinical sites In vivo animal studies Develop regulatory plan for pre IND meeting ID cGMP CRO Fund-raising cGMP manufacturer Radiopharmacies Nuclear Medicine and Radiology departments Radiopharmacies Equipment producers Prescribing physicians Radiologist who perform studies Accessibility (RCY) Purity Speed PET/SPECT Multiplatform Sensitivity (nca) Specific compounds Technical assistance Pharmaceutical development companies Direct sales of precursor R&D and clinical studies presented in journals and meetings Sales of precursor through global finished pharmaceutical distributor General methodology for adding fluorine to lead compounds of interest IP PoP data Drug developers IP PoP data Regulatory plan Understanding of the regulatory process Radiologists Sales of intermediates Technology license Product license (royalty) Contract cGMP precursor manufacture Salary, Rents Clinical trials

  49. We provide accessibility Could license precursor synthesis for incorporation in modules Channels Require GMP precursor (or cassette) to develop our product with their synthesizer Only want GMP precursor in modules without development

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