One of my favorite things to do is listen to entrepreneurs speak about their business. There is usually an excitement, an enthusiasm, and an optimism that is lacking in presentations by owners of more established businesses. Perhaps SEC regulations require the management of public companies to be less optimistic less they be sued. Maybe it is the fact that often start-ups require so much attention that entrepreneurs think more about and thus want to talk more about their companies than most others. Maybe it is just that they live so close to the edge and they are hoping that if they tell their story enough it will be accepted more and more with each telling.
On Wednesday evening, the Keck Graduate Institute of Applied Life Sciences (KGI) sponsored an innovation panel discussion for their students and some invited guests. I was among the invited guests. The panel consisted of 5 individuals, senior management or in one case a former KGI student. KGI has a very specific focus on the business aspect of biotechnology and offers a Master of Bioscience degree and a PhD in Applied Life Sciences.
The Panel consisted of:
- Patrick Gruber, President & CEO, Gevo - www.gevo.com
- Chris Searcy, Senior Vice President Corporate Development, Nektar - www.nektar.com
- Melissa Louie, MBS '05, Google - www.google.com (GOOG)
- Mark Applegate, Senior Director Operations, Favrille - www.favrille.com (FVRL)
- Chris Robertson, Product Team Leader, Kythera Biopharm - www.kytherabiopharma.com
Each panelist spoke for 10 - 15 minutes about their company and the method of fostering innovation at their company. Clearly, the issues of a pharmaceutical company are quite different from those of an IT company like Google. IT companies can put something online in days, with an audience of millions, test it and take it down in just minutes. A biotech or pharmaceutical company usually spends years, millions of dollars, and requires reams of approval papers before it can begin to introduce a product to the public. There are many areas where companies can innovate:
- New Products (existing customers, new customers, or both)
- Product Improvements (Design, packaging, or application)
- Business processes (management, HR, or support systems)
- Supply Chain (reducing, increasing, or changing)
- Customer interaction (support, feedback, or cultivation)
- Adoption (getting people to use a new product or application)
One consensus point was that the true measure of an innovation's success: Value delivered. Value can be in dollars, customer satisfaction, or internal morale, among other things. However a company chooses to measure it, it needs to be measured. In some cases, formal organization initiatives were put in place. In other cases, informal groups were assembled and the process was allowed to occur more naturally. In all 5 companies, innovation was a high priority and encouraged from the top down starting at day one of the company's existence.
One issue that most of the companies faced with some difficulty is customer adoption of their new products. Again, with the exception of Google, the companies all faced issues of trying to displace existing products with established consumers who were often reluctant to change. One of the presenters who previously worked on green technology described how hard it is, even with existing pre-orders, to accurately predict future sales. Everyone is happy to say yes during your market research about new products or services, that is until it comes time to actually buy them and use them. I call these "phantom orders" because they seem real until you try to grab them.
Market research is not a simple task of just asking a few questions. The questions need to be thoughtout and presented in a clear fashion. In at least two of the presentations, examples were given where people initially expressed interest but later changed their minds. One issue was that the potential customer did not understand the product application. In the other case, interest was dampened by naysayers in a group that created doubt by asking questions that may not have had any real bearing on the issue. This latter issue can happen any time you present to a group.
I faced the issue of the phantom pre-orders with a new type of Petri dish that I designed. I went to 20 labs and asked, "If this dish was available would you buy it?" Most declined but a few seemed enthusiastic about it. I was able to get 10,000 dishes ordered at one school before I had even made one. Then I approached several suppliers to produce the dishes. They did their own independent market research and found no interest. They even called the labs I had spoken to. One difference was that they asked for a purchase order. When it came down to real dollars people decided it was not worth the potential trouble to try something new. When I presented it, I could explain the potential benefits and uses or answer any questions. I doubt the phone calls were made by people who had much emotional investment.
I'm still not sure how to solve the "phantom order" issue except to say that it seems to require asking for money. Now, people can change their minds later and that is normal, but many will not once they have committed. One factor is the time between the order and delivery. The shorter the time span the fewer cancellations there will be.
What have you done to get solid pre-orders for a product that has not yet been made?
Comment Preview