Testing the Value Hypothesis


Medical research tool providers have driven sweeping changes to the biotech industry. By introducing technologies like DNA sequencers, thermocyclers, mass spectrometers, and others, tool providers have tremendously accelerated biological understanding, leading to advanced new treatments and diagnostics.  A prime example is the impact genomic tools are making in the emergence of personalized medicine.  Technology push is a key factor driving medical revolutions and these new tools are enabling capabilities not previously dreamed possible.

Bringing such technologies to market is the role of many biotechnology startups.  Often, these firms are penetrating markets with significant technical differentiation but limited capital resources. In a series of posts we consider the challenges faced by these companies as they bring products through the varying stages of commercialization.  A recent post discussed the use of Minimum Viable Products (MVP) in biotech.   Here we focus on the use of a MVP in the first key stage of commercialization: setting up Beta-Sites to test the Value Hypothesis.

Testing the Value Hypothesis:

The Value Hypothesis simply states that your users obtain significant value from your product when they use it.  For a breakthrough product to provide value, it must demonstrate capabilities that otherwise cannot be obtained (achieves magnitudes better sensitivity, accuracy, cost savings, usability, etc.).  Such technologies are usually developed with a specific advantage in mind, however until your instrument or tool is in the hands of a user it is unlikely you’ve considered the full benefit or burden of your value proposition.   It could be the case that your system is superior in the metric advertised, but is inferior in aspects critical to your user (throughput, speed, workflow changes, etc.).  By getting your technology into the hands of users quickly, you allow yourself the opportunity to modify your product as needed (read: pivot).  The use of beta-sites is a useful way to understand the full scope of your customer’s needs.  The following outlines some considerations that should be taken into account to ensure your beta-testing is a success.

Request Payment to Ensure Your Technology Will Be Used

Only work with those users who are as serious about your technology as you are.  Early adopters should be excited enough about your offering that they are willing to use it at its earliest stages and they are willing to pay for this early access.  Look hard for these customers and avoid those that are only interested at zero investment.  Paid beta-sites will have ownership in the success of the program and are more likely to stay with your technology through the bumps and bruises.  Importantly, if you cannot find any customers who are willing to pay for early access, you will likely have a hard time finding customers willing to ever pay at all.

Test the Core Value Proposition You’ve developed your technology with a key benefit in mind.  However, your users may prioritize your feature set differently and you should clearly identify the real and perceived value your users place on the technology.  For instance, maybe instead of the improved sensitivity of your system, it’s that it avoids tedious tasks within with the user’s work flow.  By understanding your user’s perceived value proposition, further development and marketing materials can be guided accordingly.

Identify Real and Perceived Competition & Substitution Products. Every product has competition.  It is tremendously important to understand who your user thinks that is.  Who do they initially compare your product to?  Often this is not a direct competitor but a substitute approach (for example, using label-free antibody-based detection of proteins instead of mass spectrometry).  By having a deep understanding of your user’s perspective, you will be able to anticipate challenges posed by future customers.

Determine what is required for your product to be fully integrated into your customer’s work flow.  Adopting a new technology or process is a lot to ask of your customer.  He or she is taking a significant risk by using your untested innovation and their need for pragmatism will likely match your inherent optimism.  With your user, dig deep into the requirements needed to have your equipment be in the critical path of their success.   What data package should be compiled?  What level of reliability is required?  What upstream and downstream processes need to be changed?  And so on.

Discover new potential uses of your technology.  An important bonus of providing smart people with new innovative tools is that they come up with exciting new applications of your technology.  Be acutely aware of any potential new applications introduced by the user – this could be your next big thing!

In summary, initiating beta-test sites is important tool in understanding the value proposition your product offers your customers.  With some foresight into the objectives of the program, you can extract significant learning from this process.  In a follow up post, we will discuss some of the engineering considerations that will help ensure your program is a success.

James Taylor and Joe Marotta. Find more on the Biotech Startup Blog.

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