What commonly happens with startups is that they laser focus on rapidly building the “thing,” rather than testing the value or benefit provided to a customer.

Originally posted on Med Device Online

Written by Eric Sugalski, Founder and President of Smithwise

Minimum viable product (MVP) is a strategy that has gained rapid and widespread acceptance among the startup community. Used effectively, it can be a compelling strategy to evaluate product-market fit, which often is the largest risk facing a new medical device company. The idea of MVP is to focus a product or service on the key value that it provides to a customer.

What commonly happens with startups is that they laser focus on rapidly building the “thing,” rather than testing the value or benefit provided to a customer. Consider the following example:

A new startup, CleanScrubs Inc., has seen a trend in the marketplace. Scrubs, the sterile clothes worn in operating rooms and other clinical environments, are commonly seen in subways, cafes, and grocery stores. CleanScrubs ponders that clinicians have come to think of scrubs more as a uniform than a sterile article of clothing that should be donned within a clinical environment. Meanwhile, hospital-based infectious disease runs rampant, drug-resistant bacteria are on the rise, and billions of dollars are being invested to control this problem. Moreover, hospitals have large staff and, consequently, large costs associated with cleaning these scrubs (when clinicians actually leave them at the hospital).

The founders of CleanScrubs, two bright young engineers freshly minted from top-tier universities, believe they have a compelling solution to this problem. They envision a system that receives dirty scrubs and then washes, sterilizes, presses, and packages them for bulk storage within the hospital. The process is fully automated, requiring only one person to toss the scrubs on the conveyor, reducing labor costs of the in-house medical laundry staff. The engineers dub their invention “ScrubBot.” They figure ScrubBot should be able to offset hospital costs and reduce hospital-acquired infections (HAIs).

The monetary benefits of ScrubBot are limitless. The engineers sketch out various embodiments of their system and file a provisional patent. Even though the provisional has been filed, first-to-market offers a big advantage, and secrecy will be maintained throughout development — CleanScrubs will operate under “stealth mode” for the foreseeable future.

Having heard about the Lean Startup movement and MVP strategy, the engineers aim to build a prototype, fast and cheap. Putting their skills to the test, they connect tubes, hoses, motors, and other hardware purchased primarily at Home Depot. After six months of hard work and ramen noodles, they finally have achieved their MVP. It isn’t pretty, but it works (occasionally); it’s about the size of a Honda Odyssey and it’s as loud as a jackhammer on concrete. Also, there is an odd burning odor after the system runs for a few minutes, but hey, this is MVP.

What’s up next is that it’s time to share ScrubBot with hospital administrators and venture capitalists (under a non-disclosure agreement, of course). Landing pre-orders and investment should be relatively straightforward now that their MVP is running, right?

A large number of startups take this approach. They use MVP as a license to focus their efforts on building something fast and cheap. They know that getting feedback from end customers is critical, but they think that deferring that feedback until the MVP is complete is the best strategy for reasons of confidentiality and speed. But as a rule, most of these startups fail miserably.

Why? MVP is not about the product itself. MVP is about the customer’s willingness to adopt and pay for the product. Figuring out whether organizations or individuals will pay for the product often is the largest challenge facing new companies. The goal of MVP is to test the adoption and payment assumptions as early as possible. Building up the ScrubBot from the beginning is the opposite of MVP.

Consider now this revised version of the example above:

Around the same time of CleanScrubs’ inception, SmartScrubs is launched. They have made similar observations regarding scrub usage, hospital infections, and the related costs.

The founders of SmartScrubs, a recent MBA grad and a microbiologist, want to tackle this problem and make a business out of it. They start by defining the basic problem that they are looking to solve: Clinicians wear scrubs outside of the hospital. Next, they ask, “What is the reason for this behavior?”  They speculate the following:

⋅ Clinicians think that scrubs are made of a special bacteria-resistant fabric.

⋅ Clinicians are busy people, and they can’t take time to swap their clothing multiple times per day at the hospital.

⋅ Scrub wearers want the public to know (or think) that they are doctors.

⋅ Scrubs are comfy.

SmartScrubs’ founders table these speculations and decide to get some feedback. They reach out to local academic and community-based hospitals, and they speak with a variety of administrators, doctors, and nurses. They gather a variety of opinions on the subject and they walk away with a key realization – the hospitals that were visited have grown rapidly in recent years, and the in-house medical laundry facilities have not been able to keep up the pace. As a result, clean scrubs are not readily available within the hospital, and many clinicians simply are taking home and washing their own scrubs. Additionally, the hospitals view in-house laundry facilities as low-value cost centers, and there is little interest in investing new capital to expand these facilities.

The SmartScrubs team digests this information, and they come up with an idea to replace the in-house medical laundry facilities with a system that automates the full cleaning, sterilization, and packing process. They also devise a reward system that incentivizes clinicians to deposit scrubs in designated hampers throughout the hospital. The system is fairly involved, requiring robotic washing systems, RFID tags on customized scrubs, sensor-equipped hampers to detect scrub deposits, and sophisticated software to manage the clinician reward system.

The SmartScrubs team considers its MVP strategy. They realize that their two underlying hypotheses are as follows: hospital administrators will pay for this service, and clinicians will be sufficiently incentivized to utilize this service. While robotics and software may be the long-term plan for SmartScrubs, they realize that they are a long way from achieving this status. They need a way to evaluate their baseline assumptions quickly and cost-effectively.

The team comes up with a strategy for manually delivering the bulk scrubs. They call the hospital administrators who were engaged during the feedback process, and they find two hospitals that are willing to participate in a three-month trial. The team then contracts an outside medical laundry service to provide the cleaning. Additionally, they purchase four large hampers for each hospital, and they hire temp workers to manage each of the hampers. They also provide clinicians with punch cards for their scrub return reward system. They then run this process for three months.

During that time, the SmartScrubs team collects quantitative data on the compliance rate of individual clinicians, while also collecting data on the economics of providing the cleaning service, and the administrators’ willingness to continue the paid service. In addition, the team collects qualitative data from administrators and clinicians on the system, its use, and potential areas for improvement. After reviewing this quantitative and qualitative data, the team begins to plan for its next-generation system, and they feel well-positioned to raise capital to achieve their next business milestone.

In the example above, SmartScrubs deploys a logical MVP approach. Note these key differences between SmartScrubs and CleanScrubs:

1) SmartScrubs realizes that they may not fully understand the problem. They conduct primary user and customer research to evaluate the problem, and to clarify any of their operating assumptions about the problem. CleanScrubs assumes that they fully understand the problem. They jump straight into solution building but miss the mark big time.

2) SmartScrubs focuses their solution on the end benefit to the customer, which is delivering clean scrubs. During their trial run, they use a manual process to achieve their milestone quickly and cost effectively. CleanScrubs focuses their solution on the product — a hacked-together robot that is too big, loud, and scary, and only occasionally functional. CleanScrubs thinks the robot is the product, but the product actually is clean scrubs.

3) SmartScrubs engages users and customers throughout their process. They engage these stakeholders as valuable parts of the conversation that are able to provide guidance and feedback. They are able to leverage these relationships during trial runs during the MVP testing phase. CleanScrubs stays in “stealth mode” and tries to sell their MVP to hospitals and investors. They secretly build the wrong product.

Again, MVP can be a powerful strategy for startups to leverage when testing business assumptions. However, common misinterpretations of MVP can send startups down the wrong path.

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