The power of rapid cycles of learning
Recently, I had the opportunity to be one of four judges at the semi-final stage of a business case competition that hosted MBA and Ph.D students from some of the most prestigious universities across Canada and the US. As part of the process, students were asked to submit a written business plan to judges ahead of a thirty-minute presentation and question period.
I had the good fortune of being assigned to the medical products subgroup and judging panel which included three incredibly talented professionals with backgrounds in finance, intellectual property law, and medical research.
Each business plan featured a meaningfully unique product that could help make a difference in our health and our world. Plans included detailed financials, and all four teams had taken steps to protect their intellectual property.
That being said, there were two areas where I saw challenges with their plans. Interestingly, they are the same challenges that many organizations have when they consider new innovations:
1. A mistaken belief that research always needs big dollar and time investments.
All of the business presentations we saw included a request for a capital raise, in part to fund additional research and clinical trials. What I learned from talking to my judge colleagues (with backgrounds in capital funding and medical research), was that smaller, faster tests could be performed prior to requiring large investments for major clinical trials. These smaller, faster, cheaper tests could help further prove out concepts before approaching potential investors, while still progressing ideas closer towards FDA approval.
2. Financials built on assumptions rather than on learning.
As a consequence of limited testing, the financials in the business plans were built on several assumptions. As judges we found ourselves questioning revenue projections, expenses and how teams arrived at their company valuations. While we couldn’t expect perfect financials, the use of math modelling to create more realistic financial projections would have strengthened each business case.
The best way to address both issues? Use the power of rapid cycles of learning to get smarter.
Rapid cycles of learning are designed to identify
- WHAT we need to learn about;
- Create a PLAN to learn quickly;
- DO what we need to in order to learn;
- STUDY the results from our test(s), and
- ACT appropriately based on the learning.
At inVision, we focus on one-week learning cycles as part of the Innovation Engineering system. If we are going to fail, we want to fail fast and fail cheap, instead of investing time and money in large scale studies without solid evidence that our concept works.
So, what could innovative organizations and these business case students do to strengthen their potential for successful launch?
1. Identify the death threats for the concept and prioritize them.
What are the top threats to your idea? Identify those factors that could derail your idea and prioritize them. For example, all of the groups saw that FDA approval was critical, and they put that at the top of their priority list. Lower on the priority list was comfort for the patient. I argued that both were equally important. And while they certainly couldn’t deal with all of the FDA research in one week, they could test the comfort factor of their prototypes to ensure patients could tolerate them. The key here? Do what you can to test your idea!
2. Identify fail fast, fail cheap opportunities to learn quickly.
Look for the simplest and most cost effective test to push concepts to the limit. As you continue to ‘pass the tests’, build on the test complexity. For example, in the instance of patient comfort, the students could set up prototypes for friends and family to ‘try’ and then offer their feedback. This wouldn’t replace required testing for FDA approval, but it would answer some critical questions for potential investors and remove a risk. By the time you need significant investment for legislated approvals, you should have enough proof of concept to reduce anxiety for potential investors.
3. Learn as you go: Adjust your product concept and math models based on your learning.
Every learning cycle allows you to learn something you can apply to your concept. After every cycle, re-evaluate! The cycles should help you get smarter every time, refining your concept as you go. If not, you may not be focusing on the most important death threats. The fewer assumptions you make in your plan because you have proved out concepts, the stronger your plan and the more likely that you will execute on time and within budget. Strong financials also help secure investors because it provides confidence in the management/leadership team as well as the concept.
I’m certainly not a medical professional, but I learned a lot about medical devices over the last week. This experience reinforced to me that no matter the industry and no matter the concept, it is valuable to use rapid cycles of learning to strengthen an innovation. Break down imaginary barriers and do what you can to prove out your concept, and then move to the next stage of funding and longer term testing to continue your journey.