Business Encounters: Life Scientist

What Do You Want – Money or Power?

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Entrepreneurs are often told that the founder must struggle with a “control versus wealth” dichotomy. So, we ask budding entrepreneurs, “Do you want to become rich or do you want to be in charge?” If the assumption is that the entrepreneur is solely seeking capital appreciation, we may advise the Founder CEO to give up control as fast as possible. If a faster runner comes along you should give the baton to them, right? The more folks rowing your boat the faster it will go.

In fact, this is an artificial construct that mirrors the assumption that monetary wealth is the only way to measure value. Many folks decide that because they can’t measure it, it doesn’t exist. Are you captive to that false assumption? If so, then a single yardstick (capital appreciation) can fool you and prior economists to determine that that yardstick is sufficient proxy for value.

Craigslist, Wikipedia, Apache, Linux, MySQL, LibreOffice, and Firefox are all enormously valuable, yet their success did not translate to capital appreciation.Today’s entrepreneurs are not the Robber Barons of old. It is rare that the only motivation is money. Most folks have a sense of fairness, ethical behavior, environmental sustainability, equity, and positive impact. At some time these other values will challenge a steadfast emphasis on monetary gain. As one replaces “wealth” with “value” the dichotomy falls apart.

Control and value are not dichotomous. Tight control can yield or destroy value, and lead to a loss of control. For example, a lack of control by the founder can generate a lack of value placed on social responsibility and subsequent production of a company with minimal or negative social impact. In fact, that choice may lead to destroying monetary value as well if the customers also value social impact. Do folks really think that one can launch a successful company that sells a product that kills people (e.g., the tobacco industry)?

If the personal definition of value is more nuanced and a non-monetary reason for a desire for control is defined, a simple function won’t do. To be fair to the entrepreneur and guide them in the choices they need to make, we must develop a more broad definition of the trade-offs associated with value creation.

The first step is to define the personal value of control:

  • Do you want control because you have a vision of something that is truly unique?
  • Do you want control because otherwise you have no clue what you do with your time?
  • Is the purpose of control to ensure that you and only you tell you what to do?
  • Do you want to be invcontrol because you get bored doing the same thing?
  • Do you seek out flexibility to engage in opportunities you didn’t foresee?
  • Alternatively, are you tired and would rather be a spectator than a player?

Value can vary as well. All these models of control seeking and avoiding can achieve different types of value:

  • Where does social responsibility fit in?
  • Do you care about externalities?
  • Is compensation parity an issue?

The control vs. value debate is thus not a battle or a trade-off, but the start of an internal and external conversation, and an exploration of how the two relate for you. That isn’t as simple as a dichotomous model, but our brains are pretty sophisticated.

Reducing motivation to two options was inevitably simplistic.

  • How much control over the direction of the startup do you want and what are the personal and external motivations?
  • What value do you want to create? Assuming there are multiple components, how do you rank them in importance or weigh them?
  • If it turns out that you cannot achieve all your potential values, which one is more flexible for you? What value will you give up?
  • Most importantly, how does your being in control map to obtaining value? In other words, without your efforts, would the value still be realized?

Answer the questions now and write them down. Later, when an investor asks you to change your control or the direction of the company, you’ll have an answer and a guide for what direction to go. Over time, one’s desire for control changes as does what we value. Be prepared to ask the questions again; the answers might not be the same.

The vision of an entrepreneur as someone who wants to become fabulously rich or powerful is pervasive. And we expect that to achieve the goal they need to tirelessly work 80+ hours a week and demonstrate to third-party investors on a daily basis that they are willing to forgo everything to make money for them. Instead, perhaps entrepreneurs are people with new ideas who want to work with others to launch them. Entrepreneurship in America is actually decreasing, despite all the resources that are available here versus elsewhere in the world. Perhaps we should stop focusing on burning out entrepreneurs by locking them into a treadmill assuming that value equals money, and instead focus on capturing their creativity and energy.

Photo Credit: Omnidirectional treadmill immersive simulator.JPG Author: David Carmein Licensing: Permission is granted to copy, distribute and/or modify this document under the terms of the GNU Free Documentation License.

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Team Building and the Benefits/Risks of Homogeneous Teams

Let’s first discard the notion that this company is yours. It isn’t and won’t be. Every enterprise is more than one person. So, from the beginning, this company is dependent on others. It is not an extension of you. And you are not going to be the master of all domains. In fact, you might not even be the CEO if the typical CEO skills don’t match your best qualities. So, from the beginning, this company is a team

Many founder teams are friends and already have a close relationship. They may even have marital or blood relations. Enthusiasm and excitement eventually run straight into the issue of equity. How will this group of enthusiastic folks divide up the equity?

The above background can impede the necessary discussion. Often an egalitarian focus drives a plan for an equal split of ownership. If there are 3 founders, a 1/3 split is chosen as the solution to least likely ruffle feathers; but may lead to problems down the road

  • What happens if one person loses interest and fades away?
  • Do they still get 1/3 of a company that they aren’t contributing to?
  • What if the founders disagree? Does every decision require that two folks agree? How will that impact the third person?

A fair distribution among friends can be problematic. Other questions challenge a team of “equals.” For example, will the stake of the CEO be the same as the person who is in charge of sales? In the beginning, the sales position may be pretty easy, and the CEO is pushing hard. An equal split is inevitably going to frustrate the eventual CEO. If the CEO’s role is demanding and stressful shouldn’t that person get a larger equity stake?

When you play out these and many other scenarios it is clear that an equal division is a foolish idea. But that often doesn’t overcome the fear of breaking up the team or that facade that “money doesn’t matter.” So, what can the team do?

The best strategy is to agree to divide up equity later once roles and responsibilities are defined. And that retention of equity must depend on a long-term commitment. You can keep the “we’re all in this together” vibe and at the same time establish a plan that will serve your needs going forward.

The second issue is one of the skills and relates to the initial concern. If everyone is a friend, do they have complementary skills to launch a startup? Assuming the choice of founders was based on friendships or familial relationships, probably not. Perhaps you have a team of MBA students. Or everyone is 25. Maybe no one has ever been interested in sales or finances. In the worst case scenario, everyone is a “leader.” If so, you can assume that eventually there will be a fight to see who is going to be king of the hill and grab the top CEO position.

Look at the skills and talents and find the holes. You’ll need to fill those holes quickly. Be ready for the reality that the people you choose are going to want equity or a decent salary. It’s unlikely you have a salary that can compete with real-world jobs with competitive wages, offices, and fringe benefits. Be ready to give up equity.

In sum, it’s okay to start with a homogenous group. But eventually, you need a heterogeneous team of people who get along. With such a team, when the times get tough you’ll have the comradery AND the skills you need to weather a financial storm and succeed going forward.

Further Reading

Photo Credits: CC BY-SA 3.0 Nick Youngson and Milbank_Diversity_Committee.jpg ‎(497 × 311 pixels, file size: 57 KB, MIME type: image/jpeg) Licensing: This work is licensed under the Creative Commons Attribution 2.5 License. The image was created by Milbank, Tweed, Hadley & McCloy LLP, who also holds the copyright. The image is available upon request from the firm.

Television DTC Ads from Pharma (Part 2 of 5)

I agree with the AMA’s proposed Ban on DTC Ads of Prescription Drugs and Medical Devices. To me, the logic of the ban is that the only other country in the world that allows direct-to-consumer drug ads is New Zealand. My goal in this blog is not to repeat the various pros and cons cited for DTC ads1. Although, for the record, my interpretation is that the cons far outweigh any perceived pros.

My goal instead is to shed light on how these ads work and what makes DTC pharma ads effective advertising. I selected what are considered the best DTC pharma ads per Rand Marketing (Mar 27, 2016).

Zoloft

  • Issue highlighted: Product corrects a chemical imbalance in the brain that leads to depression in the target market of individuals with sadness.
  • Value proposition: The ability to relieve sadness. It engages the user via “cuteness” that is taking a fairly depressing (sorry) topic and making it seem kid like and cute – and potentially beatable.
  • Call to action: Viewers are urged to talk to one’s doctor about Zoloft (not depression). They also highlight an ad in a magazine (Shape) and a phone number to call. Taking this action is expected to yield benefit to the viewer in terms of relieving depression.
  • Objective Measurable? The ad is highlighted as one of the most effective DTC ads ever. I feel the objective was measurable since data related to prescriptions is readily available and the company could measure changes in prescriptions in the markets where the ad was shown. I also feel the effect of ad was quite attainable at the time it was aired. It provided a clear call to action and doctors were likely to follow up by prescribing the drug that the patient requested.
  • Other notes: At the time there were only 2 SSRIs, and sertraline (Zoloft) had a better profile than fluoxetine (Prozac). Furthermore, depression as a medical condition was relatively unknown yet had been introduced already by the success of fluoxetine (Prozac).

AstraZeneca

  • Issue highlighted: A brand that cares about healthy eating. The target market here is people who eat sugar and unhealthy food.
  • Value proposition: This company can give you advice on how to lower triglycerides and eat more healthy food. It engages the user via pictures of appetizing food (bacon sizzling), people gorging on food, and most importantly humor via the two talking fish.
  • Call to action: The ad does not have an explicit call to action. The only benefit is that one is now aware that a drug company cares about health eating. When the listener runs across marketing by the company they may see it in a more positive light rather than a manipulative ploy to highlight their drug (which relates to diabetes). I think the ad is really funny, and the objective of putting a positive spin on the company’s brand should be easy to attain and measure via surveys and activity on social media (something they highlight in the ad).

Lipitor

  • Issue highlighted: the ability of the product to lower cholesterol to the target market of people with measured high cholesterol or people who are worried that they may have high cholesterol.
  • Value proposition: Lipitor will decrease heart disease (although the ad only mentions data that shows value in folks with existing heart disease, the ad implies value for anyone with high cholesterol). It engages the viewer via a healthy nature scene, someone rowing, and calm peaceful music to instill a sense of calm and vitality.
  • Call to action: The ad’s call to action is “ask your doctor if Lipitor is right for you,” and visit the website. That action is expected to yield a prescription and secondary benefit of lower cholesterol and decreased risk of heart disease.
  • Objective measurable? Yes, because prescribing habits are obtainable on a pharmacy level. The outcome was also attainable because people are always anxious about heart disease and cancer and cholesterol is a familiar and simple number that they can understand in terms of risk (a fact that is very much in dispute).

Rozerem

  • Issue highlighted: The ad highlights the ability of the drug to help you sleep better to a target market of folks with occasional insomnia (pretty much everyone).
  • Value proposition: The apparent value proposition is that this drug can help the person sleep but is not addictive and can be taken when needed. It engages the user via compassion for the person who can’t sleep [he looks awful], humor with honest Abe Lincoln, and an animal chatting.
  • Call to action: Ad says to “talk to your doctor” but doesn’t mention the specific drug to request that is expected to yield improved sleep to the viewer who receives the prescription.
  • Objective measurable? I feel the objective was measurable because prescribing habits are obtainable on a pharmacy level. The outcome (increased prescribing) was also attainable mostly because at that time most other sleep aids had been labeled as dangerous so the product was unique in the marketplace. This is perhaps why they don’t mention the specific drug for which to ask.

Vytorin

  • Issue highlighted: The cholesterol lowering feature of the product to a target market of individuals with high cholesterol.
  • Value proposition: This drug will be more effective at lowering cholesterol than its competitors because it lowers absorption of cholesterol and production of cholesterol. It engages the viewer by presenting picture of attractives food and people with funny poses and expressions.
  • Call to action: “Ask your doctor about adding Vytorin.” They also provide a phone number to call. Such action is expected to yield the benefit of lower cholesterol to the viewer.
  • Objective measurable? I feel the objective was measurable because prescribing habits are obtainable on a pharmacy level. The outcome was also attainable because cholesterol is perceived as a marker of health danger, so the public sees lowering cholesterol as a worthwhile goal in of itself.

Overall the ads use a variety of techniques and a fairly simple “talk to your doctor” call to action. They focus on areas of challenge or frustration and offer a simple and targeted solution. When a drug is mentioned the possible downside is read by the voice-over but not visually displayed, thereby implying that the advertised product would be a simple solution to their problem.

References

  1. Ventola C Lee. Direct-to-Consumer Pharmaceutical Advertising. P T. 2011;36(10):669-684.

Picture Credit: Wikipedia user Royeligio

Using Crowdfunding to Build Business and Entrepreneurship Skills

Not every life scientist wants to start a device or pharmaceutical manufacturing company and sell to a major device or drug manufacturer. Perhaps you are interested in a computer/mobile phone application for health purposes. If so, there may be the opportunity to pursue your entrepreneurial interest in parallel with your research. That is, perhaps you don’t have to give up your research career while you are investing the viability of your entrepreneurship interests.

In fact, even for a life scientist interested in marketing a device or pharmaceutical, it may be advantageous to conceive of a technical application to test the waters and develop business and entrepreneurship skills without the complexity of equity arrangements and complex financials. Imagine it as a simple Y-Combinator type training to hone your entrepreneurship credentials.

For any potential enterprise, you need to first:

  1. Get your thoughts organized regarding product, customer, customer need, and value added
  2. Gather feedback to refine the idea
  3. Assess the financial viability regarding costs and competition
  4. Develop a plan to market the idea
  5. Test the market to see if it is viable

A reward crowdfunding site matches up with these steps:

  1. For a life scientist with entrepreneurship interest, a crowdfunding campaign focused on providing a reward versus giving equity is an excellent way to take on Step 1.
  2. Once complete, you can easily proceed to Step 2 and present the enterprise concept to others. Your thoughts can be easily inspected and commented on by others to make further improvements and gather support.
  3. The process will force you to investigate how much money you need and what you would charge. That’s not a complete financial analysis, but it is a useful part of Step 3.
  4. Crowdfunding emphasizes Internet marketing, and for today’s products, social media focused marketing is your most effective strategy to accomplish Step 4.
  5. Finally, the site can perform Step 5 where you obtain qualitative and quantitative input as to the value of the potential enterprise.

Photo Credits: Wikipedia user Bizking2u and Wikipedia image Crowdfundingescense.jpg ‎under the Creative Commons Attribution-Share Alike 4.0 International license. 

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