Rich Sheridan: Innovating in a mature market

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Rich Sheridan, CEO of Menlo Innovations and I examine Accuri Cytometers as a case study in innovating in a mature market. Menlo has played a critical role in developing Accuri's core product. Accuri must convince potential customers to adopt a new product in a space where research protocols assume use of an existing standard. Rich discusses this and other barriers to entry and how they might be overcome.

In this interview (Quicktime ipod compatible, 129MB; Google streaming flash video), Rich Sheridan, CEO of Menlo Innovations, and I (Bud Gibson) discuss Menlo's work with Accuri Cytometers as a case study about innovating in a mature market.

The CEO of Accuri Cytometers is Jennifer Baird. To date, the company has received $5 million in angel investment and $5 million in venture capital complemented by funding from Michigan's 21st Century Jobs Fund.

A cytometer counts cells and is used in medical research facilities. Accuri Cytometers aims to offer a 75% initial cost of savings against a typical market price for cytometers of $200k. Further, the Accuri cytometer is intended to lower the level of expertise required for operation. Both of these factors should put the cytometer within the reach of individual researchers, thereby increasing the number of potential purchasers in the overall market.

Menlo's role has been to develop the software interface for the cytometer that delivers on the proposed value proposition. Rich's word for the process Menlo uses is "high tech anthropology". Essentially, high tech anthropology is an iterative software development approach that involves: (1) creating user personas from interviews; (2) designing mock-ups based on the personas and testing them with the appropriate target users; (3) moving from there to functioning prototypes with more testing; and (4) finally shipping product. Menlo has been working with Accuri for two years, and they expect that initial product shipments will not occur for another 6 to 12 months.

During their iterations, Menlo discovered that cytometers play a central role in the labs where they are used and that errors in utilizing them come with a high cost, potentially delaying research projects for months. As a result, lab directors do not entrust running the cytometer to their assistants. However, managers also find the low-level technical work required to run the cytometer to be a distraction from their usual managerial duties. The opportunity for Accuri lies in getting potential buyers to trust their equipment enough to leave it in the hands of assistants. That way, the market broadens and alters in a way that traditional makers of this equipment are at a disadvantage.

In considering this process, Rich notes that the transition for lab managers cannot be too discontinuous. Otherwise, there will be resistance. Accuri is essentially trying to get the buyers of one product to make a switch to another. Additionally and somewhat specific to medical research, accepted protocols have been established around the use of current cytometer products, and these protocols must be respected.

Rich and I finish by discussing Menlo's relationship with Accuri. It is not purely fee for service. Rather, Menlo has foregone a portion of their fees for a revenue share each time Accuri makes a sales. Rich notes that investors and managers in particular like this model because they feel it better aligns Menlo's incentives with those of the company. We may have the opportunity to revisit this model in a later interview.

Additional links

  • Menlo's software development approach falls under 'agile' methodologies as explained in this wikipedia article. Essentially these approaches are designed to limit the business risk inherent in software development.

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Rachel Ouillette on November 7, 2007 6:56 PM
Start from the end user and build the interface to the technology – why can’t more software developers work this way? I am enthralled by Mr. Sheridan’s description of his company’s implementation of “high tech anthropology.” I’m fascinated by systems, particularly business and work flow systems, and Menlo’s methods really strike a chord with me. In effect, whole systems are being changed here – the way some medical research is conducted will change markedly. But the process by which the systems are being changed is transforming fear of change into the desire for it. So many people work in the midst of poorly designed (or non-designed, poorly evolved) systems. They stick with them because they’ve grown comfortable doing things that way. To actually get out in the field and discover how the technology is used in the daily life of the lab makes much more sense. It’s simply brilliant. Involving potential customers in the development of the product not only leads to a very user-friendly product, but also, in essence, pre-sells it. Appearing on the doorstep with new technology doesn’t work in the conservative medical research industry. This product’s innovations will change the way flow cytometers are used in research labs, but the methods used to develop the product inherently ease the resistance to change. In fact, the way the product is being developed is creating the desire for it. Menlo and Accuri are confronting the market barrier head-on by involving their target customers in the development of the technology. Menlo’s strategy in its relationship with startups is to greatly reduce their rates in exchange for a stake in the outcome. This is a win-win for both parties. Menlo has such an investment in Accuri, and has a real interest in the success of the flow cytometer, making this venture much more appealing to investors. Everyone involved has invested a great deal in making this product a success in the marketplace. Rachel Ouillette EMU Student
Donna Armstrong on November 18, 2007 11:15 AM
When I first started reading about this product, I thought the same thing they did when introduced to it. What is a cytometer? For them to take it on not knowing what is was was very risky to say the least. But they had an innovator with ideas and the cash to back it so they pushed ahead. The way they researched their market by studying their users and working with them side by side was what gave them the knowledge they needed to proceed to the next step of the design process. When they researched further and found that only lab directors were using the cytometers because they didn't trust their assistants, they figured out a way to properly train the assistants to use the machine by working closely with them as well. Opening the door to private researchers really increased their market as well. Donna Armstrong
Nichole Washington on November 23, 2009 9:47 PM
Cytometers can capture a lot of information accurately for research studies hoping to analyze cells. I believe the model not charging a fee for service is a very good model for research studies since they’ve received funding to test their cytometer for accuracy and see if they can help researchers train their assistants to use the product. A lot of times researcher’s have very little time associated with each research project and their staff has to be trained on all aspects of the protocol. Training of the cytometer will help researchers and improve their product market in the future. The company can also receive valuable feedback from the researcher and gauge the project efficiently. As with all small business the owner should cross train to make sure that if one person leaves or over booked someone else can take up the slack. Having multiple people trained on the cytometer as well as troubleshooting the cytometer is very helpful. I’m sure the company has a very comprehensive marketing plan for the research community. Also, it would be helpful I think for the company to start in one particular department at UH for the device and take it from there. Marketing can be handled in phases starting with individual researcher conducting a search around the local area on researchers that currently use cytometers in their proposal to working with department and research teams. A lot of information is passed through word of mouth and it’s very important to have the right researchers on board. I wonder if they’ve contacted the overall UM hospital research department for assistance. I really like this idea.
Nikole Viltz on November 29, 2010 10:45 AM
I found this interview very interesting because of the type of work they are focused on. Because of the type of products and ideas Accuri Cytometers focuses on there is always going to be a need for this company. Within the market, technology is always going to grow, Accuri Cytometers has identified that and is not using it to its advantage to “take cash and ideas and turn them into software”. This company has a very stable set of funding, which can also help support it in the future. Having a high amount of Angel Investors along with the 21st century grant (given from the state of Michigan) and venture capitals demonstrate the high opinion of those involved directed towards the success of the company. This idea was created at the University of Michigan and then was expanded greatly. Because of the type of technology needed in the world today, this type of product can help in several different areas in the health world. With a growing concern and different type of health issues continuously developing, a product such as the cytometer will have a high demand. For research facilities and blood testing this product can be used. Something that I found very interesting is the need for the products to be used by “normal people”. It was described that domain experts often create these types of products yet they do not make it user friendly to those who are not experts. This is key to be successful within the target market. This would not be an issue if the only people who are going to use this product will be domain experts, but because they want to product to be used by an every day individual, the creation must be made according to those types of people. Something that I found very interesting is the fact that these ideas are just brought to Menlo Innovations with no support and their only job is to get it in to the market. The production and creation might be changed because of the type of market Menlo Innovations targets for each individual products. Not only do they have to be educated on each technology idea brought to them, but also completely aware of what type of people in the world will need the product and/or what needs to be changed so that they need it. My favorite part of the interview was the statement that they target of the entire operation is the get those who are using product A to become the users of product B. I thought this really grasped the ideas of the constant flow of changed and technology.

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