Trilogy Tidings
June 2016
in this issue
     I was recently introduced to the concept of "Design Research". I'd never heard of that before. Then I examined its definition in a LinkedIn post. Turns out we've been doing it for several decades! It can be the determining factor in establishing whether or not your new product has a realistic shot in the marketplace. You might want to know what it is.

     You might also want to learn a few truths about due diligence and the failures of M&A.

What is Design Research?  
     Chris Ross of MindFlow Design introduced me to design research in a LinkedIn post dealing with the quest for truth in medical product design. His post was a summary of the pre-design activities that should occur prior to development and commercialization of a new product. All good stuff and very familiar to me.
Design Research  
     Chris dealt with required pre-design and pre-development research activities, and he highlighted in particular the key distinctions between market research and design research. Ah, then the light bulb went off. We've been doing both market and design research for many years; I just didn't realize it.
     I don't agree will all his stated distinctions but I'm with him on the most important differences. Here's my take:
Market Research...
  • tells you about gross historical demand within a product category and the activities of suppliers serving that category
  • allows you to gather opinions of users and suppliers regarding unmet needs within particular product categories
  • reveals something about historical market size and potential future growth prospects
  • given an ethereal product concept definition, provides hints about who might buy and how much they might buy
Design Research...
  • given a detailed product concept definition or physical prototype, solicits functional and emotional feedback from prospective users
  • permits observation of users interacting with the prototype to assess benefits and limitations
  • reveals newly-met needs, inadequately-met needs, and unarticulated needs
  • provides an actionable estimate of user willingness to adopt and how much users are likely to buy and use
     Market research tends toward quantitative methods and large numbers, while design research relies upon qualitative methods exclusively and engages much smaller numbers. But both kinds of research are essential in the "quest for truth" before heavy investments in development and commercialization.
     So, now we both know about design research. Try it during your next new-product adventure. 
The Truth About Due Diligence   
     Due diligence is one of our hallmark services, so I had to check out a recent piece by Connie Loizos in TechCrunch dealing with that activity as practiced by VCs examining technology startups for early-stage and follow-on investments. The article spun a tale familiar to me.
Due Diligence  
     It's main points seemed to be: (1) due diligence is hard, (2) there's an understandable tendency to rely too much on the prior judgment of investor "stars" and inner-circle cronies, and (3) some VCs simply don't do their jobs. I know that #1 is true, and I suspect that #2 and #3 are accurate as well.
     The classic case is Theranos, which I (and many others smarter than me) recognized over a year ago was facing serious headwinds and not doing its required commercialization homework. I was puzzled how so many high-profile VCs and celebrity investors could be overlooking issues which I knew were obvious. It's now clear the reason was over-reliance on the enthusiasm of other investors (point #2 above).
     Most of our DD work deals with corporate and private-equity investors targeting more mature enterprises in the life-science arena, not so much tech startups. Therefore, in our practice market opportunities tend to be a bit more certain and, accordingly, DD tends to be a bit easier. (Do I really believe that?) Nevertheless, it's always a good idea to step out of your inner circle to keep inevitable biases from creeping into your investigations of business opportunity.
     Forewarned is forearmed.
Why do so many M&A deals ultimately fail?   
     "M&A is a mug's game: Typically 70%-90% of acquisitions are abysmal failures." So says Roger Martin in the June issue of Harvard Business Review.

Quoting further:
" The Problem: Although M&As are a tempting strategy for fast growth - and psychologically gratifying for CEOs - most of them are extremely expensive mistakes.
Why It Happens: Companies tend to look at acquisitions as a way of obtaining value for themselves - access to a new market or capability, for example. But if you spot opportunity in a company, others will too, and the value will be lost in a bidding war.
The Solution: Look for ways to give value to the acquired company rather than take it - by being a smarter provider of capital, offering a better managerial oversight, transferring a skill, or sharing a resource. These approaches have been behind the handful of deals that have succeeded."
     Mr. Martin makes a well-informed, compelling case in his article. But I'm left with the impression that his solution is (a) counterintuitive, (b) perhaps a bit unrealistic, and (c) in any event hellishly difficult to implement in most cases. After all, the driving motivation for most acquisitions is 'What can we get from those guys, and what is that worth to us.' Turning that attitude around in most organizations requires a very special skill exercised by a powerful voice in the buying enterprise.
     What do you think?
Resources from our Archives 
     Check out our Reading Room to view my published articles, presentations and white papers on a variety of topics.
     And, you can examine an archive of my prior newsletters (since February 2007).
What does Trilogy do? 
     Trilogy Associates facilitates business growth and renewal through commercialization of new products, providing the following services:
  • Opportunity assessment
  • Business planning and enterprise growth strategies
  • New-product conceptualization, commercialization and marketing
  • Market research and competitive assessment
  • Business development and partnering
  • Market and technological due diligence
  • Assessment of the therapeutic and diagnostic potential of novel technologies
  • Design of efficient and effective development strategies for early-stage biomedical products
  • Business and technical writing/publishing

     Inquiries to establish whether and how we might support your business initiatives are always welcome.  Contact us.

Contact Information
ContactInfoJoseph J. Kalinowski, Principal
LinkedIn Profile: www.linkedin.com/in/trilogy