[Ken] In the same way that a strategic minded person really needs to be surrounded by operators, operators I think, get a lot of benefit out of of somebody who is strategic minded as well. So, being able to not have my head really looking down at my feet and be able to look forward a few years, I think that's what allowed me to look at it from the outside and be pretty clear minded as to what the right thing to do was. (soft music) - [Kevin] Welcome to Strategy For Scientists. This is a podcast for scientists interested in learning about business strategy through stories. I am Kevin Hartman, with Strategy for Scientists at the University of California San Francisco, UCSF. We just heard Dr. Kenneth Lynn describing how he was able to bring a new perspective to help set strategy. Ken is currently the CEO and president of Ab Initio Biotherapeutics, but much of what Ken shared with us, relates to his experience at Ulthera, where he helped define the focus that would lead them to profitability. To get started, Ken tells us about the state of affair when he joined and what needed to happen. - [Ken] When I joined, it was kind of entering a period where they were still trying to fully define themselves, it was a high intensity focused ultrasound, it was being studied for a bunch of different applications. The first application that was pursued and ended up getting FDA approval was for a cosmetic dermatology indication. It was important, at that point, to really focus the strategy on something a little bit narrower as opposed to kind of keep a lot of the options open and that was absolutely what we needed to do in order to be the most effective both in terms of executing on the business and in terms of positioning the company and clarifying what paths should be taken and how capital resources should be allocated. - [Kevin] Reaching FDA approval is a major accomplishment and an inflection point for a company. One of the first strategic steps that Ulthera took to achieve this was narrowing their focus, Ken shares how Ulthera's leadership had been able to achieve this by running a conservative or lean company. - [Ken] So, this company, again, great technology, had done, I think, pretty much everything rationally and right, for any mistakes that were made, the conservative running, the philosophy of the company and the CEO was to run it in a way that you didn't, that the entire farm, hoping that something was going to happen when it was less than assured so they ran it extremely lean for a really long time. Because, it gave them flexibility for the inevitable delays, regulatory delays. So, ultimately when they got to their approval, they were in a reasonably great place, having not spent a huge amount of diluted capital in terms of getting there. - [Kevin] So, Ulthera had FDA approval for a cosmetic indication. Determining whether to focus resources on this application meant understanding the market. This includes understanding customer trends and how they would compare to others in the same space. - [Ken] I mean, it's a great market, obviously. If you look at products like Botox, these are enormously valuable products and they move from things that are not really talked about to things that are talked about a lot. The entire cosmetic market has moved to a point where, our culture has moved to a point where, these procedures are perfectly acceptable and normal and there's demand for them, but they really show this great demand only for things that actually work over time. - [Kevin] Some of the technologies in cosmetic dermatology have been marketed well, despite lacking long-term effectiveness. So, these technologies are typically limited to temporary commercial success. However, Ken made the case that Ulthera had a value proposition that set them apart, that they could deliver sustained value to their customer. - [Ken] So there was a lot of consternation about not getting valued properly because, just being in that sector and the argument from the outside championed largely by me was that the differences that we actually have differentiated valuable technology. Part of the proof of that is not just the clinical data that we generated, on top of that, the value proposition of our technology was one that just came with much better economics. So, it was a better business model also. So, we shouldn't be ashamed of being great in this particular market. - [Kevin] Ulthera had explored other applications for this technology such as medical dermatology and neurology. These were important to show that the technology had room for growth and provide some insurance should they fail to gain traction in cosmetic dermatology. But when a new opportunity presented itself with a shared customer base, the cosmetic procedure, Ken advocated the perspective that Ulthera was better off narrowing the focus of their additional investment. Because this potential acquisition shared a customer base, there would be synergies on marketing and distribution, investing in commercialization in this segment, would be the best way to drive revenue growth. - [Ken] Ultimately, the catalyst in this case was that we had the opportunity to actually buy another company and that company only fit in if they are were to say, we are a cosmetic dermatology company and the most valuable thing that we can do is focus on the marketing channel, the commercial channel where we're building a really important and sustainable presence and that's a very, very valuable thing with a constant stream of revenue and relationship with these customers to be able to go in after them having successfully bought a technology and been running that business successfully, to be able to sell them another procedure, another product that fits right in with their existing customers, fits in with their workflow, and actually, again, has the backing of really solid clinical studies to show that it works. That was actually the smartest decision, smartest strategic fit. So, that was the catalyst in terms of moving things forward to make sure that the company actually focused on this as a strategy instead of saying, oh, we're an ultrasonic technology company or we're a women's health company, which, really, we were not. - [Kevin] Ken's awareness and analysis of new circumstances didn't support the company's original hypothesis. With this new data, he was able to build the consensus needed to set Ulthera's new focus. Ken applies these same principles of maintaining agility and setting focus at Ab Initio Biotherapeutics. Given that this company is in a much earlier stage of development, how does strategy differ? - [Ken] Our company right now, we have a really proprietary technology and we can do things that I believe are, if not unique, then very, very close to unique in the entire world and I think what's important for us is to really think about the fact that okay, we have a platform technology, it can be pointed at a lot of different targets, that are provably valuable and to solve a lot of problems that people have been trying to solve for a very long time. The conventional wisdom would be to say, build a big company, pursue products immediately, you know, I think that's not exactly bad, but given where we are right now, the smart thing to do as a young company is to focus on being a platform company early on, find partners to help fund us and to help validate and to help move forward and build a body of evidence that we can do what we say we can do and then also create our own programs in parallel with that and that allows us to be spending our dollars more efficiently and getting more out of it early on. - [Kevin] So, Ab Initio will focus their strategy on being a platform company that uses their core technology in its niche market. He also defines their organizational context and how they will meet their company objectives. For example, they will work with other enterprises to validate targets and define funding. The partnerships that they will form, will be critical to take forward potential products. With that in mind, what is the best approach for forming these partnerships? - [Ken] You have to think about what your weaknesses are, where you have the gaps, for example, for us, we are excellent at the drug discovery piece, at the discovery piece and protein engineering, but we do not have expertise in advancing drugs through development and so I think, for now, the best thing to do is actually to find great partners who are excellent at those pieces where we can hand it off, instead of feeling like you've gotta run the entire marathon, it's more of a relay race. You do the part that you're the best at, you hand it off to the best partner who's great at that next part and then the other things that you care about are that your program is actually important to them, that they actually want to succeed, that they want to move it forward, do anything they can in addition to being the best, the most competent. - [Kevin] With all these strategic decisions that we discussed, what is the scope of strategy that can be set? - [Ken] While you might have a long-term strategy that's 10 years in the future, I think, it's really valuable to have a strategic mindset also for a two-year future or a five-year future as well and then one-year, it's really hard to say those that are strategic decisions made over a one-year period, that I think comes more down to the discipline to the strategy and then being very operationally focused, being very focused on getting done the things that need to get done in order to stay on that strategy. - [Kevin] Success in business or otherwise, is a combination of setting the correct longer term goals and following through on the shorter term tasks that get you there. These two are intertwined in a dynamic and iterative process. Strategy cannot exist in a vacuum and must be assessed by its ability to be executed. We thank Ken for sharing his experience in the leadership of these two companies. Thank you for listening to Strategy For Scientists. (soft music) If you're interested in learning more, check out the online lectures co-produced by iBiology and the UCSF Office of Career and Professional Development. We would like to thank the Burroughs Wellcome Fund and the NIH Institute of General Medical Sciences for grant funding. Thanks also to the PRX Podcast Garage for the studio space and helping us get started with this production. Tune in here for more stories about scientists using strategy.