Revenue

Humaginarium is more moonshot than pizza delivery.

When it comes to revenue, consider two types of startup. One wants to solve problems and also make money. The other wants to make money and also solve problems. They sound alike but their raison d’être is different. I thought I observed the difference in a series of pitches this week. Problem-solvers edified and inspired me whereas money-makers pressed for my buy in. Hopefully I’m not making this up. I think it’s real. The difference between the types of startup is like the difference between quality and utility, transformation and fulfillment, moonshot and pizza delivery.

Be that as it may, all startups have to spend and make money, the more the better. For their innovations to engage, they must scale so that they solve one huge problem for many different customers or a lot of little problems for just a few customers at a time. AAA game studios are examples of huge; indie studios of little. Ideally and rarely, when innovations solve a lot of huge problems for many different customers, brands like Amazon and Google are born. Humaginarium may be that kind of startup.

It’s a nice thought, but in any case where will our revenue come from? Most likely from multiple streams including:

  • Direct sales
  • Sponsorship
  • Advertising
  • Analytics

With a freemium pricing strategy, direct sales to consumers will occur when uncommitted users become paying customers. Why would they do that? In order to unlock extra content and premium services. Freemium will help Humaginarium build a large fan base by removing piddling barriers to entry. True, only a small portion of users will actually become paying customers, but the value of scale to us far exceeds the value of purchases alone. Strange as it sounded before Chris Anderson explained this for me, free is far more lucrative than subscription or PPV.

In addition to consumers, we will also book revenue with direct sales to organizations that hire Humaginarium. Hire us? For what? Most likely to develop branded content for their customers, members, students, or employees. This contracted work for hire will be vended by a sub brand named Humagine Learning. That brand draws from the same creative and technical resources as Humaginarium, but makes different products. Organizations get to own what they buy from Humagine Learning, and they also get to decide what it is and whom it’s for.

Our work for hire is a kind of “sponsored content,” but not the only kind. Content we make for direct sale to consumers can also be sponsored. For example, by nonprofits making program-related investments in health literacy or by for-profits trying to build their brands with a large audience of our consumers who have the problem that our sponsor claims to solve. In this way, the Cleveland Clinic could decide to sponsor our cardiovascular portfolio because it promotes health literacy in a segment of the population that the Cleveland Clinic famously serves.

Advertising is yet another revenue stream, different from sponsorship because ad sales are specifically for demand generation rather than brand building. Thus a pharmaceutical or food processing company might decide to advertise to consumers playing in our immunological portfolio. Why? Because the advertiser has a specific product that mitigates a chronic illness that we are helping consumers understand and maybe do something about.

Analytics is different from the previous streams but also valuable. Consumers who explore and challenge chronic illness in Humaginarium may generate mass insight into behaviors, beliefs, preferences, habits, and concerns that transcend play and factor into real-life choices. We will sell this insight to customers in health care and population health who can use it. For example, insight into complex emotional causes of medication non adherence for marketers of drugs.

These multiple revenue streams are organic to the value propositions of Humaginarium. They all represent transactions that reinforce our nudge to wellness. Unlike Walgreens selling liquor and tobacco products in their pharmacies, they fit our mission. Am I sure that there’s enough revenue in these combined streams to warrant investment in the highest quality scientific entertainment that I have in mind? I won’t know for sure until I have a financial model that presents the data and passes the test. However I’m pretty sure that Humaginarium is more moonshot than pizza delivery. The upside potential looks incredible.

Customers

Fully realized human beings, imperfect and aspiring.

Humaginarium customers are people with a chronic illness who enjoy video games. This begs the questions: what people, what illness, and what video games?

My people are 18 and older. They’re “regular folks,” a denominator I borrowed from Chris Anderson. Diverse in age, gender, ethnicity, community, socioeconomic class, vocation, and education. That sounds like everybody, but it doesn’t include children or puerile adults. Cognitive and emotional loads of Humaginarium are for the types of people Ralph Waldo Emerson called “man thinking” and Johan Huizinga called “man playing.” Fully realized human beings, imperfect and aspiring.

These regular folks have a chronic illness; or believe they have or risk developing one; or empathetically care for somebody who is afflicted. Approximately half the population of the United States has a debilitating chronic illness; many individuals have more than one. I don’t know how many more worry they have something that hasn’t been diagnosed; nor do I know how many healthy people care for others who are chronically ill. Still, the total population of my people is very large and is projected to grow about 1% annually. At this point it’s fine to leave it at that.

What chronic illness am I talking about? Well, there are many. Humaginarium has nine portfolios to cover them:

  1. Cancerous
  2. Cardiovascular
  3. Endocrinological
  4. Hepatic
  5. Immunological
  6. Neurological
  7. Renal
  8. Respiratory
  9. Rheumatological

My starting point in conceiving Humaginarium was immunological disorders, for personal reasons, but I switched to endocrinological for technical reasons. In line with that choice, our prototype project Diabetes Agonistes simulates type 2 diabetes. There will be several more Humaginarium games for customers concerned about this dreadful malady; and eventually there will be hundreds of games across all nine portfolios helping millions of people come to terms.

That said, we can advance to the final question: what video games? I bifurcate the lot according to the ways they’re used: streaming and downloading. Streaming refers to PC games but I expect the PC to subsume game consoles while Humaginarium is breaking away. So think of these video games as all that stream from the cloud to a screen. In contrast to streaming, downloading refers to games retailed by Apple and Google; and probably by Amazon and Microsoft before long.

My streaming video game is long-form in the strategy genre. Hours of thoughtful and engaging entertainment in each portfolio with themes, stories, characters, immersive aesthetics. In contrast my downloading video game is an itty-bitty app in the casual genre featuring mind-bending puzzle forms. Customers may play downloading games that unlock content in their streaming adventures. They may likewise collect clues and tokens in streaming games that solve some of the thornier problems in downloading titles. Streaming and downloading both promote escapism and catharsis.

Thus Humaginarium customers are people with a chronic illness who enjoy video games. Even accepting that, however, it’s reasonable to wonder something like this: Why would any customer want to play video games about chronic illness? Well, a similar question has been asked about popular games that depict violent crime and warfare. After all who enjoys rape and murder, pillage, pain and suffering? The answer (I hope) is nobody; but the timeless function of art is not to purvey sadistic pleasure. It’s to reframe and overcome horror in ways that are gratifying and empowering. Grownups use all of the arts – visual, literary, dramatic, cinematic, musical, and interactive – to face the terrifying mysteries of life with curiosity and courage; and use that experience to beautify and make better sense of living in the real world.

I’ve noticed that some critics who question the utility of games for people with a chronic illness neither have a chronic illness nor love video games. Not surprising. Moreover they haven’t considered the therapeutic affordances of art or the developmental impetus of play. That being the case, they can relax, they’re off the hook, because Humaginarium is making stuff for the other half of humanity. Skeptics are not my customer.

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Scientific entertainment.  Variation on Male Nude Study, by Gustav Klimt

Roundup

Humaginarium will keep people up at night jailing the baddies of chronic illness.

I recently shared quick impressions and opinions of meeting with the Diabetes Technology Society. I’ll begin now with a rumination that kindled slowly; then offer a roundup of other recent activities.

Concerning my passivity at DTS. Though I traveled as an NSF sponsored investigator, I didn’t hunt and gather evidence that shores up my business model. I didn’t follow the I-Corps script for customer discovery and afterwards I wondered why. Without realizing it, I may have become recalcitrant towards the empiricism of lean startup. There I was, schmoozing and kibitzing in Bethesda, getting out of the proverbial building. But instead of probing stakeholders about problems and needs, I was learning their science and taking time to ponder and reflect. Ideation and reflection are among the missing pieces of lean puzzles. Lean technique is more reactive or opportunistic than inquisitive and creative. So maybe I was reverting to form at DTS after my summertime plunge in the turbulent Mines of Moria-Newark.

Concerning revenue streams. At my poster session in Bethesda I told a diabetes drug company that it doesn’t want what Humaginarium is making. You invest in sickness, I said, but Humaginarium is an investment in wellness. They told me I was mistaken. A few days later a marketing advisor told me I was wrong. A few days after that a business mentor told me I was stupid. The net? I must restore health care companies to my customer segmentation! Why? Because two pharmaceutical executives liked the idea of Humaginarium. That counts as evidence in a lean startup. Yet I don’t want to do it! I already view health care companies as revenue streams because they are potential sponsors and advertisers. I don’t view them as customers because that, honestly, is not what they are. Think about it. They sell products and services to clinicians who care for patients, but how does that qualify them as my customers? They don’t even qualify as my business partners because their job has little if anything to do with promoting health literacy. They sell stuff to doctors but they don’t empower patients. In this light the advice I got feels unhelpful and distracting (not unusual when a startup is incubating).

Now looking beyond DTS, I recently wrote three challenge grants for support of our prototype project Diabetes Agonistes. All three were (ironically) sponsored by health care companies: big pharma, a provider system, and a payer organization. I’m not sanguine about making even the first cut in these pitches, but it’s good practice and I hope to collect a bit of useful feedback from potential sponsors and advertisers about the role of Humaginarium in the health care ecosystem. I learned yesterday about a fourth challenge grant that resonates because the corporate sponsor claims it wants to disrupt the health care industry. I’ll write that grant as well.

After returning from Bethesda I interviewed two consultants, one in Indiana and another in Michigan. They advise startups that want to apply for SBIR funding. SBIR has been a goal of Humaginarium for about a year now. We were prevented from making a December 2018 submission by nuisance factors in I-Corps. However these consultant interviews were encouraging and a good reset. Right afterwards a third consultant was recommended to me, this one in Illinois. On the basis of these inputs, Humaginarium may apply for Phase 1 SBIR at least twice in 2019: to NSF in June and NIH in September. There’s also a chance that we’ll discover other sources of government funding and foundations that make program-related investments in health education and wellness.

Still looking ahead, after the Thanksgiving holiday I’m going to visit somebody I’ve wanted to meet for years: a research scientist at UChicago Medicine who founded a studio making games for health. Though her focus is pedagogy and mine is andragogy, I am so looking forward to meeting and will write about it in a future blog. She and the medical director of LevelEx are in my gallery of local heroes.

Speaking of university, over the past few days Humaginarium became the subject of a practicum for business school students at Northern Illinois University. If enough students sign up, starting in January 2019 they and a faculty advisor will research and draft marketing and commercialization plans that bridge the abyss between entertainment and health. That bridge building is fundamentally my mission, so I am very excited about this project. I’ll ask the class to study the commercialization model of Professor Scott Meadow at the University of Chicago, which is the best thing of its kind I have seen and way better than lean templates that are more familiar among startups.

Last but certainly not least in this meandering roundup, I interviewed a quant named Richard Cross who is not looking for work but who easily gets what I’m trying to create (bless him). Our 30 minutes together were full of ideation and reflection. My kind of guy. He offered to connect me with people who can plot the kind of mathematical model that I want for consumers exploring the human body in Humaginarium. A model I can use to generate real-time scenarios of adventure, complementing the real-time scenarios of physiology that I already have with HumMod. My vision for world building in this fantasy platform is biology that truly mimics and yet improves nature. When consumers roam the miracle known as the human body, I want them to experience what exists under their skin as well as what could happen there with a braver and more skillful self at the controls. A digital engine that turns our teeny weeny Diabetes Agonistes into gobsmacking cool video games that keep people up at night jailing the baddies of chronic illness in their own bodies.

Diabetes Tech

Everybody would know what everybody else is talking about and even patients could join the conversation. Imagine that!

On November 8 I presented a poster at the Startup Company Showcase of the Diabetes Technology Society meeting in Bethesda, Maryland. The Showcase featured a variety of gizmos, most notably for monitoring and measuring risks and symptoms, enhancing delivery of medications, and managing dietary and lifestyle choices. Humaginarium uniquely made a case for diabetes education and was one of just two solutions that empower autonomous self-care.

The three-day meeting agenda listed many speakers from around the US and overseas. Most were academic, many were corporate, a few were government officials from the FDA and the NIDDK. I observed more than I understood because typical presentations were given in science lingo over PowerPoint slides that looked like pharaonic walls in the Valley of the Kings. I’m not complaining about that. If presentations were given in a vernacular over artistic images, there would be far less need for the Rosetta Stone that Humaginarium is carving. Everybody would know what everybody else is talking about and even patients could join the conversation. Imagine that!

My observations and interactions with attendees led me to this provisional conclusion: Humaginarium is making a kind of health education that doesn’t already exist for diabetes, has never been tried, makes a lot of intuitive sense to providers and payers, and complements a pervasive, relentless, seemingly desperate search for solutions that empower patients. Desperate is a strong word, but in light of the widely acknowledged catastrophe threatened by type 2 diabetes, it’s no exaggeration.

I even received encouragement from two executives with a pharmaceutical company. They so liked the idea of Humaginarium that they asked if I could make similar media for their marketing and education groups. I was amused. Before customer discovery earlier this year I had actually included B2B revenue streams in our business model, but later removed them because I learned from stakeholders that big pharma invests in sickness rather than wellness. (You may think I made that up, but it’s true.) Anyway I shared this anecdote with my DTS interlocutors and stated confidently that their company wouldn’t care for things Humaginarium is making. They politely disagreed and walked away.

To me one of the striking things about the Diabetes Technology Society meeting was an almost complete absence of educational technology. Apart from my poster, not a single other session I attended, or read about on the program, acknowledged the existence of edtech or its utility in the struggle with chronic illness. Is that because diabetes treatment and management don’t rely on health and medical education? No, it is not. Education plays an enormous role, but I sensed that educational technology doesn’t (yet). Diabetes education is still an analog business pretty much, like the conference itself, and powerful affordances of instructional systems are overlooked rather than resisted. Some of this may be for economic reasons, but my intuition is that the real reason is unawareness. The diabetes experts aren’t resisting educational technology; they just don’t know much about it and haven’t talked with a lot of people who do.

Still the knowledge and passion of conference attendees really impressed me. These are the kinds of people that I want to work with, and several stepped up to advise the Humaginarium prototype project Diabetes Agonistes! I plan to cultivate their interests and collaborate with some to create maybe the greatest diabetes education in the world so far. A portfolio of products that everyone can use, enjoy, and share when and where they want to. I know, I know, “greatest” is a strong word, but in light of the observed status quo, it’s no exaggeration.

Value Props

Impact isn’t inevitable; it depends on what customers do with what they experience and learn.

Every startup must have value propositions (plural), at least one for each customer segment and just one for everybody. The big kahuna is called a universal value proposition (UVP). The One Ring to rule them all.

Before identifying our customer segments, I’ll mention that Humaginarium serves two types of customer: fans of the arts and consumers of health care. Though the same people are found in both categories, the categories don’t necessarily overlap. The way to keep them separate in your mind is to mark a basic difference between fans and consumers. A fan is an ardent admirer or enthusiastic devotee. Fans have passion. They buy what they love. A consumer on the other hand is a user of goods. Consumers have problems. They buy what they need.

During customer discovery in I-Corps, I tried to explain these customer types to our facilitators. They had a different mental model which I call materialistic. They understand consumers, they don’t understand fans. You can infer from this, as I did, that they obviously don’t understand behavioral science and economics, but that’s a topic for a different blog.

Humaginarium caters to fans of:

  • Strategy video games
  • Casual video games
  • Popular science
  • Science fiction/fantasy

These fans are equivalent to four customer segments. If customers don’t really truly love at least one of these genres of arts and entertainment, they’re not in our fandom. Though they may still be customers. Here’s why.

Humaginarium also caters to consumers of health care; specifically those who have a chronic illness. It’s safe to say that nobody loves health care but everybody needs it. The chronically ill need it more than others. We cater to two segments among consumers who have a chronic illness:

  • Those who are resisting (been diagnosed, being treated)
  • Those who are avoiding (at risk, maybe in denial)

These consumers are equivalent to two customer segments. If they aren’t resisting or avoiding a chronic illness, we don’t serve their needs. They may still be customers if we spark a passion.

So, seven customer segments show up in our business model. They can be refined and narrowed, but they’re good for now. The segments don’t necessarily overlap; people can be in just one. However it’s common to be in more than one. When that happens their perception of value in Humaginarium steeply rises. If you both love and need something or someone, that tends to rule some of your choices and decisions.

The gains we offer fans and consumers who use our product are listed below. Notice they are imminently palpable and harden with repeated use:

  • Pleasing entertainment
  • Useful health literacy
  • Aptitude for self-care
  • Deep physical self-awareness
  • Actionable framework for wellness

These gains produce beneficial aftereffects when they influence behavior beyond the product. For example in scenarios where consumers can control for things like:

  • Ignorant choices and decisions
  • Risky behavior and lifestyle
  • Irrational medical outcomes
  • Weak patient engagement
  • Avoidable medical costs

As with all entertainment and education, real-life impacts that minimize losses are not inevitable; they depend on what customers do with what they experience and learn. That’s one reason why repeatability (deliberate practice) is a pillar of video games. Practice makes perfect.

What about our UVP, the One Ring to rule them all? I’m still thinking about that, but for now I can’t do better than this:

A nudge to wellness.

May not sound like a big deal, but it is. Critical questions about every value proposition are: “Do customers care?” “How do we know they care?” “Even if they care, will they buy the product to see if they like it?” My answers are:

  • Customer discovery has strongly suggested that they care
  • They already spend liberally to satisfy or offset similar wants and needs
  • They don’t have to buy the product; they can use it for free

Easy. Frictionless. Risk-free. Huge upside potential.

Solving for X

We’ll have nine product portfolios with dozens of nifty products.

Size is a conundrum for startups like Humaginarium. We’re born infinitesimally small with no employees, no address, no products, no customers, and no capital. Unlike most hatchlings, we don’t even have parents to foster our growth. We start with just an idea and then a panoply of ideas as immaterial as energy. Yet somehow ideas cause startups to grow. How?

Or more specifically, how fast, how large, and to what end? The answers seem irregular and obscure to me. I listen to How I Built This, the invaluable podcast hosted by Guy Raz, and every success story is more than different; it’s unique. I attend fireside chats with VCs like Ben Horowitz and haven’t caught a whiff of the secret sauce. On the other hand experts like Ron Adner, Chris Anderson, Steve Blank, Geoffrey Moore, Alex Osterwalder, Eric Ries, and Noam Wasserman have published standard methods, tools, templates, and models to explain how startups grow, but I’m still not convinced they figured it out. For one thing, many fine entrepreneurs haven’t read their books or followed their advice. For another, many like me, who did, found it’s about as useful as scripture for writing code.

Yet growth is crucial. So I’m pondering “how I’ll build this” along lines like these. Two years ago we started at an infinitesimally small Point A. We’re now advancing to a minimally viable Point B. In a few years we’ll end up at a big Point X, when we make our way to the exit.

I know what Point A looks like. It’s the company I founded named Humaginarium LLC. We’re earnestly building Point B. It’s named Diabetes Agonistes, our very first minimally viable product with at least one paying customer (hopefully more than one). I’m using the Unit Model Method to inform the design so that it’s repeatable and scalable. Because Diabetes Agonistes has to contain DNA for transforming intellectual energy into subject matter that consumers will learn with and enjoy again and again and again. Without that, it’s just a game.

Now what about Point X? As I say, I’m working on it, but I don’t care much for cookie cutters and a unit model feels a bit like one of those. Make it once, sell it many times. That’s not for me. I want to make many things once and sell each of them many times. This ambition leads me out of the neighborhood of type 2 diabetes and into the realm of chronic illness.

To my way of thinking, Humaginarium is a safe and trustworthy place where people of all stripes go to reckon with their chronic illness, and have fun with it, and practice killing it. Starting with type 2 diabetes and ending with… what?

The answer goes something like this. Diabetes Agonistes is a product. It’s going to lodge in a product portfolio. All told we’ll have nine product portfolios in Humaginarium with dozens of nifty products. The nine portfolios are:

  1. Cancerous
  2. Cardiovascular
  3. Endocrinological (home of diabetes)
  4. Hepatic
  5. Immunological
  6. Neurological
  7. Renal
  8. Respiratory
  9. Rheumatological

Have I left out any types of chronic illness? I have indeed, but I also included enough to bound what Humaginarium is, and what it isn’t. It’s very big, huge actually, but exactly the size needed to bend the curve of the #1 cause of sickness, suffering, and death in the United States and worldwide.

If you already know that half of humanity has at least one chronic illness, and if you already know that chronic illness is our #1 killer, and if you already know what each chronic illness is, and if you already know what you can do about it, then you are much farther along than millions of regular folks who may want Humaginarium because we built something they need. Therein lies Point X.

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Scientific entertainment. Variation on Seated Nude, by William Bouguereau

Pillars

The assumption that health science is inscrutable for all but a few brainiacs is preposterous.

Right now Humaginarium is making. Making a prototype; making a production path; making a pitch deck; making several models that go with. Making though is contextual. It happens in a space full of influences. I call these influences “pillars” because they hold up the roof of a moral universe.

One of our pillars is behavioral economics. Our slogan Nudge To Wellness springs from this pillar. It means, essentially, that we want people to exercise free will, according to their own nature, when deciding how they’ll deal with a chronic illness. Unlike authority figures like doctors and nurses, we don’t tell people what’s good for them or what to do. Instead we present an engaging “choice architecture” that informs and conditions people so they’ll decide themselves and experience consequences. This pillar is one of the things that makes video games like ours enormously entertaining and influential.

Another pillar is game theory. In order to craft a coherent choice architecture, we first have to understand the logic and dynamics of choice when it comes to managing a chronic illness. What are the options in a given situation; what are their relative advantages; who gets to make the choices, when, how and why? How do certain choices limit or expand freedom and autonomy? Game theory maps questions like these ultimately to experience design for a simulation. A matrix of if-then events that may lead, of their own accord rather than prescriptively, to each individual’s different and preferred way to win.

Deliberate practice is also a pillar. It evokes the Hole in the Wall (or Hole in the Web) metaphor that explains what Humaginarium is getting up to. We start by rejecting inferiority. The assumption that health science is inscrutable for all but a few brainiacs is preposterous. The belief that health science is useless to regular folks is ridiculous. Health science (i.e. knowledge of a body we spend our entire lives with) is not hard intrinsically. The keys are reductionism (so that folks are not thrown by obscure rhetoric) and deliberate practice (i.e. sustained engagement until challenges become second nature). Because gamers often play a couple of hours a day every day, video games are a pretty good fit for deliberate practice. (Just imagine how proficient you could be on the guitar if you practiced two hours a day every day!)

Constructivism is the last pillar I’ll mention. This one is about building; how building things is maybe the most efficient way to learn. Not only how to make stuff, but also fundamentals like the laws of nature, behaviors of systems, ways to communicate, what to fear, how to overcome anxiety and depression, when to fight and when to flee. This pillar puts the responsibility for teaching where it belongs: with the learner cum builder. It trains the hands, the senses, and the the intuition to figure things out. No skill is more important in play, nor in dealing with a chronic illness that seems to thrive on pain and suffering.

I haven’t mentioned technologies like programming languages, instructional systems, game engines, digital imagery among our pillars because they are all, loosely speaking, means to an end. The pillars I named here are not that at all. They are mental models in Peter Senge’s sense of that term: ways to approach problems creatively and successfully, when outcomes cannot be planned or predicted, even when they are life or death.