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

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.

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.

Problems

Is solving the problem of health illiteracy the reason why we exist? Candidly, it is not.

I have a problem with problems. For ventures like Humaginarium, problems are supposed to be liberating, motivating, focusing, ultimately rewarding. Often they’re not. They’re merely utilitarian.

Problems make consumers feel confused, distressed, vexed. A problem is anything that isn’t right and furthermore, by being wrong, creates an unwanted opening between what is and what should be. Openings like that have costs and conceal opportunities. Unlocking hidden opportunities is the job of entrepreneurs.

Fair enough, but since the business of business is to deliver solutions rather than solve problems, it’s normal to hand off problems to engineers. Myriad kinds of engineers have just this in common: they all solve problems.

That’s why startups are called “tech” startups, led by engineers at least in the beginning. Startups launch to solve problems. That’s the gist of their value propositions to investors. This stance is brilliantly utilitarian, yet somehow incomplete and unsatisfactory.

Why? Because engineering doesn’t begin to cover the gamut of human endeavors and aspirations. I’ll go out on a limb and posit that engineering is largely irrelevant to many basic human activities.

What might those be? For starters, set technology aside and consider art and science. If you believe that arts and sciences are technical, well, you’re wrong. They use technology of course, just as industry and commerce do, but neither is utilitarian per se. Art is essentially imaginative self-expression. Science is essentially the discovery of new knowledge. Both are useless. Neither art nor science solves problems, though both satisfy deeply felt human needs.

What kinds of needs? In the case of art, the need to experience rarefied beauty and truth. That’s what drives billions of consumers to books, screens, galleries, and theaters, spending hard cash to contemplate things that are admittedly useless. In the case of science, it’s the need to apprehend contextual, mathematical, and physical truth. Both art and science enable people to perceive their place in the world, which is different from changing or improving it.

The difference between problems and needs is often glossed over by tech entrepreneurs. Could that be why 90% of startups fail? I’m not sure, but in any case Humaginarium isn’t glossing over anything; and we’re going to succeed.

Humaginarium is a tech startup, meaning that we solve a problem. We call this problem “health illiteracy”: the massive obstacle preventing most people (90% of adults) from achieving and sustaining wellness. Is solving the problem of health illiteracy the reason why we exist? Candidly, it is not.

We exist to satisfy needs. The need for a sense of well-being that doesn’t depend on being healthy or strong or smart or young or beautiful; but only on knowing precisely what you are, aware of what that means, and curious and brave enough to have fun with it.

Satisfying needs (not solving problems) is also the mission of entertainment, education, and health care. Satisfying needs drives consumers to shows and museums and consultations and classes and all sorts of adventures.

Speaking of adventures, my recent hike to the Burgess Shale did not solve a single problem, mine or anyone else’s. It simply satisfied needs that somehow made me appreciate my “wonderful life” and the world I live in. That is the benefit users will get from Humaginarium, whether or not their problems are solved.

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Scientific entertainment. Variation on The Cock Fight, by Jean-Léon Gérôme

Literacy

All consumers need is a nudge at just the right times, in just the right ways, to change from a hapless ignoramus into a hero of their own life story.

We’re making a market for health literacy. Say whaaat? I’ll parse that claim.

Every market is a space for commerce. Where buyers with certain needs look for sellers to satisfy them. Humaginarium is making a market for health literacy and selling in it. This market hasn’t existed before; we’re not improving on some mediocrity in the health care industry. Ours will be the first and most likely the best market for health literacy for a very long time to come.

A glance at the dictionary reminds us that health may be many things; or maybe nothing after we think about it. That’s because everybody wants or claims to be “healthy” but nobody ever is. Our real lives compare to the paragon of health somewhat like our appearance compares to models in Vogue magazine. Without thinking deeply about it, personal health is a state of mind more than a condition.

Humaginarium doesn’t buy that conceit of popular culture. Health for us is tangible, not ethereal: it’s physical well-being. Health is the state of a body within the normal range growth and decay over time. Mind you, normal isn’t necessarily good; it’s actually more like meh when it’s not dreadful. That may be why many healthy people are troubled by their bodies while the unhealthy try not to think about it.

Bringing this down to the level of how we live versus what we’re taught to believe, for most of us health is merely shorthand for the ability to function. “How are you?” “I’m good.” (I may have a tumor the size of a grapefruit in my bowels, but forgetaboutit, “I’m good.”) Most of us run our bodies the way we run our cars, with minimal preventive maintenance and no clue what’s under the hood. Works great until it doesn’t. Then we find a mechanic or doctor for expensive and inconvenient repairs.

Now for the most important word in our syntax. Basic literacy is the ability to read. From reading we get knowledge, from knowledge we get competence or the ability to do things. Few people care about reading for its own sake (and no one knows this better than a jaded English professor). But most people put a very high value on the utilities of literacy. Literacy makes people smart and capable, maybe effective and successful too.

Health literacy is a variation on the textual kind. It’s the ability to read a body, develop insight into its condition and needs, make shrewd choices for or about it, and consequently become its good steward. Those who have health literacy are competent consumers and patients. They engage in preventive maintenance and clinical care, and are eager to learn what’s under their skin. Those who don’t have health literacy check their look in the mirror and say, “I’m good, forgetaboutit.”

Only 10% of American adults have health literacy. The other 90% can’t read their bodies worth a damn. Compare this with 80% of Americans who read the newspaper and email, books and blogs. How can this be? Why can 80% of adults understand the enormously complex fantasy of The Lord of the Rings while only 10% can comprehend the physical reality of their own bodies?

Believe it or not, no one has asked that question until now. While the health care industry bets big on scientific breakthroughs, nobody is asking the more important question: “How about regular folks like you and me?” Can they become good stewards of their bodies and stop running to mechanics every time a weird sound comes from under the hood?

Yes, they can, and they will, but no mechanic is going to do it for them. All they need is a nudge at just the right times, in just the right ways, to change from a hapless ignoramus into a hero of their own life story. The nudge isn’t coming from health care. It’s coming from Humaginarium.

Positioning

Like everything we’re doing right now, the elevator story will be tried on hundreds of people.

When we have seconds to say what Humaginarium is, what is it? The answer must be straightforward and intriguing, and elicit a response. Ideally something like, “How does it work?”

Humaginarium still needs an elevator story, but doesn’t have to write it on a blank sheet of paper. There’s a template and it goes like this:

For (target customers) who (have certain needs), the (product name) is a (product category) with a (compelling reason to buy). Unlike (competitive alternatives) our product (is different and better).

Filling the blanks of that template is surprisingly difficult because much of what we think must be left out. No room! The little that gets in has allusive meaning that stirs the imagination and doesn’t cotton to analysis. For that reason an elevator story is a little like poetry.

Few people can write good poetry, or understand it for that matter. Nonetheless we go where angels fear to tread: into the Shark Tank. Here’s what we have so far:

For adults 18 and older who worry about medical unknowns, Humaginarium is video games that increase health literacy and self-awareness; making people good stewards of their bodies. Unlike ordinary entertainment and education, it nudges people to wellness.

Not great, but not too shabby. Like everything we’re doing right now, the elevator story will be tried on hundreds of people from all walks of life. It’s not positioning per se, but a starting position.