Marketing, the Bridge for Growing from Engineer to Entrepreneur
Doing Your Own Market Research
Stanley N. Lapidus

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Stan Lapidus raised more than $100 million in venture capital to found companies which achieved a market value of nearly $4 Billion; an incredible entrepreneurial accomplishment.

Stan is an Electrical Engineer.  Early in his engineering career, while at Raytheon's famed Spencer Laboratories, he pioneered digital electronics for Gamma Cameras, solving problems of the notoriously unstable analog systems of the day.  When his innovative digital design was reviewed alongside legacy analog approaches of long-time Senior Engineers, the head of Spencer Labs concluded, "I am going to go with the kid!"

However, Stan's first forays into entrepreneurship were not so successful.  In the early 1980s, Stan helped launch the machine vision field.  While he founded Itran, raised $15 million in venture capital, and drove the company to become the #1 machine vision supplier to the automotive industry, Itran was a financial failure.  Stan remembers, "It was not a lot of fun.  It was a failure.  The close friends and I who founded Itran together are no longer speaking to each other."  Itran suffered from a Marketing/Engineering Investment Ratio of 0.05.

Stan needed a bridge from engineering to entrepreneurship.  Marketing (market research) provided that bridge.

In the late 1980s, Stan started Cytyc to pioneer new technology in PAP tests for cervical cancer screening.  This time, however, while Stan was still in his basement, he invested 1.5 times as much in marketing (market research) as in engineering.  Stan invested $120K in marketing versus $80K in engineering in Cytyc's first twelve months. 

Cytyc was one of the premier financed companies of its era on the East Coast, garnering $43.6 million from VCs and $133.8 million from the public markets for a total of $177.4 million.  By 2001, Cytyc achieved a market capitalization of $3.65 Billion.  

Early market research, in advance of engineering, identified profound changes from the initial product concept which was a machine vision slide reader.  Upstream market research identified the real customer problem; the preparation of the Pap smear slide before the slide was read.  A patented slide prep system emerged, the ThinPrep® System, which adds to product differentiation and simplifies Pap screening.  The ThinPrep® Pap Test® makes Pap smears by an automated slide preparation unit, the ThinPrep® slide processor, that produces uniform thin-layer slides, virtually free of obscuring artifacts such as blood, mucous, and inflammation.

With marketing guidance, engineering designed the right product, and captured the business opportunity. Cytyc developed the technology to fit the customer need.  Clinical trials demonstrated that Cytyc's ThinPrep® Pap Test® increases disease detection 65%, and reduced the error rate (False Negative) by a factor or four.

In MIT's entrepreneurship course, Stan taught, "We didn't plan it that way.  We just did what we had to do.  In retrospect, it would have been helpful to have such a planning tool.  We didn't think in those terms [of the Marketing/Engineering Ratio] at the time.  We just did what was necessary to launch Cytyc successfully.  Now, we have a budgeting tool in the M/E Ratio."

In his next startup, Exact Sciences, Stan invested even more in marketing, 2.33 times as much in market research as in engineering (1995-1996), while developing world-class molecular biology technology for colorectal cancer screening, arguably even more complex technology than Cytyc’s.  Exact went public with an IPO, and attained a market value of more than $300 million.

Stan learned the value of market research.  Although his slide show is subtitled, "Doing Your Own Market Research," Stan actually retained marketing consultants in addition to doing some of his own market research..

I would call Stan Lapidus a “super success.”  Across the broad landscape of technology-based enterprises are other super successes like Dell Computer and EMC.  There are also business basket cases such as Thinking Machines, Polaroid, and Genuity who have all gone down in flames in bankruptcy.  I would call them “flaming failures.”

Here is a graphical way to summarize what we might learn from these outcomes.

More than $1 Trillion is represented either in value creation by the successes, or in capital squandering by the failures.  The human impact has been more than 400,000 jobs created by the winners, or lost by the basket cases; and more than 150,000 engineering slots fashioned or vanished. The data are consistent from the 1950s into the 2000s, from startups to Fortune 500 firms, and across a broad range of technology-based enterprises. Click for an enlarged chart with the evidence; listing company names, products, and dates.  Opens in new window. 1024 x 768, 34 K, easiest to read 800 x 600, 24 K   Download a printable version of the evidence in Adobe® Acrobat® (PDF) format, 161 K. Requires Adobe® Acrobat® version 5.1.0, released 9/17/2002, or later. Download the Adobe® Acrobat® reader .

At my request, Stan has delivered this material as a lecture during MIT's annual entrepreneurship course, 15.976, "Starting And Running A High Tech Company."  The engineers love him at MIT.  The course has been sponsored by the MIT Enterprise Forum and MIT's Entrepreneurship Center, and is three credits towards an MBA at MIT's Sloan School of Management.  Stan has been my Guest Professor during the "High Tech Marketing And Sales" section of that program.  I have also had the pleasure of having Stan teach for me as a Guest Professor in the Executive MBA program at Suffolk University.

Ralph Grabowski

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