Lessons from Healthcare Innovation in India

image of the Taj Mahal in India (from Microsoft PowerPoint)

By Wayne Caswell

The Innovation Sandbox, by C.K. Prahalad, is an excellent article published in 2006. But because it’s a bit long for my audience and requires user registration for access, I’m presenting my summary below.

To create an impossibly low-cost, high-quality new business model, start by cultivating constraints.

Once the “sandbox” of constraints is defined, unconventional thinking can occur in many directions at once. The result is often breakthrough innovation that doesn’t just change processes; it changes lives. For example, indiOne found a way to offer modern and well-equipped hotel rooms for $20USD per night while Western-style hotel rooms typically cost $250-$300. And indiOne does this while making 65% gross profit, compared to 30-40% for the luxury chains. They did it through innovation.

India’s healthcare system is on a similar trajectory, with innovation coming from a national objective of providing poor people the same world-class healthcare as the rich. The author describes a set of self-imposed constraints, which can vary by industry and are derived from previously ignored consumer insights. For India’s healthcare industry, the sandbox is constrained by four sides:

  1. Innovation must produce products or services of world-class quality;
  2. It must achieve a significant price reduction of at least 90%;
  3. It must be scalable to serve both rural and urban environments; and
  4. It must be affordable by all, regardless of income.

That sounds like a good model for our own healthcare system, so there are many lessons we can learn from innovation in India and the sandbox model.

Change in India’s healthcare system is an ongoing process and has not been easy. The country is known for its poverty, horrible living conditions, and poor public health, with high rates of infant mortality and HIV/AIDS that have reached epidemic proportions. Doctors are scarce (1 per 100,000 people versus 1/160 in the U.S.) and most people live in rural areas with no easy access to healthcare facilities.

Even though they face tough challenges, India has seen some phenomenal success, largely through specialization and process improvements.

Health Service

Procedures per year

Gross Margin (2004)

Cost vs. U.S.

Prosthetic Foot

16,000

*

300x

Cataract Surgery

240,000

54%

50x

Cardiac Care

7,500

19%

30x

* Does not apply. All treatment is free. Donations are not related to individual patients.

The “Jaipur Foot” is a prosthetic foot made of rubber for below-the-knee amputees. Such a prosthetic in the U.S. would cost $8,000-$10,000, it costs just $30 in India. The foot and other prosthetics are distributed and fitted for free by a nonprofit organization.

The Aravind Eye Care System is the world’s largest provider of cataract surgery, performing 240,000 procedures per year in a very specialized factory-like setting with a goal of wiping out blindness.

Narayana Hrudayalaya (NH) is one of the world’s largest providers of cardiac care and heart surgery, performing dozens of surgeries per day. They train doctors and nurses in record time and focus on specialization and volume. That way the medical staff quickly gains expertise in the limited number of procedures they do. Specialization also allows NH to buy only medical equipment related to cardiac care and use the equipment 24/7. To help drive volume and keep the surgeons, equipment and facility humming, they offer discounts for off-peak exams and procedures. It’s a very efficient system that lets NH charge a fixed rate of just $1,500, which is about 7% of what a typical U.S. hospital might charge.

Most hospitals here in the U.S. still rely on EKG, X-ray and CT scan equipment using 40-year-old technology. The cost of that equipment is kept artificially high since there are only a few suppliers, but that’s about to change. (See “Smart Skin” monitors Vital Signs.)

Because medically trained practitioners are scarce in India, innovators focus more on the specific skills they need than on the broad credentials of their staff. NH, for example, trains women with a high school education to become echocardiographers, and since they do nothing but read some 200 images a day, they get really good at it real quick. Physicians supervise their work, but the women often detect abnormalities that were overlooked by other institutions and cardiologists.

India makes effective use of video calls and telemedine to reach patients in rural settings and prescreen them before surgery, and they often do this in batches of patients and then provide them all with free transportation to the hospital for surgeries.

NH’s goals are clear and motivating, and its staff all works with the same purpose:  “to provide all people, rich and poor, with world-class care.” That helps create a culture of mutual respect, where young women from the villages are trained as nurses and work side-by-side with Western-trained doctors, designing process improvements together.

U.S. companies in any industry can learn from India’s “sandbox” approach to innovation, but it requires:

  • A clear and unwavering commitment to a strategic intent,
  • Accepting a set of imposed constraints,
  • Rethinking the entire business model (technology, pricing, distribution, scale, workflow and organization),
  • Observing and understanding their target customers’ priorities and needs, and
  • Not innovating in isolation.

Breakthroughs occur when clusters of innovation overlap, taking place through small experiments over time. So why do the big multinational corporations have a hard time adopting this approach? It’s counterintuitive, and they cling to what made them successful in the past.

The zone of comfort drives away the zone of opportunity. If managers believe that 80 percent of humanity is “too poor to pay for our products and services and is not part of our target market,” then a new offering at one-fiftieth the price of the current offering, made without sacrificing quality and at the same time ensuring the company’s profitability, looks at first glance like an impossible task. So… instead, they make minor changes to existing products and business models, start endeavors that often fail, and conclude from those failures that success was indeed impossible.

This summary only touches the surface of Prahalad’s 9-page white paper, but if I’ve piqued your interest, then follow the link to ready more.

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