This content relates to : EMERGING ECONOMY – INDIA
Affordability, quality of outcomes, and access to care are three critical pillars for innovation success for healthcare innovation in emerging economies.
A thorough understanding of contextual constraints, e.g., mode of use, is crucial to building these pillars.
Addressing contextual constraints often requires unlearning past practices.
Former CEO, GE India & China Technology Center
Presented at the Special Session on Emerging Economy Innovation Research Opportunities: 2022 American Marketing Association Conference, August 9, 2022 1:15 PM CST
Panelists: Dr. Anand Jaiswal (Indian Institute of Management Ahmedabad), Mr. Munesh Makhija (Former CEO, GE India & China Technology Centers), and moderator Dr. Jagdish Sheth (Emory University) discuss various aspects of innovation in emerging economies from both academic and industry perspectives.
Thank you, Professor Sheth, and it’s a pleasure to share the platform with you and Professor Raj and my good friend Anand as well. I want to say right up front everything I’m going to share is learned in the school of hard knocks versus a school of, you know, marketing or education, although I have some business background educationally as well. Anand’s framework, actually, while it resonates with me, the first thing I think about when I look at that neatly stacked framework is it’s anything but linear, this process. So what I’ll say is, after spending about 20 years of my career, although having grown up in India, I spent the first 20 years of my career working in the Western world in the US and Europe, and then the next 10 back in the emerging markets. So the process of unlearning for me was much greater than the process of learning as I approach this. Just to set it in context, if you look at market data, and this is 2019 data, from the World Bank, the percentage of GDP spent on health care in the US is about 17.5%. By contrast, the percent of GDP spent on health care in India is 3.5%.
A second pretty stark metric juxtaposed with that one is the out-of-pocket spend. So this is the spend, literally, that comes out of a consumer’s pocket versus being covered by government or insurance or any other kind of overlay scheme. So in that same context, within the US, the out-of-pocket spend on the average, of every dollar spent is 11.3%, whereas in India, it’s 55%. So when you think about these metrics, you immediately start to feel the pressure of affordability, like you mentioned, Dr. Sheth. But that’s just one of the three vectors that matters. So while cost or how much is a huge component, equally important are quality, which is outcomes, and access, which is where and when can I actually access health care services where I need them, when I need them, etc.
Those three pillars or vectors, whatever you want to call them, cost, quality, and access, actually stay constant across geographies, just the degree to which they become important or less important varies as economies. It’s what I learned and what I found is as economies progress, as societies progress, sometimes you’ll find in healthcare systems where cost is not an issue, nationalized healthcare systems, like Canada or the UK. What becomes an issue is access. Why do I have to wait for six months to go get my PET-CT scan? Or what might become an issue is quality. Am I getting consistent health care or not? So again, I think while we think about lots of differences, there’s actually a lot of similarities as well across these healthcare systems.
I just wanted to say that as an underpinning. I’m going to jump to the end before a talk about two or three stories. And the end for me was really four or five principles that cemented and formulated over time as we navigate this journey of 25 products for emerging markets, India, China. Call it frugal, call it reverse, call it whatever you want. It all happens in a melting pot, versus saying, “Now I’m going to do reverse innovation.” And, “Oh, by the way, I checked the box on frugal innovation.” It actually happens as you learn. So I want to just mention what some of those learnings were. The first thing is, I think, like anywhere else, you have to understand and map the value chain. If you don’t start with clarity of what the value chain is and then what are the opportunities and barriers and pain points in that value chain, I think you could be sort of chasing your tail a little bit. And that discipline, I think, has to stay consistent.
As you map that value chain, I think what we found is you find constraints. You find things that you can’t change and things that are not going to be easy to change, like a cost envelope that the product has to fit in, or more importantly, a price envelope that the product has to fit in. And so this helps you lean into the problem rather than being — rather than force-fitting a solution. And I think that mindset was another one that helped us over time. Didn’t have it at first. I already mentioned the unlearning greater than learning, But also, and Anand mentioned this or touched on it, which is, while you always want to respect the past and respect the learnings from the past, no sacred cows. No deference or default deference to the powers that be and the ability to actually allow for some open thinking.
That leads to the next one, which is empowered teams. Teams that are truly chartered and empowered and not just in paper but actually feel that air cover from their leadership to be able to think differently, think laterally, go beyond what might be considered the norm, in terms of product design, product selection, ask questions that haven’t been asked in a while, etc. And finally, this idea of nonlinear, you know, a classic startup or anything, you’re going to pivot. You’re going to — you’re going to — you’re going to figure something out. You’re going to figure out what’s wrong. And that’s okay. You got to take the next step. And it’s never just about the product, right? The product is just one piece of the success. Equally important, if not sometimes more important, are things like, how do you train people? How are you going to distribute this product? How are you going to service this product? What is the, you know, what’s the financing strategy? So all of those pieces, I think, become as important.
With that, I want to share two examples of lessons that learned and, you know, Anand had in his opening page, one of them, around ECG machines. And then there’s another one around a phototherapy device. Phototherapy is used to treat babies that have jaundice when they’re born. Our focus was in three clinical areas. It was cardiac care, maternal and infant health, and early detection of cancer. These were the three areas. And they were all areas that came from market data that suggested these are areas that people feel underserved, willing to pay for, etc. “We have 30 models of ECG machines selling around the world, so, why do you need a 31st?” is the first question that comes around, and ECG for less than the price of the bottle of water, which was 10 rupees at the time, one ECG less than the price of a bottle of water was really the mantra. How do you get there?
We had a speaker from Ford come talk to us about their journey. And what he mentioned to us, Ford Escort launched — Ford launched the Escort product in India between 1995 and 2001. It was their first car that launched. And they used the de-featuring approach that Anand talked about. One thing they did was they took out the electric windows and put in the manual crank windows in the back seats. The front seats still had the electric windows. While sitting in Michigan, that may seem like a great strategy to do. Anybody that could afford that car in India had a driver. And so, the driver ends up with the electric windows. Right? And it’s a, you know, so, innovation for markets, just like any market, not just emerging markets, cannot be done by remote control, was the lesson that we learned out of that.
So this was the reason I was sent to India. I was like, “Go, go figure this out for us.” Right? “Let’s go build a team and go figure this out.” The first people I hired in India were not engineers. They were product managers. Because you need to have the — and they came from pharma, from consumer, and from other more established industries that had touched consumers and touched the markets in India. Not so much, you know, medical devices at the time. When we started thinking about ECG, it became clear that only two things mattered. One was ease of use and two was affordability. Well, they sound very, very easy. Ease of use, what ease of use means is ease of use means the ECG needs to travel to the patient because the patient can’t travel to the ECG. What ease of use means is there’s no air-conditioned rooms and dust-free environments to operate the sophisticated equipment. It has to travel in a backpack and there’s no electricity to plug it into. It needs to, you know, have a week’s worth of charge, takes 500 ECGs on a single battery. So, those kinds of things, our teams in Germany or in the US, those were not constraints that they had.
When I talk about embracing the constraints, it’s first finding what those constraints are and then leaning into them more so than not. Leveraging a local supply chain became another very, very powerful way to think about this. The printer used in the ECG machine actually is the same printer that the bus tickets are printed on in rural India. It’s a thermal printer. We had the drivers modified. But the fundamentals of this printer, its ability to resist dust, its ability to operate in very hot and humid environments was already proven. The supply chain to manufacture that printer was already there.
It’s easy to say that these are the crown jewels. You will not have them in a lower-end product. Such was the case with an ECG interpretation algorithm that automatically interpreted the ECG to say whether it was normal or not. We de-featured that product to pull that out of the software on the low-end product. Eight months later, we found ourselves putting it back in. The market has taught us a pretty stark lesson, which was, essentially, while the high-end products had ECG interpretation software in them, those products were used by cardiologists who all knew how to read ECG. So they sort of ignored that interpretation, or sometimes just looked at it and, you know, confirmed their own or vice versa or what have you. But it was not a vital part of it. To screen for cardiac disease in primary care or primary health environments [inaudible] not a cardiologist. Sometimes there’s not even a cardiologist in the whole town or village. So the need for that algorithm was even more pronounced. As we put it back in while our fear was cannibalizing the high-end product, we didn’t cannibalize anything at all because these were two completely different market segments, appealing to two completely different kinds of institutions, kinds of practitioners, but it was hard. Well, that seemed very easy to understand after the fact. It was hard for us sitting in, you know, a corporate world to even fathom that this prized crown jewel, you know, algorithm, we could just give away, not give away but, you know, put into our low-end product.
Finally, I’ll share my second story, and I don’t know. Dr. Sheth, do I have five more minutes? Absolutely. Okay. This is a different story. This is a product called Lullaby Phototherapy. I have two daughters. One of them was born with jaundice. Forty percent of kids are born with jaundice. Very, very treatable with light. Phototherapy is — actually, it’s a specific wavelength of light. It’s 420 nanometers, is all that matters. If you can expose the skin for long enough to that wavelength of light, bilirubin in the blood gets dissolved and excreted through urine and the baby cures itself of jaundice. While in developed markets, this is done inside controlled environments with, you know, certain blankets and light blankets and enclosed chambers where babies are treated. In most of the developing world and certainly in India, this is done with sunlight.
And you put the baby by a window, and you — the baby is wearing a diaper, and you do it for two days, three days. And most times it works okay. But you’re also exposing these babies to the other elements of heat, ultraviolet light, etc., which is not the best for, you know, for delicate skin. So the idea was, why can’t we provide safe and effective phototherapy for these 40% children? The product was again too expensive. It had fans in it that cooled CFL bulbs. It used about 140 watts of electricity. While we had donated some of these products to primary health centers, we found that people weren’t using them. Because the fans would get caked with dust, stop rotating. They couldn’t cool the bulbs. The bulbs would fuse. And then they would say, “Well, I got to buy new bulbs and it only lasted a few months.” Or the primary health center would have a choice. They ran a generator maybe 80% of the time for electricity because they didn’t have direct electric supply. They could either run the operating room to deliver the baby, or they could run phototherapy for three days to cure jaundice. Well, guess which one they would select? So we had a real different question on our hands. And the answer came from some lateral thinking.
GE at the time had a lighting business. And I was just talking to a colleague and they said, “Of course, we can do 420 nanometers. We can do any wavelength you want, 1/10 the power, 10 times the life.” Long story short — — LED phototherapy became like Kleenex, meaning it was a rebranding of phototherapy. The category got rebranded to LED, not just because of what we did, but just because every competitor gravitated to LED within a five-year period. Because there was no — there was no benefit to staying with the incumbent CFL technology. It just took one of these forcing functions, crucible moments of understanding that in an emerging market to be able to make that leap faster than we otherwise would have made it. That then led to the reverse innovation, to say — and I use the term “reverse,” but reverse is just a perspective on which way you’re facing. So whether it’s reverse or forward, it doesn’t really matter. The fact that matter is getting to an environment that actually forces you to think differently, embrace that environment, and then see what you can do with that innovation in the rest of the world.
So I’m going to stop there. But like I said, a fascinating journey. I’m humbled by the learnings my team had and I’m happy to have this platform to share it with you all. Thank you so much, Munesh.
Former CEO, GE India & China Technology Centers