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Reverse Innovation Case Study: GE Healthcare in the Heart of India

healthcare

By Vijay Govindarajan & Chris Trimble

Excerpted from Reverse Innovation: Create Far From Home, Win Everywhere (Harvard Business Review Press). Copyright 2012 Vijay Govindarajan and Chris Trimble. All rights reserved.

When visiting their local doctors, members of a Bangalore-based GE Healthcare engineering team noticed something troubling. More precisely, it was what they failed to notice that frustrated them.

Starting in 2001, they had been developing and manufacturing GE’s high-end electrocardiogram (ECG) machines in India. Electrocardiograms are noninvasive, risk-free, relatively low-cost tests that measure electrical activity in patients’ hearts. The ECG is the most widely performed cardiac test in the developed world. In poor countries, GE’s “global premium” ECG machines have typically been available only in hospitals in major urban centers. The price of the machines, their weight, and their power requirements have put them out of reach for rural India. As a result, heart problems that could have been detected early and treated have too often gone undiagnosed.

GE Healthcare (2010 revenues of $17 billion) is among the dominant manufacturers of medical-imaging, diagnostic, and health-information technologies and the story of GE Healthcare’s ECG project highlights common themes in reverse innovation tales. Local innovators pay their dues and develop their skills. In light of what they’ve observed in the marketplace, they are driven by a growing passion to fill an important gap—one that hasn’t yet been grasped by the larger enterprise.

Making the Pitch
New business ideas within GE had to clear many hurdles. Not the least of these was convincing the corporate office that you had the capabilities needed to see the project through to success. GE’s emphasis was increasingly on capturing growth in emerging markets. It took persistence, but for its trouble, the team got a $500,000 investment for a low-cost ECG the engineers were calling the MAC 400.

Clean-Slate Needs Assessment
The mission of the MAC 400 would be to extend the lifesaving diagnostic power of a traditional ECG to a mainly poor population of 700 million in rural India. This was where the bulk of India’s chronically underserved, undiagnosed patients were to be found. “The most frequent cause of death in India is heart attack,” says V. Raja, president and CEO of GE Healthcare in India. “Cardiac disease is a big social issue. Mitigating its impact requires early detection. GE had to think of a solution that could be used by every one of India’s seven hundred thousand general physicians.”

To achieve its ambitious mission and defeat local rivals, Raja’s team would have to fully understand just how distinctive the Indian health-care market was. As is so often the case, the company needed to get over its past: leaning too hard on its potent brand, its high-end legacy, and its strategy of glocalization. Instead, it would have to recognize that Indian health care operated under a number of basic constraints—mainly those of income and infrastructure—that compromised access to services.

Income

Low cost to patients. At US$5 to US$20, the cost of an ECG test, done with a traditional machine, is not trivial. It is expensive enough to discourage a great many people from promptly seeing a doctor when they experience chest pains, even though the consequences of an undiagnosed condition can be ruinously expensive and possibly fatal. Therefore, the cost of a single MAC 400 ECG test for the patient would need to fall to the point where no one would have a reason to refuse it.
Low capital cost. GE Healthcare’s $3,000 ECG model was also too expensive for most physicians and clinics. The MAC 400’s price would have to come way down to be affordable by small clinics and individual physicians.

Infrastructure
With transportation, reliable power, and medical experts in short supply in India, medical equipment needs qualities and features seldom considered in the rich world.

Portability. The MAC 400 would have to be easily portable, so that physicians could carry it with them to the patients, rather than expecting the patients to travel.
Battery power. India’s electric power grid is not fully developed, and electric power is either unreliable or unavailable in rural areas. The MAC 400 would have to be able to run on a battery when power from the grid was unavailable.
Ease of use. A traditional unit requires a competent, well-trained operator, but there is a severe shortage of medical professionals in developing countries—even worse in rural areas. The MAC 400, by contrast, would have to be radically simple, usable by nearly anyone.
Ease of maintenance and repair. The infrastructure for maintaining and servicing medical technology is likewise not well developed outside of the largest cities. Thus, the MAC 400 also needed to be very easy to repair.

Finally, of course, the machine had to be better than the ones offered by BPL and other local competitors.

Clean-Slate Solution
The team found many ways to cut costs. For example, GE has historically designed entire ECG machines in-house, based on proprietary technologies. High-end units had custom-made components: GE-designed chips, GE-designed printers, GE-designed keyboards, and even GE-designed cables. Since proprietary technology can quickly drive up product cost—both to manufacture and to operate—the LGT scrupulously avoided it. Instead, the team looked to leverage existing technology wherever possible.

After a series of experiments to design a cost-effective printer in-house, the team hit upon a novel idea: to consider the suitability of the kind of ticket printer used on public buses and in movie theaters. The Bangalore bus system used a printer that was of the right size, weight, and durability to be used for MAC 400 ECG printouts. Millions of these printers are sold every year. GE Healthcare could buy it off the shelf and enjoy additional irresistible economies of scale—versus commissioning a custom solution for only ten thousand units a year.

The team also made progress on shrinking the form factor so that the machine would be easily portable. The goal for total weight was between 1.1 and 1.2 kilograms.

Minimizing the size of the printer reduced the footprint and weight. Eliminating the monitor reduced overall technical complexity, weight, and power consumption, which in turn contributed to longer life for the rechargeable battery. The team achieved its goal of recording a minimum of one hundred ECG tests on a single charge.

The LGT also found clever ways to meet ease-of-use and ease-of-repair requirements. The MAC 400 interface consisted mainly of a green button that started the machine and a red button that stopped it. As Oswin Varghese, the engineer in charge of building this radically different ECG, puts it, “If the person knows how to read traffic signs, he should be able to operate a MAC 400.”

The Launch
The MAC 400 launched in December 2007 and quickly proved itself. At just over 2.6 pounds, it could be carried easily in a briefcase or hooked to a shoulder strap. Moreover, under the hood of this small device, there was considerable ingenuity. For example, it used the same patented GE analysis algorithm that runs on premium ECGs.

The MAC 400 extended affordable diagnostic testing to a poor rural population whose needs had hitherto been neglected. Despite the machine’s bare-bones architecture, it recorded and printed clinically accurate electrocardiograms, detected cardiac illnesses, and helped to save lives.

Patients in Bangalore, or some other urban center, would be charged 90 rupees (about $2) for an ECG. Patients in rural areas would pay fortyfive rupees (about $1). Either price point compared quite favorably with the $5 to $20 cost of an ECG taken on a premium model.

“Innovations for the developing world sometimes move into the developed world unexpectedly, into niche opportunities in marginalized markets that previously went unnoticed.”

Beyond India
Although the MAC 400 was designed for the unique circumstances and needs of India, it quickly found a market in the developed world. Much to the surprise of everyone involved, the fraction of MAC 400 sales made in Europe grew rapidly to half. The machine was a perfect solution for physicians in individual practice who could not afford the bigger systems. The quick win validated the LGT’s foresight in complying with all international standards.

The MAC 400 is now sold in virtually every country (except the United States and Canada, where GE instead sells a model developed in China). “We are not just innovating for India,” says Munesh Makhija, CTO for GE Healthcare in India. “We are innovating for the world.” As another example, Makhija cites GE’s line of lower-cost baby warmers—units that maintain a consistent thermostatic environment for newborns: “Infant mortality is a major problem in India. We developed the Lullaby line of baby warmers in Bangalore. We launched the product in May 2009 at a price point of $3,000.” (Rich-world prices for these units start at $12,000.) “This made-in-India product is now sold in over sixty countries, including rich countries in Western Europe.”

The successful spread of the MAC 400 and the Lullaby baby warmers to new markets highlights a key point: innovations for the developing world sometimes move into the developed world unexpectedly, into niche opportunities in marginalized markets that previously went unnoticed or were too small to justify a product development effort.

MAC India
The initial reverse innovation is sometimes just the beginning. The first salvo later becomes a platform for subsequent forays both up market and down market. Says Raja, “One of the things we learned from this process is that there is a segment even lower than the value segment.”

GE’s first product extension was a scaled-down version of the MAC 400, dubbed MAC India and launched in the first quarter of 2010. MAC India delivered an ultralow price. At just nine rupees, an ECG scan from a MAC India cost a bit less than a bottle of water. Raja notes that at forty-five rupees, “MAC 400’s ECG scan is still too expensive for patients in rural areas. If somebody has a pain in the chest, he will say, ‘Oh, this will cost me forty-five rupees. Maybe the pain will go away.’ But it doesn’t. Then, three days later, he has a heart attack. Either he dies or, if he survives, he incurs the cost of further medical care, which burdens his family with debt. But if the ECG costs only nine rupees, he will say, ‘All right, let me spend nine rupees.’”

MAC 600
The next iteration aimed up market. There’s no question that the MAC 400 involved difficult trade-offs. For one thing, it lacked any digital memory. It was therefore impossible to perform and store more than one ECG exam before printing out the results. If the printer were to break down in the field, the machine would be rendered unusable. Another trade-off was the lack of a monitor. If one or more of the electrodes were attached to the patient improperly, the mistake would be discovered only in the printout, after the test had been done; it would then have to be redone. Finally, it lacked an alphanumeric keyboard or keypad. Operators couldn’t key in the patient’s name or any identifying number. A name or number would instead be written on the printout once the test was completed. This was rightly seen as a cumbersome workaround.

So the MAC 600 added a cell-phone-like keypad. It also added a memory card capable of storing up to five hundred ECG tests. If the printer failed (or if each test no longer had to be printed immediately), the stored tests could be printed later from the memory card. Tests were stored as PDF files rather than in GE’s proprietary data format. That meant they could be read on any computer, printed on a standard office printer, and easily shared via e-mail or mobile phones. Seeds of telemedicine were sown.

These enhancements were all accommodated within the same basic form and footprint as the MAC 400 and MAC India models. The MAC 600 was launched in the first quarter of 2011 and retailed for $1,200. Whereas its less-featured siblings were intended for smaller cities and rural villages, the MAC 600 was suited to large urban clinics and physician practices.

The brilliance of the MAC series of ECG machines shows what big companies can do when they organize themselves to tap into the hunger and intensity typically associated with start-ups. On a modest $500,000 budget, the Bangalore LGT had to be mindful not only of every dollar but of every cent that went into the design of the MAC series. To reach its goals, the team had to draw both on cutting-edge proprietary in-house technologies and off-the-shelf signal processing and printing methods. And, only by harnessing the forces of iconoclasm, opportunism, and efficiency could the team create an adaptable product that could be easily upgraded or downgraded to address a variety of underserved markets, from second- and third-tier cities in the developing world to remote rural areas to doctors’ offices in Western Europe.

MAC 800
Concurrent with the Bangalore effort, GE Healthcare pursued one other ECG innovation. An LGT in Wuxi, China, developed a quasi-premium machine called the MAC 800. It can’t properly be seen as a platform extension, since the China LGT took a different approach. Indeed, it’s a separate platform with a separate operating system. It has a seven-inch monitor, a bigger printer, and a cell-phone-like keypad.

The Chinese team began its project later than the MAC 400 LGT did. It set out to build a more sophisticated product, more in line with China’s market requirements. The Wuxi LGT had learned that Chinese customers were willing to pay extra for a level of sophistication that Indian customers weren’t. CTO Munesh Makhija says that the MAC 800 interface has a contemporary look and feel, more-advanced software, and built-in connectivity.

The MAC 800, which sells for $2,000, is identifiably a cousin of the Bangalore platform. It has portability, simplicity, and battery operation. In terms of features and value, it is roughly comparable to GE Healthcare’s high-end models priced at $5,000. (In some respects, the MAC 600 was an effort to close the gap between the MAC 800 and the MAC 400—a smart compromise upward from India’s value obsession.)

Perhaps a good place to end this story is to note that by 2011, the MAC 800 was being sold in the United States to new customer segments—rural clinics, visiting nurses, and primary-care doctors. These medical professionals either cannot afford the big-ticket diagnostic machines or else need equipment they can easily tote. Reverse innovation isn’t complete until the circle closes and the product meant for an emerging market finds its way back to the developed world.

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About the Authors
Vijay Govindarajan
is the Earl C. Daum 1924 Professor of International Business at the Tuck School of Business at Dartmouth College, and the first Professor-in-Residence and Chief Innovation Consultant at General Electric. He ranked third in the recent Thinkers 50 list of the greatest management thinkers in the world.

Chris Trimble, a well-known innovation speaker and consultant, is also on the faculty at Tuck.

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