It seems axiomatic that innovation happens in economies where resources are plentiful, but it is equally true that necessity is the mother of invention, so can new ideas that could transform health care delivery in the developed world arise in low-resource regions?
Throughout history, the world’s biggest technological innovations have emerged from rich countries. Resource availability, economic prosperity that supports specialization in key areas of science and industry, and the concentrated centers of learning that such economies create all support this model. But history sometimes turns back on itself, and this is one of those moments.
In the future, more innovations will emerge from countries such as India and China. Their vast populations—a huge potential customer base—and their lower per capita income necessitate new products and processes that are efficient, scalable and simple.
More multinational companies recognize this and are intensifying their focus on reverse innovation—the flow of ideas from low-resource economies to the developed world. Back in 2010, GE Health care began building up its Indian operations as a center for reverse innovation, and more have followed suit.
“Health care is ripe for reverse innovation because spending in developed countries has been spiraling out of control for many years,” says Ravi Ramamurti (Figure 1), University Distinguished Professor of International Business and Strategy and director of the Center for Emerging Markets at Northeastern University, who is coauthor of Reverse Innovation in Health Care (Harvard Business Review Press, 2018). “Technology is advancing rapidly and people are living longer in developed countries, and because most patients are insured, the problem of spiraling costs will not go away any time soon.”
Figure 1. Ravi Ramamurti, university distinguished professor of international business and strategy and director of the Center for Emerging Markets at Northeastern University. (Photo courtesy of R. Ramamurti.)
Developed countries share this problem, but the U.S. is the most extreme example. There is little or no socialized health care but instead competing systems—some private and some public—driving up costs.
“In developing countries, the situation is ideal for driving costs down,” believes Ramamurti. “At most 10% of people in India, for instance, have health insurance—so most people pay out of pocket and health care is expensive. It can bankrupt families, even middle-class families. And because there is a shortage of doctors and facilities, there is enormous pressure to innovate and find ways to provide quality health care at much lower costs.”
With a research background in research and development and innovation management, Dr. Simone Corsi, associate professor and senior lecturer in strategy and innovation at Loughborough Business School in the U.K., has looked closely at reverse innovation dynamics. He concurs that providing effective, reliable and timely health care in developed economies is a constant challenge.
“In most European countries, access to health care is universal and paid for—or heavily subsidized—by the state,” he remarks. “With an ever-growing aging population, budgets are under stress, accounting for up to 13% of GDP, so solutions that maximize value are essential. Even in a system like the U.S. model, pressure on insurance costs or even access to basic insurance remains a challenge.”
“Reverse innovation can help with the provision of more affordable and widespread health care solutions, and reach segments of the population that have been left without health care,” he adds.
Some innovations require a vast input of time and money, so new drugs and hi-tech medical devices are likely to emerge from richer economies, but developing countries are more likely to devise new ideas for health care delivery to reach larger numbers of people—including those in far-flung rural areas—at the lowest possible cost.
Ramamurti has focused intensely on the pathways by which reverse innovation happens, and has shown that a country such as India, which not only has a large population and low per capita income, but also a concentration of high-level skills and technical knowledge in urban areas, can be a hotbed of radical new ideas.
India: Home of jugaad
In Hindi, Urdu, and Punjabi, the word “jugaad” means a nonconventional, frugal innovation—a hack. It is synonymous with the notion of “thinking outside the box” to find innovative, low-cost solutions. In health care, India is the source of many such hacks.
The Leveraged Freedom Chair (LFC), an all-terrain wheelchair designed by MIT engineer Amos Winter, is a prime example. Winter’s team spent six years in India creating an off-road wheelchair for developing countries. The LFC is 80% faster and 40% more efficient to propel than conventional alternatives. For sale in low-resource countries for $250, comparable to competing models, its underlying technologies have been incorporated into the GRIT Freedom Chair. This sells in the U.S. for just over $3000—less than half the price of most alternatives.
Given the challenges of reaching its vast and widely dispersed population, India has also driven advances in telemedicine to bridge the gap between rural and urban areas. Around 75% of India’s health care facilities are in urban centers, where only 27% of the population lives, while rural areas lack surgeons, gynecologists, pediatricians and physicians [1].
“Developing countries like India are much farther along in the use of telemedicine,” observes Ramamurti. “They have to be, because doctors can’t or won’t work in the countryside. So, India has been leveraging teleconsultation for many years. But in the U.S., teleconsultation took off only after COVID, when insurance companies finally agreed to pay for it.”
The Aravind Eye Care System, which Ramamurti describes as “an assembly line for health care,” is another huge step forward in health care delivery. It reduces waiting times between patients at centers for eye care and surgery by allocating resources in a more efficient way.
Organizational innovations enable surgeons to perform around 25 cataract surgeries in a 6-hour period compared to six to eight surgeries per doctor at other eye-care hospitals. Economies of scale enable Aravind to manufacture intraocular lenses for $5, when global prices are around $80. The result is a model that could be successfully deployed anywhere in the world, from the U.S. to sub-Saharan Africa.
In India, a lack of access to technology forces local entrepreneurs and technologists to find simpler solutions. Furthermore, the main market for an innovative product is not large hospitals, as it would be in the developed world, but smaller and less sophisticated health care facilities.
“Affordability is a key issue,” remarks Corsi. “Innovating for the bottom of the pyramid often requires the development of a product or technology that meets the very limited financial resources in those markets.”
“Henry Ford invented the assembly line, which brought down the cost of cars by over 80% while also improving quality,” says Ramamurti. “Toyota took it a step further by implementing total quality management to produce cars perfectly almost all the time. Some innovative Indian hospitals are doing the same thing for health care. We often assume that high quality means high cost, but the Indian innovators have shown that you can have both high quality and low cost. In fact, you need to strive for both or you will fail to capture the opportunities that lie in front of you.”
India’s health care organizations leverage the power of volume, process and, most importantly, purpose. Volume is a necessity given India’s population of 1.4 billion. Process simply means assuming there is a better way to do everything. Purpose, however, is where Ramamurti believes richer nations struggle. In India, the purpose is to bring health care to the masses. Small advances can have a huge impact, which fuels more innovation.
Changing minds in the developed world
India is by no means the only source of health care delivery hacks. For example, the uterine balloon tamponade, a device made from a syringe, blue tubing, and a lubricated condom that can quickly stop uterine bleeding in women who have just given birth and, therefore, vastly reduce instances of maternal mortality, was created in South Sudan.
A team of researchers working in Uganda who saw local surgeons using cheap hardware-store drills instead of expensive clinical drills led to the foundation of Canadian company Arbutus Medical, which has created a sterile drill cover for a standard DeWalt drill to provide a device that is 90% cheaper than most clinical alternatives.
For developed economies, the problem is not a lack of ideas that could improve quality and lower cost. Adoption is the stumbling block, and few reverse innovations gain real traction in Western health care systems.
Usually, lower cost is seen as a positive. TVs made in low-cost regions are high-quality and the lower price is welcomed. Health care apparently operates on a different model. Cheaper medicines or medical devices are presumed to be of lower quality.
“Innovations from emerging economies often entail approaching problems in a way that is completely different from what an executive or technologist is used to in an advanced economy,” says Corsi. “That may create a cultural obstacle to adoption. The context in which reverse innovations are developed and first introduced often allows for technological leapfrogging.”
He points to the Chinese economy, which has adopted financial technologies at a faster rate and on a larger scale thanks to its population’s widespread use of smartphones and relatively low adoption rate of debit and credit cards. As a result, it has leapfrogged from cash to smartphone-enabled cashless.
“There is an element of business competition that may be why the U.S. health care sector is resistant to reverse innovations,” he continues. “The risk of these cannibalizing highly profitable product lines and disrupting markets currently led by large and long-standing conglomerates is high.”
Is the real issue that the so-called advanced economies are programed to believe that innovation is their prerogative? Is it simply a cultural barrier that holds them back from embracing new ideas from low-resource economies? Is it arrogance?
“In so many industries, innovations by profit-seeking firms have produced high-quality products for people of limited income,” says Ramamurti. “Take innovation in communications, for example, which has benefited the poor enormously. However, health care is different from other industries. Everyone should be entitled to health care, and even gung-ho free-market evangelists are against sending uninsured people away from hospitals.”
“Poverty is a great driver of innovation, if one has any compassion,” he adds. “The U.S. and U.K. are more individualistic societies, driven by the belief that people should take care of themselves. They are not as community-driven as some other countries. But to drive innovation in health care, companies need to be motivated by a larger purpose than profits.”
Ramamurti firmly believes that U.S. hospitals and insurance companies should visit India to study what happens in its hospitals, and that they would be warmly welcomed. The benefits would surely outweigh the inertia caused by the established pattern of history. Reverse innovations rely on identifying and exploiting new ideas with global potential, which would put companies in a better competitive position and open up untapped markets.
The model of innovation is changing. It is no longer the prerogative of advanced countries and multinationals. Individuals and businesses in emerging economies have always been innovating, but it has often gone unrecognized. Now is their time to step into the spotlight.
References
- L. Bhandari and S. Dutta, “Health infrastructure in rural India,’’ India Infrastruct. Rep., 2007. [Online]. Available: https://www.academia.edu/40176448/Health_Infrastructure_in_Rural_India