Impossibly economical and Unexpectedly profitable !

IndiOne, a subsidiary of Indian Hotels Company belonging to the Taj Group of Hotels are planning to spring up around 35 hotels in India providing all the luxuries which any 5 or a 7 star hotel would have like a refrigerator, internet connection, coffee maker, work area etc. The rent
of these rooms are estimated to be around 10% of the usual room rents and still making a good 50% plus margins. Such kind of models are not only breakthroughs but they are the ones which bring change to times. It will help in expanding the business travel in order to explore opportunities in India and generate more revenue for India.


When such a kind of a model needs to be realized it has to make sure that :

• The quality is the finest and the best
• Cost reduction will be around 80-90% of the original prices
• The product is marketed well to reach the masses
• It should be made viable so that it can be accessed by the last rung of the economic pyramid which comprise people having the lowest levels of income.

INNOVATION "SANDBOX"

This approach is similar to how a Sandbox looks like, as described so by a professor at a US league university. Here, the innovators have the liberty to try any approach and experiment within the limits of constraints. The value of this approach will be felt beneficial in the lower economic society where the dirth of qualified service looms over the poor people who cannot afford the costly services.

Dismal State of Healthcare in India.

80% of the population cannot afford the health care facilities and insurance services. Also, it is unavailable and inaccessible to them in the rural areas of the country India. There is a shortage of doctors too as only one doctor is available for 100,000 people unlike one doctor for every 160 in The United States of America. Since, people travel from rural areas to cities along with their families to to avail of the medical facilities, the treatment must get over in one sitting so that the patient and the family can return home the same day.

Using the above limitations as constraints a few health care providers converted the situation into opportunities.

Narayana Hrudayalaya (NH) - A cardiac care centre in Bangalore, which specializes in performing over 8000 cardiac surgeries, treated over 60,000 outpatients and also provided consultation/treatment to people at remote sites through internet/telephone till date.

Bhagwan Mahaveer Viklang Sahayata Samiti (BMVSS) - Since, 1975 it's been distributing Jaipur Foot ( A prosthetic foot made out of rubber) and does not charge for the prosthetics and services; it survives on donations from satisfied patients and from philanthropists.

Aravind Eye Care System - The goal of this organization is to wipe out needless blindness by performing cataract surgeries free for around 60% of its patients and continue to operate profitably.

All these three profitable organizations could provide good quality care all coming in from basic philanthropy and public sector subsidies.

To Note: They all innovated under self imposed constraints such as the quality of the service is non negotiable irrespective of what kind of society the customer belongs to. It remained same for all the business models be it IndiOne, NH, BMVSS or Aravind.

Sandbox in Action

There is no generic sandbox design but a checklist of strategies which business leaders can identify so as to overcome them to give birth to breakthrough innovations.

Constraints used for tackling the state of healthcare in India are:

1. Specialization - A general hospital is known to provide all the health care facilities but the ones like NH, they specialize in providing dedicated heart care facilities performing 23 cardiac surgeries in a day which is in contrast to any other urban hospital performing only 4-5 surgeries in a day.


2. Pricing - The organization has to take care of the pricing of their services in order to maintain profits as well as to make sure that the services reach the lowest economical class without a compromise in the quality of service. Even so, many patients could not afford this facility, NH tied up with State Govt. of Karnataka and ICICI (India's second largest bank) so as to make it available for poor people through an affordable insurance plan.


3. Capital Intensity - Cost reduction also needs innovative methods. At NH, they only purchase equipments related to Cardiac Surgeries so as to make use of it round the clock. Incentives are encouraged at off-peak hours when the patients come in for tests at odd hours. NH also bought X-Ray machines which stored X-Ray images on computers cutting down on X-Ray Film costs.


4. Talent Leverage - Surgical skills can only be improved by the no. of encounters a surgeon gets to face. At NH, the heart operation is broken into sub - procedure where every sub procedure is being looked into by the respective expert team.


5. Workflow - Process design is critical. Each member of the team needs to have the know how of what each team member is responsible for. They are all answerable for the outcome. The quality of the outcome depends on the sophistication with which the total task has been disaggregated and assigned to its incumbents.


6. Customer Acquisition - The success of such kind of a business model is dependent upon the volume of customers. The business needs to continuously deploy ways to attract more and more customers. Aravind, organizes eye checking camps in rural areas and even takes the patients along with their relative to their centres. None of them are denied the care if needed, while food and lodging too is taken care.


7. Values and Organization - It is not possible for such breakthrough innovations to become a success unless all the members at the organization are imbued with the importance of the deeply held values to provide world class care to rich and poor.

Any company belonging to any industry in any country can adopt such kind of an approach but they need to be disciplined to breakthrough innovation.

• They must rethink the entire business model which includes - techonology choices, distribution, pricing, scale,, workflow and organization instead of fine tuning the existing model.
• Rather than researching the markets they should immerse themselves in the lives of their target consumers.
• They must accept constraints.
• They must innovate in an ecosystem with many collaborators and partners.
• None of the changes are possible without a clear and unflagging commitment to a strategic intent.

Why do multinational corporations fail to embrace such an approach? The companies are unable to get out of their dominant set of logic using which they have been successful in the past. Managers here believe that 80% of the humanity is too poor to afford their products and services. So, they make minor changes to the existing products and business models, start endeavours that often fail and conclude that success from these was indeed impossible.

For these innovations to be a success the companies/managers need to mobilize themselves so as to target the waiting consumers belonging to the bottom of the pyramid. The opportunity beckons.