Recently, Cambridge Consultants hosted a leadership workshop that brought together a wide swath of healthcare professionals — medical device manufacturers, service providers, payers, and universities all were represented. Industry higher-ups in competencies ranging from research and development to market strategy, clinical affairs, and operations gathered with the singular goal of uncovering opportunities for surgical care in emerging markets. Many of the participants were chosen for their extensive experience in places like India, China, Latin America, Southeast Asia, and Africa – nations projected to be core drivers of global healthcare growth over the next 15 years.
Per a report by Cambridge Consultants summarizing the assembly’s findings, the significant opportunity starts with the more than two billion unserved and underserved patients in these regions. The reasons for this deficiency are many – fragmented hospital infrastructure, limited trained clinicians, and lack of affordable healthcare contribute to the challenge. And, as these underserved patient populations grow, the healthcare infrastructure problems will grow with them. However, Cambridge Consultants’ report does identify some of the potential solutions, including investing in risk by embedding resources in the regions, locating and hiring local talent, and breaking barriers related to intellectual property, local regulations, and policies.
The group’s key finding, though, was the need for updated innovation models; to be successful, device makers need to rethink their approach to unmet medical needs. The ability to deliver affordable care in emerging markets requires a change from the West’s top-down thinking. Specifically, device developers must identify unique local unmet needs, approaching the issue from the bottom-up.
Rahul Sathe, Head of Surgical Innovation for Emerging Markets at Cambridge Consultants, was among the event’s hosts and an author of the subsequent report. We recently discussed his thoughts and experiences targeting unmet medical needs in the emerging markets.
Med Device Online: What are the differences between identifying unmet medical needs in developed markets and identifying those needs in the emerging markets?
Rahul Sathe: The concept of needs-driven innovation is core to unlocking business opportunity and delivering value to patients and healthcare systems in emerging markets. Needs-driven innovation is based on objectively understanding unmet needs of surgeons, clinical teams, and hospitals to drive decisions regarding a product's need. This approach is universally relevant across both emerging and developed markets.
However, in practice, medical products in developed markets are heavily influenced by new technology, which can lead to very sophisticated, but very costly equipment. A tech approach can deliver value in developed markets, given their high quality hospitals, well-trained clinical teams, and ample healthcare investment and resources.
In emerging markets, multi-national medtech companies (MNC's) were relatively successful at selling Western medical products directly into top-tier urban hospitals. However, those hospitals represent only 10 to 15 percent of emerging markets healthcare and, over the next 10 years, investment and growth will be in the mid-tier hospitals and the rural clinics. They present an entirely different set of challenges.
In India for example, mid-tier and rural hospitals are overcrowded and understaffed, and struggle with limited infrastructure – electrical power can go down several times a week. On a daily basis, surgeons in those facilities use equipment that ranges from brand new to 30 years old. There is a lack of adequate after-sales training or maintenance support from industry. Often, surgeons must invest their own money to train on new devices, and then in turn train their nurses and technicians.
Aside from a few exceptions, MNC's have yet to rigorously adopt and execute needs-driven innovation in emerging markets. The initial focus was placed on acquisitions or joint ventures with domestic players. Acquisitions served a valuable route to establish market presence and sales, as well as add distribution channels, but major players across industry now are recognizing that the next wave of growth opportunity is upon us, and selling Western products will no longer be a sustainable winning strategy. Instead, emerging market hospitals are demanding tailored products, technologies, and services that address their unique needs.
MDO: What challenges does this create for medical device makers?
Sathe: There are two major challenges to overcome. The first is re-organizing to rigorously execute needs-driven innovation. The key is to pair local insight with global capability, which sounds like a nice platitude, but it is a significant undertaking. However, there is historic precedent for success: GE Healthcare has invested significantly in a large R&D team in India focused on ‘in-country, for-country’ product development.
The second challenge is to evolve business models to deliver tailored products and solutions. Most medical device companies are product companies that thrive on a capital/disposable model in developed markets. [At the leadership workshop], many senior industry leaders agreed that a conventional capital/disposable model is not sustainable for growing market share in emerging markets. Domestic competitors are able to cut prices and offer local support, and are even out-competing MNCs. Hence, a sustainable value proposition is not to offer cheaper, less advanced products, but to deliver greater value through services, patient education, and design-tailored products and technology that can enable team-based surgical care.
MDO: What composition, of job functions and expertise, is required for the teams involved in this process?
Sathe: Needs-driven innovation relies on an objective understanding of the unmet needs of all users and stakeholders who will invest, use, or interface with a potential product or solution. Effective innovation occurs when the entire multi-disciplinary team is involved, particularly across strategic marketing, clinical affairs, and research and development. Our experience has also been that human factors engineers (HFEs) are crucial to objectively identifying unmet needs. HFEs use scientific methodology to conduct ethnography, observational research in operating rooms and hospitals, workflow analysis of procedures, and user and stakeholder interviews.
A multi-disciplinary team taking this comprehensive approach helps uncover explicit, implicit, and latent needs, and helps ensure the right product is designed. Not only are global regulatory bodies, including the FDA, requiring human factors engineering approaches in medical device development, but such approaches in emerging markets can maximize market adoption and proliferation.
Product designs and systems engineers also are crucial to needs-driven innovation. HFEs, working with strategic marketing and clinical teams, can define what function the product needs to deliver, but product designs and systems engineers define how the product functions. To translate the “what” into the “how,” user requirements are converted into relevant product requirements. A robust system architecture should be defined early in the development process. Crucial elements of the design should be evaluated regularly with end users, with the aim to get objective feedback to improve the ongoing design.
MDO: Can you provide a few examples of companies working in emerging markets that have identified unmet needs?
Sathe: In the public domain, GE Healthcare was a pioneer in tailoring medical products for unmet needs, largely the result of investing in an R&D team in India focused on turning local insight into locally-designed products. In 2007, GE launched the MAC 400, a portable electrocardiogram (ECG) that revolutionized rural access to medical care. The device cost less than $800 (compared to $3000-$10,000 in U.S. hospitals) and the cost of an ECG bill was less than one dollar. The product was successful because it was developed for target users. In addition to providing accurate diagnostic readings, it was designed to be used in villages and rural hospitals, being portable in size and weight, and used a rechargeable battery. To reduce cost and simplify user interface, the system had no display screen, and instead relied on printer technology.
Our own organization uses needs-drive innovation approaches to developed disruptive products for emerging markets. Cambridge Consultants recently unveiled a low-cost, portable surgical system the size of a small suitcase that could transform the treatment of patients. The 'Ekano' concept is aimed at laparoscopic surgeons in mid-tier and rural hospitals in countries such as India and China. It was developed at our in-house simulated operating theatre, driven by insights gained from in-depth research in Indian hospitals. A team of our product development and human factors engineers visited hospitals in India to observe surgical procedures and interview surgeons, nurses, and hospital executives to identify unmet needs and innovation opportunities. Our team collaborated with surgeons and hospitals in India to drive product feature decisions, with the aim of preserving clinical functionality, improving usability, while reducing the cost of ownership.
MDO: How can this approach be adapted to serve in other emerging-market countries, or even different regions within the same country?
Sathe: Practically, understanding unmet needs is similar to designing an experiment. In cases where there are more variables that could have high impact on the product direction, more data is needed to come to a conclusion of reasonable confidence — and obtaining more data generally translates to investment.
For example, when we conducted our research in Indian hospitals, we identified that geography, hospital ownership model (e.g., government, surgeon-owned, venture-financed, etc.), hospital tier and size, and user types (e.g., surgeon, nurse, or executive) all could affect a future product's value proposition. We hypothesized that hospital ownership model and hospital tier had the greatest impact to our concept's value proposition. Of course, geography could play a role, but in our case, it was impractical to conduct ethnographic research across all of India, so we honed in on Maharashtra and visited top-tier, mid-tier, and rural hospitals in Mumba, Pune, and surrounding villages. We made sure we observed procedures and interviewed not just surgeons, but executives, nurses, and technicians. Thus, we got a broad representative sampling of data to provide insight to our innovation process.
MDO: What new products have been designed and developed through this needs-driven process?
Sathe: An impressive recent product resulting from needs-driven innovation is ChotuKool, a portable, affordable refrigerator in India, designed by Godrej & Boyce. Godrej competes with Whirlpool and LG for home-based refrigerators, but it wanted to capture the market at the bottom of the pyramid. The company’s leadership realized they knew little about the consumers they wished to target, so they embarked on observational research, conducting open-ended interviews and video ethnography.
Godrej’s team built a prototype cooling unit from the ground up, tested it in the field with its consumers, and even collaborated with hundreds of consumers to determine product design features, from the lid and interior structure to the colors. The product has a low part count to minimize breakdowns and maintenance, it can run on a battery during the inevitable power outages in rural villages, and it comes with a handle for transportability. Finally, its cost is about half that of most basic home-based refrigerators. Godrej’s design team cites that time spent in people's homes, watching how they actually use products, as the key to understanding consumer needs, rather than relying on focus groups or secondary research
MDO: What future advantages can device makers reap by using these approaches?
Sathe: Needs-driven innovation maximizes the chance that the right product is actually designed. While this seems trivial, let's take an example of what happens when the wrong product is launched.
Looking outside of healthcare for a moment, Tata motors set out to launch the world's cheapest car, the Nano. The company’s approach was to significantly strip out functionality; the base model had no air conditioning, no stereo, and just one windshield wiper. When the Nano was launched, customer feedback was negative and included complaints that the engine sounded like an auto-rickshaw.
Tata Motors did not consider user needs. In their own home market, they forgot that owning a car in India is considered a progression of life, an aspiration. Tata Motors spent close to $400 million developing the vehicle and hundreds of millions more building a factory capable of manufacturing the Nanos. The failure to understand unmet needs for emerging markets resulted in a business catastrophe.
Ultimately, needs-driven innovation helps deliver better value to patients and healthcare systems, because unmet needs are fulfilled with products tailored to that purpose. When hospitals and healthcare systems recognize the innovative value of a medtech company, they will welcome partnership opportunities and provide sustainable future growth for that business.