By Navi Radjou, Jaideep Prabhu, and Simone Ahuja, Special to CNN
Editor’s note: Navi Radjou is a Silicon Valley-based strategy consultant and a Fellow at Judge Business School, University of Cambridge where Dr. Jaideep Prabhu is the Jawaharlal Nehru Professor of Indian Business and Enterprise. Simone Ahuja is the founder of Blood Orange.
The U.S. health care system is headed for a train wreck. Costs are poised to balloon from $2.6 trillion in 2010 to a whopping $4.6 trillion in 2020 – accounting then for 20 percent of U.S. GDP. Yet, over 50 million Americans still lack medical insurance. And worse: 63 percent of Americans surveyed by Deloitte complain that their hefty monthly healthcare spending curbs their ability to pay for other essentials like housing or education.
So we face a huge paradox: the world’s wealthiest nation keeps increasing its healthcare spend (which is not economically sustainable) and yet a growing number of its citizens cannot avail of affordable, quality care (which is not socially acceptable). The only way to solve this vexing paradox is through innovation.
But by innovation we don’t mean the “bigger is better” R&D approach of big pharmaceutical and medical device companies. These large medical product suppliers have traditionally invested huge sums on R&D to develop expensive drugs and medical devices for which they charge customers – HMOs, hospitals, or patients – a hefty premium. However, this ‘‘more for more’’ R&D approach is no longer sustainable in the post-2008 recessionary economy. Cost-conscious HMOs, hospitals, and patients can no longer afford pricey medical products.
What the U.S. health care sector desperately needs now is a new approach to innovation that delivers more for less – that is, more value to customers at less cost. We call this cost-effective R&D model “frugal innovation.” Frugal innovation is a new way of innovating faster, better, and cheaper. It maximizes customer value while minimizing costs and resource utilization.
Yuri Malina and Mert Iseri are two young American entrepreneurs who are pioneering frugal innovation in healthcare. Malina and Iseri, graduates of Northwestern University, are cofounders of SwipeSense, a portable hand sanitizing device that doctors can clip to their scrubs. The device, which is designed like a computer mouse, dispenses antimicrobial liquid when gently pressed. SwipeSense costs overall 50 percent less than traditional solutions like fixed hand sanitizer dispensers. It is also more effective since busy physicians can now clean their hands on the go without having to interrupt their work routine to stop by a sanitation station. Hence SwipeSense is a frugal innovation that delivers more value at less cost. This ingenious device, currently being piloted in hospitals in the Chicago area, has the potential to save the lives of 100,000 Americans who die each year of hospital-acquired infections.
Malina and Iseri, both Millennials, are the MacGyvers of our generation. Remember MacGyver, the TV action hero of the 80s? Unlike James Bond, who carries expensive gadgets, MacGyver is a resourceful secret agent who ingeniously solves problems he faces by relying on his Swiss Army knife and whatever resources at hand. He is a “frugal” agent and the embodiment of Yankee ingenuity.
The U.S. healthcare system needs more MacGyvers to help fix it. The United States has to quickly transition from the “more for more” R&D model to the “for more less” frugal innovation approach – or else its bloated healthcare system risks collapsing under its own weight.
While the U.S. is struggling to innovate its way out of its health care crisis, emerging economies like India, China, Latin America, and Africa are teeming with thousands of MacGyvers who are helping build from scratch affordable and inclusive healthcare systems. These creative entrepreneurs are using frugal innovation techniques to cost-effectively deliver quality care to millions of citizens. We profile three of them here:
Jane Chen, cofounder, Embrace. To save the lives of millions of premature babies, Chen, a California native and Stanford MBA grad, cofounded Embrace with her Stanford classmates Linus Liang, Naganand Murty, and Rahul Panicker. Embrace has developed a portable infant warmer priced at only $200, which is 1 percent of what incubators in Western markets cost. The device doesn’t need electricity (which is unreliable in emerging markets): it can simply be “recharged” using hot water. Unlike fixed incubators, Embrace’s portable device – designed as a tiny sleeping bag – enables mothers to hold their premature babies close to their bodies, a feature which on its own is priceless. Embrace is now rolling out its life-saving device in India and other emerging markets.
Dr. Liu Jiren, CEO, Neusoft. Liu, who heads China’s largest IT services provider, is concerned about the health of 800 million Chinese living in rural areas. These people, Liu says, are going to ‘‘get older and sicker before they get wealthier.” To diffuse this ticking time bomb, Liu believes that the Chinese healthcare system needs solutions that favor prevention over cure. This belief has led Liu’s firm to develop affordable telemedicine solutions that help the elderly in rural China to regularly track their health indicators and receive customized advice on proactive lifestyle changes that can prevent the onset of disease.
Jorge Odón, founder, Odón Device. Jorge Odón, an Argentinean car mechanic, had a knack for pulling a cork out of an empty wine using a simple plastic bag. One day, he realized the same technique could be used to gently pull a baby through an obstructed birth canal – a safer and easier method than using forceps or a vacuum extractor, let alone applying a Caesarian operation. Inspired by this insight, Odón invented the Odón Device, a simplified low-cost device for assisted delivery that is currently in trials. This low-tech device promises to be a boon in resource-constrained emerging markets where it can be used even by unskilled staff to safely deliver babies.
Margaret Chan, head of the World Health Organization, refers to simple and frugal solutions like the Odón Device and Embrace as “examples of strategic innovation” that can be “game-changers” in the global healthcare sector.
In our book Jugaad Innovation, we profile many such “game-changing” frugal solutions currently being deployed in emerging markets to make healthcare affordable and accessible to the masses. Jugaad is a Hindi work that loosely translates as “an innovative fix; an improvised solution born from ingenuity and cleverness.” Jugaad is the resourceful “MacGyver spirit” that seems to have waned in America, but is more active in emerging markets like India and China, where it is helping fuel rapid growth.
How do we rekindle the jugaad – or MacGyver – spirit in the U.S. healthcare sector and make America a leader in frugal innovation? We believe this would require a few forward-thinking pharmaceutical and medical device companies to partner with young people like Malina and Iseri and adopt frugal innovation methods. The good news is that this is already starting to happen. GE Healthcare, for instance, has tied up with Embrace to distribute its portable infant warmer in emerging markets like India. It has also partnered with Rock Health, a startup accelerator in San Francisco that brings together the smartest people in technology and medicine to build simple and affordable healthcare solutions in the United States.
Similarly, Johnson & Johnson is sponsoring Text4baby, a text messaging service that provides low-income pregnant women and new mothers in the U.S. with valuable information about how to care of their health and give their babies the best possible start in life. Text4baby is inspired by successful mobile health initiatives implemented by entrepreneurs in Mexico and Kenya.
In a way, Big Pharma and medical device giants have no choice now because their largest “customers” – HMOs and hospitals – as well as health insurers are leading the frugal innovation movement in the U.S. Kaiser Permanente, for example, has set up an internal innovation consultancy to design cost-effective and patient-friendly care delivery processes. Similarly, Aetna has partnered with Rock Health to gain access to entrepreneurial talent: they recently hosted RFP Live Design, a 3-day challenge event where freelance designers were invited to conceive frugal solutions for improving the lives of senior citizens.
As more healthcare providers join the frugal innovation revolution, entrepreneurs may finally be able to help save the ailing U.S. healthcare system and make affordable healthcare a reality for all Americans.