Designing Medical Device Products for Emerging Markets: GEMBA, Jugaad, and Reverse Innovation – An interview with Palani Palaniappan, EVP at TerumoBCT

We were honored to have Palani Palaniappan, EVP Innovation & Development, of Terumo BCT, join us at the 2017 American Medical Device Summit, where he gave a plenary address on “The Democratization of Healthcare Technologies”. This is an excerpt from an interview with Palani, also on this topic. You can read the full interview here.

Until now, corporations have served only the top tier of the world’s population: the top 2 billion. That leaves 5 billion people underserved. The underserved can maybe only spend $1 per day, instead of saying $100 in the developed world, but the sheer number of them make it profitable. By addressing these people and their needs, companies who have done it right have thrived. But many have done it wrong.

A common mistake many companies make when designing products for emerging markets is that they simply defeature a product that is engineered to meet the needs of a developed economy. For instance, they will develop a product for the US market, then remove the more costly features to meet a price point they think will sell in a developing market, such as India or Africa. But achieving the right price point alone will not sell your product. You have to hit the right price point and 100 percent of the features have to be appropriate for the market.

Companies looking to design medical device products for emerging markets should keep in mind three terms: Gemba, jugaad, and reverse innovation.

Gemba is a Japanese word meaning roughly “being at the site of action.” This is a term that’s typically used in a manufacturing setting, meaning one has to get to the factory floor to see what’s happening. But it is used all over now, though it goes by different names: ethnographic research, anthropological research, human-centered design, Stanford design thinking … I talk about Gemba as a unifying word. Whatever you call it, you have to do it. Many have failed by sitting far away from the patient and thinking they know what the patient needs. You must immerse yourself in the culture and observe how people live and work and what their unique needs are.  

Second, when you cater to developing—and often cash-strapped—nations, affordability and accessibility are critical. I use the term Jugaad innovation, which means frugal innovation. This has been a subject of a book by Navi Radjou, Jaideep Prabhu and Simone Ahuja. It’s about utilizing existing resources in the area and actually tethering together a technology that will meet the needs of a given medical condition in an affordable way. In the developed world, we think about value for money: creating value to charge a high premium. In the developing world, we should not be thinking about high premiums. We need to think about value for many: the profit margins will be lower, but business will succeed because of volume. We need to be thrifty in product development and innovate within these constraints.

The third idea I talk about is Reverse Innovation, which is really interlinked with the first two ideas. This concept was pioneered by Dartmouth Professors Vijay Govindarajan and Chris Trimble and GE’s Jeffrey Immelt. Many companies—like GE, Siemens, and Renault—have come up with innovations that meet the needs of the developing economies first, because that kind of constraint places a discipline on the innovators. Constraints feed creativity, with the challenge here to ensure we create an affordable product. But developed markets also face price constraints—more and more so. So an inexpensive product developed for a cash-strapped market may also be perfect for developed markets. As an example, GE created a low-cost, portable electrocardiogram device to serve the needs of tribal populations. This device was made for about $300, as compared to a similarly functioning device used in centralized labs in the U.S. that costs about $30,000. GE then launched essentially the same product in the U.S., where it turned out to be pretty handy for use in ambulances and more decentralized healthcare facilities.

A great example of these concepts at work is that of Gillette, a P&G company. Realizing that developed markets were saturated, P&G was looking for new opportunities. There are 500 million men in India they wanted to reach. So Gillette started product development on razors for the Indian market, not realizing that for most of those men, electricity—and therefore lighting—is a concern, that there are specific benefits to shaving with a double-edged razor and that most men in India are more focused on not cutting themselves than on getting a really close shave. Going into that market with a 3-blade or 5-blade razor is useless because people who don’t have unlimited access to running water dip their razor in a cup of water when shaving, so a multiblade razor just clogs. P&G did their research, but there was a problem—they only did research on Indian men living in the U.S. as surrogate representatives of the Indian market. They then made the common mistake of simply introducing a defeatured product, designed for men who like a close shave, have running water and can shave every day in a well-lit area. The launch was a huge failure. Subsequently, they spent 3,000 hours in the market, doing extensive Gemba and watching men shave. They came up with a concept for a single-blade razor, manufactured in India, that was safe and cost just a few cents. This was the Gillette Guard. They were able to very soon corner the marketplace, replacing double-edged razors, and it became a huge growth market for P&G—all because they followed the principles I talked about: Gemba, Jugaad and Reverse Innovation.

There are so many examples of these concepts in action. For instance, GE, as well as companies like Siemens and Phillips, has come up with portable ultrasound devices, handheld sensors that are connected directly to your iPhone, iPad or other mobile technology, which are all becoming so common around the world. You can carry these devices into the field and essentially address the healthcare needs of the emerging market with something as common as a smartphone. We are 7.5 billion people, living in a world with 22 billion connected devices!
To read the full interview, click here.