Final Report_

AFFORDABLEDIAGNOSTICSFORINDIAN BASE OFTHE PYRAMID MARKETSA PILOT PROJECT TO CONNECT FINNISH AND INDIAN DIAGNOSTICSINDUSTRIES

Adalgisa SantosChi ZhangGiulia CentonzeRamsankar MuraleedharanTuuli Hakkarainen

Supervised by: Teija Lehtonen MSc. (Econ.)Dr. Mikko Koria DSc (Econ.) MBA (DesMgt.)

INDUSTRY PROJECT 2010/11

R

AFFORDABLE DIAGNOSTICS FOR INDIAN BASE OF THE PYRAMID MARKETS //i

T his report has been prepared with the ardent support and

contributions of many persons. The project work was supported by Auli Pere, Chief Technology Advisor, Tekes and supervised by Dr. Mikko Koria and head of BoP service project, Teija Lehtonen. The core team is composed of Adalgisa Santos, Chi Zhang, Ramsankar Mu-raleedharan, Giulia Centoze and Tuuli Hakkarainen. Valuable con-tribution and comments were also received from Dr. Minna Halme and Paula Linna. Our gratitude also extends to the Department of Bio-technology, India for their support and help during our field trip.

Further, the team also wishes to thank everyone who has been in-terviewed during the project; the representatives from diagnostics companies, Indian specialists and contact persons from the non-governmental organizations.

ACKNOWLEDGEMENT

A ffordable diagnostics for Indian Base-of-the-Pyramid

(BOP) markets is a key pilot under the larger Sustainable Innovations at the BOP service project at Aalto University. The project was funded by Tekes, the Finnish Funding Agency for Technology and Innova-tion and set on the assumption that Finnish medical diagnostics companies desire to expand their markets while India shelters a huge BOP market that needs innovative and affordable diagnostic tech-nologies. The objectives were to visualise the complexity of both innovation ecosystems and provide helpful information and tools that enable organizations analyse dif-ferent aspects of creating new business at the Indian BOP.

This report discusses the key findings and outcomes of the

project Affordable diagnostics for Indian BOP markets. Beginning with a background introduction, the key concepts of BOP in the Indian context, the diagnostics industry, and Indian and Finnish innovation ecosystems are ex-plained. This theoretical section is then followed by the main find-ings on the Finnish innovation ecosystem focusing on the actors in both the Finnish and Indian di-agnostics industry. The connec-tions within and across Finland and India are also discussed.

Afterward, the report will bring forth observations and case exam-ples of the BOP market in the Indian rural areas where the team con-ducted fieldwork. Based on the findings, the Actor Map, one of the major deliverables of the project, is used to visualize the key stake-

EXECUTIVESUMMARY

AFFORDABLE DIAGNOSTICS FOR INDIAN BASE OF THE PYRAMID MARKETS //ii

holders and their interactions in and across Finland and India. Lastly the Infogram, the end outcome of the project is present-ed. It is a tool for companies to ask the right questions concerning their suitability for the BoP markets (for the visualisations of Actors Map and Infogram, see the appendices). It is supported by a hints section which provides keen insight into the Indian BoP sce-nario based on background re-search and observations from the field trip. The Infogram is expect-ed to help companies test their products and assess the expecta-tions on the Indian BoP.

TABLEOF CONTENTS

i. Acknowledgementii. Executive Summaryiv. Table of Acronymsv. Table of Figures

1. Introduction// 1.1 Background // 1.2 Research Aim // 1.3 Limitation of Research // 1.4 Research Method // 1.5 Related Concepts

2. Observations in Finland// 2.1 The Actors Map: Finland// 2.2 Finnish Diagnostic Companies

3. Observations in India// 3.1 The Actors Map: India

4. Field Experience: Exploringhealth care in Rural India//4.1 Rural Areas at a Glance//4.2 Observations on the Environment//4.3 Observations on people andmind sets

5. Strategic Management Tool:Infogram// 5.1 What is the Infogram// 5.2 The Application// 5.3 The Information

6. Conclusions and Future Research// 6.1 The Results// 6.2 Suggestions for Future Research

vi. References

vii. Appendices

12222

79

11

151718

2121

22

2526

AFFORDABLE DIAGNOSTICS FOR INDIAN BASE IF THE PYRAMID MARKETS //iii

AIIMS All India Institute of Medical ScienceBoP Base of the PyramidBHC Block health centreCHC Community health centreCDSCO Central Drugs Standard Control OrganizationDBT Department of BiotechnologyDGHS Directorate General of Health ServicesDCGI Drug Controller General of IndiaGVL Global Venture LabFDA Indian Food and Drug AdministratorICGEB International Centre for Genetic Engineering and BiotechnologyICMR Indian Council for Medical ResearchIIM Indian Institute of ManagementIIT Indian Institute of TechnologyIISC Indian Institute of ScienceNGO Non-governmental organization PPP Public-Private-PartnershipPHC Primary health centreSitra The Finnish National Fund for Research and DevelopmentSHC Sub-health centreTekes The Finnish Funding Agency for Technology and Innovation TEM The Finnish Ministry of Employment and EconomyVTT The Technical Research Centre of FinlandWHO World Health Organization

LIST OFACRONYMS

iv\\ AFFORDABLE DIAGNOSTICS FOR INDIAN BASE OF THE PYRAMID MARKETS

AFFORDABLE DIAGNOSTICS FOR INDIAN BASE OF THE PYRAMID MARKETS //v

LIST OFFIGURES

Figure 1.1 Income segments of BOP market worldwide (Hammond, Kramer, Katz, Tran, & Walker, 2007) //3Figure 1.2 Structure of an Innovation Ecosystem Aimed at Solving Problems //4Figure 1.3 Innovation Ecosystem in the United States //4 Figure 1.4 Finnish innovation ecosystem //5Figure 1.5 Indian innovation ecosystem //5Figure 2.1 Street views of New Delhi, Spring 2011 //8Figure 3.1 A Busy day in AIIMS, New Delhi //12Figure 4.1 Community Health Centre and Rural Health Centre //16Figure 4.2 Interviewing people in the Rural Village //17Figure 4.3 Invisible Barriers: Border between castes is respected //18Figure 4.4 Information Booklet for Mothers //19

4

AFFORDABLE DIAGNOSTICS FOR INDIAN BASE OF THE PYRAMID MARKETS //1

T o provide solid ground on the project, this chapter

begins with briefly introducing the background of this project. The research aim, limitation and research methods used in the study are also described and the third stage elaborates on the as-sociated concepts including Base of the Pyramid (BOP) and diag-nostics industry. Finally, Finnish and Indian innovation ecosys-tem models based on a literature review are presented.

1.1 Background

A wide range of literature reveals the importance of large population, but low-cost markets which provide potential op-portunities and challenges for

new business (Prahalad, 2009; Rangan, 2007).

Finland is a technology and in-novation driven nation, and it’s investment in the same has been ranked among the top three in the world for quite a while (OECD Science, 2008). Hence, we take the model of the Finnish inno-vation ecosystem as a starting point for preparing the Indian market entry. For the BOP market in particular, a well-founded platform is a key prerequisite for business operations. In this study, we intended to combine innovation ecosystem concept with the actual situation of BOP to help Finnish companies and relevant organisations explore a proven business development methodology. Keeping in mind this purpose, we first conducted

INTRODUCTION

research on both Finland’s and India’s innovation ecosystem, then through visits to various representatives of the actors within the system, we understood their operational models and the associations operating between the actors. Subsequently, we also went deep into the Indian BOP community. We conducted interviews inside the villages in Gujarat area, trying to make clear the needs of ordinary people at the BOP and their awareness and attitudes towards medical care service, diagnostics in particular.

This study is based on learning and understanding innovation ecosystems and industrial net-works, combined with a bundle of practical experience for the first hand material which we called fact-finding process.

1.2 Research Aim

Affordable diagnostics for Indian BoP markets is one of the pilot projects under the larger Sus-tainable and User-Driven Innova-tions at BoP Markets service project at Aalto University. The project is funded by Tekes and un-dertaken by four master s level students of International Design Business Management (IDBM) of Aalto University. Its aim is to help Finnish diagnostic companies to operate in a sustainable way in the Indian market, and also assist in delivering affordable and innova-tive technologies there. Thus, both countries will benefit from this collaboration.

This study has taken Finnish companies’ interests to enter the Indian low-cost market as an example and analyses, observes, and elaborates on the recognition of the entire industry network along with some first-hand infor-mation of the Indian low-cost market. It is intended to help Finnish companies and organiza-tions to get some insights when building up the initial stages of this strategy.

This study mainly utilizes Actor Map as the visualizing tool to map out both Finnish and Indian inno-vation ecosystem in Diagnostic field. Also, based on the under-standing of connections between innovation ecosystem and Indian society, a strategic tool, Infogram was made to provide perspective on the process of setting up the business strategy to BOP market in Indian context.

1.3 Limitations of Research

All of the information and con-clusions are based on the field work made by the Aalto University team. The discussion on the rural areas of India is mainly based on one region in India and there could exist variations across the country, so the conclusion from this study may not apply to other parts of India. Also, due to the limited time frame of 16 working days in India, it was possible to cover only a small part of research topic. The report aims to bring up relevant issues for further research and does not guar-antee comprehensive information regarding the Indian BOP market. Moreover, there exists dynamics in the emerging economy such as India, therefore the information provided here could become out-dated if no follow-up research is conducted.

1.4 Research Method

This project was started with Objective-Attributes criteria anal-ysis, conducted by means of Logical Framework and Context Map. Within this sub-section, we also utilised problem tree analysis for better understanding of the core problems and their relationships. As the preliminary objective of the project is to build a network map which can visualize the collabora-tion between the two countries, it is important to understand the stakeholders, their roles and the connections among them in the network. For these purposes, we utilized three methods to develop the project during the second

period of research part: Stake-holder analysis, Actor-Resource-Activity analysis, and Actor Map.

Based on the understanding of the complexity of the whole network, we further developed canvas framework tool which is based on the widely used strategic management tool, Osterwalder’s Canvas. When the canvas tool is used together with the Actor Map, they are intended to facilitate the understanding of the project ob-servation. The result is also ex-pected to make contribution to the Indian market entry for the Finnish companies.

1.5 Related Concepts

1.5.1 Indian Bop Market

The Base of the Pyramid (BoP) refers to the largest, but low-in-come socio-economic group. The population of this group is still growing rapidly (London & Hart, 2004). According to the report from World Bank Group (2007), the BOP market constitutes four billion people whose annual incomes are below $3000 (measured in 2002 international dollars and equiva-lent to €2090 as of July 2011). The annual income contributed by BOP market is around 5 trillion dollars globally. The income segmenta-tions are shown in Fig 1.1.

However, even though there is significant business potential in this BOP market, the transnation-al business strategies cannot be directly used for this low-income market. BOP market differs from the other markets and the charac-teristics of the BOP market itself

2\\ AFFORDABLE DIAGNOSTICS FOR INDIAN BASE OF THE PYRAMID MARKETS


differs by nations and regions (London, 2007; UNDP, 2008). For example, the daily income of Brazil BOP is $3.35 (€2.33) while in China the number is $2.11 (€ 1.47) (Hammond, Kramer, Katz, Tran, & Walker, 2007).

The daily income of Indian BOP market as given by the report is $1.56, and the BOP accounts for 95% of the Indian population. Al-though the individual’s purchasing power in Indian BOP market is weak, yet the aggregate purchas-ing power implies significant busi-ness opportunities. The annual expenditure of the Indian BOP market is more than 1.2 trillion dollars, representing 85% of the

national expenditure. Please refer to page 128 of (WBG, 2007) for more details of these statistics.

The Indian BOP market is mostly rural, and it is a poorly served, in-eff icient and noncompetitive market. According to (WBG, 2007), many people in the BOP have to pay higher prices for the same or even lower-quality goods and ser-vices. Considering the size the ag-

gregate value of Indian BOP market, this provides huge poten-tial for companies and organiza-tions that possess advanced tech-nologies that can better serve the needs of local customers. There-fore, it is an important first step to carefully observe the local market and to identify business opportu-nities. Based on the observations and findings, relevant business models and products are to be de-veloped for the market entry.

1.5.2 Diagnostics Industry

The diagnostic industry consists of companies and organizations that offer analytic or diagnostic

services, i.e., to apply imaging and laboratory capabilities to deter-mine the cause of an illness. Diagnostics plays an important role in health care sector. It detects symptoms of heath risks and disease at an early stage, thereby decreasing the

medical costs and improving peo-ple’s health. Along with the pro-gress of the economic situation in India, the spending in health care has been increasing. The Indian diagnostic and pathological labs test services market was valued at Rs. 66.87 bn (€1.05 bn) in 2008, and is expected to reach Rs. 159.89 bn (€2.51 bn) by 2013, reflecting a growth rate of 18.9% during 2009-2013 (Cygnus, 2009).

Although the continuous moder-nisation and improvement in living standards, the BOP market still play an important role in the Indian health care sector. According to

(WBG, 2007), the BOP market for pharmaceuticals in Asia is $30.8 bn (€21.45 bn), out of which $26.6 bn (€18.53 bn) is from India. In addition, the BOP market accounts for 85% of the national expendi-ture in health care; however the spending in health care from BOP market is only 2.9% sector wise. This gap to some extent indicates the business potential of providing high-quality and affordable diag-nostics in India.

Diagnostics cover a range of advanced technologies: optics, microelectronics, industr ial Design, nanotechnology, bimo-lecular recognition, materials science, mathematics, micro ma-chining and printing. Finland in this area has its competitive ad-vantage. In Finland, there are 30 companies with approximately 2000 personnel in the diagnostics industry (Jouko, 2010). The annual net sales are about €350 million. The personnel and the investment in R&D will increase by 8% and 12% by 2014 respectively. It is, there-fore, expected that the combina-tion of Finnish know-how in diag-nostics and massive Indian market would create a double-win situa-tion.

1.5.3 Innovation Ecosystem

Ecosystem is an environment where there exist certain relation-ship and interaction between in-dividual, the living organisms and nonliving components (Dai, Chen, & Ye, 2007). Innovation is defined as a new idea, a certain practice, or object that is created through a process that various factors such as talent knowledge, funds,

Figure 1.1

Income segments of BOP market worldwide (Ham-mond, Kramer, Katz, Tran, & Walker, 2007))

systems, and markets are related to one another in a complex manner (Japan Science, 2011). An innova-tion system is a “set of institutions whose interactions determine in-novation performance” (Kim & Nelson, 2000). National innovation systems have been identified as the primary engine for innovative capacity and fast growth (Kim & Nelson, 2000; Freeman & Soete, 1997). Such systems are becoming increasingly open to innovation systems of other countries, as their efficacy increasingly depends not only on local institutions, but also on global connectedness. To main-tain the continuous creation of innovation, we need to organize a well-defined environment sur-rounding innovation. Within the system, each member’s knowledge of the innovation is dependent on and subject to the “cycles of inter-pretation” happening in the larger community (Swanson & Ramiller, 1997).

Inside the innovation ecosys-tem, networks of innovations and communities of people and or-


ganizations interact to produce and use the innovations (Japan Science, 2011). Due to the cul-tural and economical diversity of various countries, it is not feasible to find a universal model, even among developed countries. For example, innovation ecosystem in Japan aimed at solving problems (As shown in Fig. 1.1), while in-novation ecosystem in the United States aimed at sustaining indus-trial ecology (As shown in Fig. 1.2).

Based on the observation of in-

novation ecosystem in various countries, it turns out that there are mainly three key factors, i.e.,

public community, industry com-munity, and research community. Public community refers to the government and administrative agencies who take the role of le-gitimacy. They support the crea-tion of scientific knowledge and goods and services, and also develop new policies to promote cooperation between the innova-tion organizations (Japan Science, 2011). Industry community stands for enterprises in various indus-tries producing goods and ser-vices. Research community refers to universities and research insti-tutes generating scientific knowl-edge (Japan Science, 2011). Each actor plays a role in developing and adopting innovation, and the in-

teractions among them are also impor-tant.

Nowadays, innova-tion ecosystem at national and regional level is needed to bring innovations to commercial reality. And many countries have realized that

Figure 1.2

Structure of an Innovation Ecosystem Aimed at Solving Problems.(Japan Science, 2011)

Figure 1.3

Innovation Ecosystem in the United States (Judy, 2009)

promoting national innovation and entrepreneurship to maintain the economic growth is a common chal-lenge for both social and econom-ic perspectives (Charles, 2005). The benefits of this ecosystem include decrease the risk of innovation, decrease the cost of sustaining in-novation, increase learning cycles and diversity of innovation (Jeff, 2008). Realising the needs and the benefits of innovation ecosystem we were led us to first examine both Finnish and Indian national innova-tion ecosystem model.

Finnish Innovation Ecosystem

According to Ilkka (2010), the Finnish innovation ecosystem is composed of three components: policy maker, company and aca-demia. Policy makers include the government and relevant decision makers. Companies refer to those companies and organizations that are operating for profits from the industry point of view. Academia includes the research institutes and

Figure 1.4

Finnish Innovation Ecosystem

Figure 1.5

Indian Innovation Ecosystem


universities. The three parties form close relationships and interac-tions through formal or informal cooperation. Policy makers provide for the company funding, policy assistance, research centres, aca-demia and so on. Companies accept the assistance from the policy makers, and at the same time, carry out various short-term or/and long-term projects with research institutions.

Indian Innovation Ecosystem

According to CII (2010), due to the challenges in the fields of edu-cation, infrastructure, water, energy and so on, it is difficult to identify such an innovation eco-system in India. We have made our assumption of the model based on our preliminary research as shown in Fig 1.3.

However, after the information from the field trip and interviews conducted in India, it is found that our previous assumption of Indian innovation ecosystem does not ac-

curately describe the operation of the innovation ecosystem there. Based on our previous analyses and the field trip in India, it is not easy to implement a sustainable innova-tion ecosystem. In order to achieve such a long-term system, it is simply not the close cooperation among the important actors. More important factors. e.g. culture, leadership, funding, policy, educa-tion should be carefully considered and planned. The realisation of innovation process is not a quick fix, it requires a long-term gradual process. First of all, it should start from the culture, education and so that people can realize the impor-tance of innovation. This topic is beyond the scope of this study, so we will not expand our discussion on that here.


I nnovation Ecosystem in our work refers to a network of

interconnected actors working around a core platform of tech-nology and business. Accord-ing to our findings, the Finnish innovation ecosystem is well-structured where the main actors—policy makers, compa-nies and academia—have their well-defined roles. In a relatively small country like Finland, coor-dinating the roles and common objectives is possible and it is gainful for every actor to cooper-ate towards a common goal, such as aiding to understand a starkly contrasting country such as India in terms of doing business there. We assume that it is important to understand the key players in medical diagnostics sector and the rest of the ecosystem and the

Finnish innovation ecosystem. Such relevant actors for diagnos-tics industry are discussed in the following section and visualized in the Actor Map on the following page.

2.1 The Actors Map: Finland

The Actors Map is given asAppendix A.

Concerning the connection-enablers between Finland and India, we observed that The Finnish Funding Agency for Tech-nology and Innovation (Tekes) has a critical role in connecting the private sector, academia and research organizations; India has been one of the focus countries of Tekes for some years already.

OBSERVATIONS IN FINLAND

Tekes is one of the founders of an important player FinNode, which is the access node to hook up with partners in Finland. It is a community of Finnish public and nonprofit organizations, made to enhance international R&D coop-eration and business (FinNode.com). Along with Tekes, the founders are Academy of Finland, Finpro, the Finnish National Fund for Research and Development (Sitra) and the Technical Research Centre of Finland (VTT). FinNode is steered by The Finnish Minis-try of Employment and Economy (TEM). India became the fifth op-erating country of FinNode in the beginning of year 2011, which shows a growing interest towards India as an important market po-tential for Finnish companies.

FinNode is helping Finnish

8 \\ AFFORDABLE DIAGNOSTICS FOR INDIAN BASE OF THE PYRAMID MARKETS

Figure 2.1Street views of New Delhi,

Spring 2011.

Photos by:Tuuli Hakkarainen (1,2,3)

Adalgisa Santos (4)

1

2 3

4

companies internationalise and connect to right partners in India. As part of this project, we interviewed Finnish diagnostics companies. Based on these, one can observe that, while there are many relevant issues that the companies are well aware of, deeper understanding on the Indian markets is something most of the mention to be still lacking. As such, the fact that FinNode included India as their operating countries is significant in improving the flow of informa-tion within parties that are inter-ested in India.

In Finland, universities are working closely with companies and research centres. University of Turku could be stated to have the leading position in the re-search in diagnostics in Finland. The connection is beneficial to all parties as companies are inter-ested in the newest technology and University of Turku is devel-oping new technology together with the best know-how on diag-nostics in Finland.

Another interesting actor to mention is Global Venture Lab (GVL) which is an entrepreneurial and university-based business creation platform. Their Indian health kiosk program is further discussed in the Indian part. GVL is an interesting issue in the Indian context, as it was founded by three professors: one from University of Jyväskylä, another from University of California and the third from Indian Institute of Technology (IIT).

2.2 Finnish Diagnostics Companies

In order to understand the Finnish diagnostics industry five companies were interviewed. The aim was to get a general picture on the possibilities for them to venture into the Indian market or learn about their experiences, if they already were operating in India. The companies have high-end products with premium quality, conferring them high po-tential but operating in India is complex, and has unique factors to be taken into consideration.

Broadly conceived, the com-panies were on different levels in their expansion to India; some had already established partner-ships and certain others were thinking about the expansion possibilities. They often men-tioned operations in China and it appears to be a more familiar market, but owing to the huge potential, companies may want to consider India as well. It was as well widely known that the markets of China and India differ highly, yet there was lack of in-formation on the Indian markets and challenges in practice. Also, the fact that there is huge poten-tial for diagnostics companies in India was discussed with every company.

Many of the Finnish companies stated that they aim to keep man-ufacturing or other key functions in Finland and primarily look for distributors in India. Some also expressed interest in col-laborating with manufacturers in India, typically if there would be someone to finance it. Also,

almost every interviewed com-panies mentioned cultural dif-ferences as one of the challenges or concerns. These challenges included differences in the way of communicating and the issues in creating mutual trust when es-tablishing a partnership far away. There was also discussion on the limited resources that small and medium-sized companies have. It was several times mentioned that large companies are able to expand to India because they are able to take bigger risks.

One can observe the impor-tance of networking with rel-evant actors in Finland in order to achieve a common goal of un-derstanding the Indian markets and thus enable company success in Indian operations. As we have learned during the project, no one can survive alone in India and we emphasize the impor-tance of support networks, such as FinNode.



O n a quick note, the multi-tude of actors and the level

of complexity of the Indian eco-system seem to be the main dif-ferences compared to the Finnish innovation ecosystem. It is quite characteristic of such huge and emerging countries to have a large number of actors; like, or-ganizations (both profit and nonprofit making ones), policy makers, research centres, and ac-ademia, all of which are relevant to the diagnostics industry. In the case if India, the presence of non-governmental organizations (NGOs) is more significant than in Finland. According to a recent study commissioned by the gov-ernment, the number was esti-mated at 3.3 million, accounting for all such entities until 2009. That is one NGO for less than

400 Indians, which interest-ingly enough, is many times the number of primary schools and primary health centres in India. (Source: The Indian Express, www.indianexpress.com)

As part of the project the team travelled to India for 16 working days to learn and understand how the health care system works in the rural areas in the state of Gujarat. The field trip was an es-sential part of the project, since the official viewpoint (such as from the health officials) and the actual situation (for example, ex-plained by rural health workers) seems to differ and therefore it is essential to go to the grass-root level and observe how the system works.

OBSERVATIONS IN INDIA

3.1 The Actors Map: India

The Actors Map is given asAppendix A.

In the policy makers in The Actors Map of India the most rel-evant to diagnostics industry are the Ministry of Health and Family Welfare as well as Ministry of Science and Technology, under which the Department of Bio-technology (DBT) functions. DBT has connections with Tekes, and as revealed during our fieldwork, they are at the crux of collabo-ration in diagnostics between Finland and India. DBT is also the actor connecting policy makers to diagnostics laboratories and companies in India.

J.Mitra is chosen here as an example of an Indian diagnostics

company as it enjoys 70% market share in low cost in-vitro diagnos-tics in India and, it focuses on af-fordable diagnostics for the BOP. We also found out in the course of the interview that they have established collaboration with the Finnish diagnostics company Medix Biochemica. The managing director of J. Mitra mentioned, that the main benefit from the partnerships with Finnish compa-nies for the Indian companies is the latest technology.

J.Mitra is merely one example of an Indian diagnostics company and others that were mentioned during the interview were com-panies such as SpanDiagnostics, The Tulip Group India, Abbott Diagnostics, Bayer and Beckman Coulter India Pvt.

From the manufacturers side there is Orchid Biomedical Systems and to illustrate con-nections to the policy makers. Dr. Toprany Laboratory, serves as an example of a private laboratory. From the policy makers side, Di-

rectorate General of Health Ser-vices (DGHS) play an important role and it administers Indian Food and Drug Administrator (FDA) and Central Drugs Standard Control Organization (CDSCO), which leads Drug Controller General of India (DCGI). These actors are relevant to all diagnos-tics companies working in India (both Indian and foreign) as the regulators.

In between governmental and research organization is In-ternational Centre for Genetic Engineering and Biotechnology (ICGEB) which has a collabora-tion with Tekes. ICGEB also has collaborations directly with diag-nostics companies in India.

Nevertheless, the collabora-tion between the industry and the academia does not appear to be very strong in India. From our interviews with professors at Indian Institute of Management (IIM) and the ICGEB, the link seems not to be strong at least in the diagnostics field. Based on

their comments, the collabora-tion could be more intensive and might be something to develop in the future. One may state that this linkage would be beneficial for fostering innovation within a country by joining company re-sources and university research to benefit all. This collabora-tion could be one of the building bricks towards a more coherent innovation ecosystem.

Another future possibil-ity could also be collaboration between universities in Finland and in India. Some institutes like the Indian Institute of Man-agement, IIM conducts research on the Base-of-the-Pyramid markets. Other relevant insti-tutes to diagnostics are Indian Institute of Science (IISC) and Indian Council for Medical Re-

Figure 3.1A Busy day in AIIMS, New Delhi

Photo by:Tuuli Hakkarainen


the state of Gujarat, and Save the Children as an example of an international NGO with notable influence.

Concerning other organiza-tions that are operating direct-ly with the BOP, an excellent example would be Aegle Angels Foundation. They have health kiosks called Aegle Angels Kiosks, which are stores equipped with vital measuring equipment. The strength of the kiosks is that they can be located close to the com-munity in remote areas (www.aegle.org). They are centrally connected with hospitals. We wish to emphasize their work, as it is a good example of a business model in the sector of affordable diagnostics for the Indian BOP. After an academic year s research we haven’t been able to identify another entity which has been

search (ICMR) as they fund re-search on affordable diagnos-tics. They coordinate projects for World Health Organization (WHO) in India, which is one example of the collaboration between a re-search institute and NGOs.

Other player in the health care system of India is AIIMS which stands for All India Insti-tute of Medical Science, which is a leading medical college and a large hospital in New Delhi. The patients at AIIMS come from all around India as the hospital provides affordable health care which is free of cost for the pa-tients who are classified as un-derprivileged by the government.

In the non-governmental or-ganization (NGO) area, we took the example of Deepak Founda-tion, a local NGO, which is doing significant work in rural areas in

more successful and creative in its operations directly with the Indian BOP markets. In a discus-sion with the Aegle representa-tives, we were informed that they are considering expanding their business and according to our field trip, there is demand for innovative businesses around health care to cover for gaps in the typically government-funded health care system in the remote rural areas.



T his section describes our observations on the Indian

Base of the Pyramid (BOP) based on our field work, which included trips to rural regions near Va-dodara and Ahmedabad, in the state of Gujarat. Our experience on the rural areas, villages, and health centres will be noted in this section, along with exam-ining the BOP and the mentality towards health care. In the rural areas we visited health centres of all levels (see their description in more detail in Indian actors section and in the The Actors Map).

Rural Areas at a Glance

India is formed of 28 states and 7 union territories. These states and the union territories

are divided into districts. Each district is further divided into sub-districts, which are known differently in different parts in the country. Villages in rural areas are, along with towns in urban areas, the lowest primary administrative units of adminis-tration (Census India). Therefore, the many levels of administration and divisions affect the organiza-tion of health care system in the country.

According to Census India there are total 638, 365 villages (Census Data 2011). As large as 70 percent of the population live in these villages, and they are of different population density depending on factors such as geography of the area as well as availability of land and water (Census India). Owing to such

FIELDEXPERIENCE:EXPLORINGHEALTH CAREIN RURAL INDIA

huge volume, reaching the BOP market is challenging. There are diverse needs and possibilities for new businesses; however, the access to the people seems to be one the key challenges.

4.1 Health care system in Gujarat

The complexity of the health care system in India is visualised in the Actors Map. In the rural areas in Gujarat, the health care is organized on the state, region-al and community level. The roles of each centres are discussed in the following. The examples and emphasis is on our field trip to Gujarat and villages which are re-ferred to are located in the state.

Block Health Centre

Block health centres are the administrative offices, which operate in the same building to-gether with a local health centre. Health centres report to the block office, except for the sub-health centre, which operates di-rectly under a primary health care centre.

Community Health Centre

The community health centre is a major health facility in the region, which provides services for a very nominal fee, this is to say almost free of charge. Pa-tients are requested to take an OPD (out patient diagnosis) ticket for which Rs.5 is charged

and medical treatment and basic diagnosis are provided hence-forth. Whatever advanced diag-nosis they may require,patients are charged Rs.20. The centre we visited was a Public Private Part-nership (PPP) between Deepak Foundation and the Government of Gujarat and is an Integrat-ed Child Development Scheme (ICDS) facility.

The main activities are focused on the mother and child (which seemed to be the case in all health facilities visited), and there is a gynaecologist working on spot, available 24 hours a day. All basic diagnosis for this purpose like haemoglobin/HIV tests can be done in-house but more advanced tests need to be referred to district hospital/

private clinics. But, neonatology diagnostics are yet to be avail-able.

Primary Health Centre

Serving a population of nearly 30000, PHCs are arguably ill-equipped when it comes to equip-ment and whatever might be available seems not to be used frequently. There is a general physician available and the place also serves as a storage facility for vaccines. Like CHCs and all

Figure 4.1 Left: Community Health Centre Above: Sub Health Centre

Photos by:Ramsankar Muraleedharan


other government medical facili-ties, devices and medicines are provided by the state with an annual budget allocation of Rs. 100000 (€1592) which might be hardly adequate.

Sub Health Centre

Hardly a health centre, SHCs resemble more a kiosk within the village where a public health nurse resides and provides basic medical advice and treatment. They cater to about 5000 people and also act as a local centre for dispensing the polio vaccines. For instance, the vaccines are taken to the houses by the nurses along with an ASHA worker on the second and third days of the vaccination. The nurses are also close with the community and the ASHAs are from the local village which facilitates access to people s homes. Treatment is done in SHC only when the doctor is visiting, the rest of the time hardly any equipment based diag-nosis is performed and no devices are available.

4.2 Observations on the environment

On the whole, public services provided under this system are basically free of cost and cover therapeutic and preventive health care. Vaccination kits and such are provided from the PHCs which the female health workers deliver to the village people with the help of ASHA workers. They visit each house in the village for this purpose or in case of any

emergency. Apart from nurses, they are also counsellors who provide advice on HIV, family planning and related issues. ASHAs also contribute greatly to this purpose. They are women from the community and play a key role and social mobilization and awareness regarding health

and safety.The environment of remote

rural areas is challenging in terms of adequate and sophisticated health care. Drought is not un-common, especially in Northern and North West of India, which poses challenges with health and food in the areas. In contrast, during monsoons, heavy down-pour constrains the already de-ficient infrastructure with roads are flooding and muddy. Rural health workers mentioned this as a key problem as ambulances are not always able to reach villages. Besides, vector-borne diseases, especially malaria, is a problem during this time. The health of-ficials mentioned prevention and cure of malaria and early-stage diagnosis of tuberculosis as some of the major areas of health care that needs improvement. Harsh climate prevailing for most of the

year calls for diagnostics that are robust and can handle hot weather and humidity.

Equally, the overall hygiene and sanitation levels are low. Access to clean water is another problem and future efforts on water purification were stated by the health officials as important.

From interviews with health of-ficials, we learned that there is power supply in the rural villag-es. But, based on our experience and discussion with the people working at rural areas, power cuts are not uncommon, which is an important issue to take into consideration when planning health care. For example, as one cannot rely on the distribution of electricity, health care equip-ment is best when portable and work with a back-up battery for instance. Also, as rural health workers frequently make house calls, anything easily portable is a working solution.

Figure 4.2 : Interviewing peoplein the Rural Village

Photo by:Adalgisa Santos


4.3 Observations on people and mind sets towards health care

In the villages, the caste system cannot be neglected and it seems to affect the every-day life. In one village which we visited there were four different areas for people from different castes. First we met people from the lowest hierarchy and we were told that their income level is low as they do not own land and are mainly working on fields. And, on top of that, there is no work all year round and they are forced to migrate sometimes even tens of kilometres in order to find work. An ensuing problem is that chil-dren remain absent from school.

A concrete example of the caste system inside the village was that people do not cross the invisible

barriers. Even children who were first following us stopped and stayed in their own part of the village. In health care and diag-nostics the strict caste rule poses challenges. For instance, sharing a device or other items would not be practical across castes. If

a person from a lower caste has touched a device, a person from the upper caste may well refuse to touch it.

According to several interviews and observations, one can argue that health does not seem to be a priority in India. For example, even entertainment goes before health care. Education for boys is another issue which families may invest in before health care for the whole family. Like, when we visited the poorest part of one village, the father of the family told us that he paid for his son to go for a computer class. The lack of money might not always be the reason for neglecting health issues. Still, as awareness on the health care rises, this could then lead to more understanding of the importance of both preven-tive and curative health care in

people s minds.Currently, diseases are cured

as they occur, and even in a case of sickness, regular check-ups are not typically followed. This could be taken into consideration when designing diagnostics services in a sense, that more different

types of tests and diagnosis could be performed during the same visit. Health workers told us that people try to avoid hospital visits and “faith in destiny” affects their attitude towards diseases. Rural health workers (usually one to two women) have solved the problem of people avoiding the health centres by walking to the villages to see the people in their homes. For example, nurses and ASHA workers keep record on pregnant women and go for regular visits to the women s homes. The rural workers are wel-comed to the houses as mutual trust has been built. As ASHAs are people from the village them-selves, they are well trusted among the village inhabitants.

The government distributes pregnancy kits free of charge. The health workers told us that they

aim to promote the kits and en-courage in their usage. However, the usage rate is relatively low. We were told that one of the reasons for this is that as price is the sign of quality in India, free products are not trusted. There-fore, even a nominal charge may be beneficial in health care.

Child nutrition is another issue that all the rural health workers emphasized and health care for mother and child appeared to be underlined both from the of-ficial point of view as well as at


Figure 4.3: InvisibleBarriers: Border between castes is respected.

Photo by:Chi Zhang


the village level. One practical example of such initiatives in the rural areas was an informative booklet given to the mothers. Form the booklet they can follow if their child s growth is healthy. Many (according to our research, the average of 50%) of the women at the BOP are illiterate thus there are informative pictures in the booklets as well. Using pic-tures for communication seems to be a relevant issue in every product aimed at the BOP and is advised for diagnostics products and services as well. Spoken com-munication can be considered ef-fective too.

Concerning challenges, as we discussed with the rural health workers and DBT, there is a chal-lenge in attracting doctors to work in the remote rural areas. The government pays all public

doctors the same amount of salary, so doctors tend to prefer working in cities. Moreover, if is there is the opportunity to work for a private hospital, it is often the first choice because of higher salary. The problem of not having adequate amount of qualified

doctors in the rural areas was mentioned fre-quently by health workers of differ-ent levels. In one rural area where we visited, there was a new, only couple of years

old primary health centre built by the government which now was empty due to the lack of employ-ees. The fact that the daily life in a health centre is mainly run by nurses and other health workers with basic health education, puts emphasis on the fact that diag-nostics in the health centres need to be simple and easy to use.

Figure 4.4: Information Booklet for Mothers

Photo by:Adalgisa Santos


A fter the analysis employing the Actor Map had been per-

formed, we realized it was neces-sary to use a business approach for analysing the outputs. As it takes significant effort to develop the business model, and with the time constraints, we developed the strategic management tool, Infogram, based on the Osterwal-der Business Model Canvas.

This chapter presents Infogram as a strategic management tool for analysing the market entry to Indian BOP market. The first part briefly introduces the Info-gram tool. Next, the application of the Infogram in this project is described. The last part of this chapter explains how to utilize this tool, and the information re-trieved from the Infogram.

5.1 What is the Infogram?

The Infogram (given as Appen-dix B) is a tool for organizations which are planning to do business at the Indian BOP. It helps gain an overview of different aspects that need to be taken into account before making a move and even acts as a filter to check if they are actually ready for the market. Alex Ostwerwalder’s well rec-ognized Business Model Canvas (Osterwalder, 2010) is used as the framework and the nine ‘building blocks’ also make an appearance here. The factors, namely; key partners, key resources, key ac-tivities, cost, value proposition, revenue streams, customer rela-tionship, channels and customer segments cover basic business operations, and is a holistic con-

INFOGRAM:STRATEGICMANAGEMENTTOOL

sideration of business at the base of the pyramid.

5.2 Application in this project

There are two parts of the In-fogram; the first being an info-graphic questionnaire, which is referred to as the ‘infogram’, as shown in Figure 8, and a hints section which provides key insight into multiple facets of the Indian BOP as shown in Figure 9. The Infogram poses the user(s) with a series of carefully chosen questions, which span the nine business building blocks, and can serve as a reflection on why and how an organization is intending to do business at the BoP.

The questions are further cat-

egorized into three colour-coded segments of green, blue and red, emerging from the line of the same colour. Green stands for ‘safe-zone’, organisational level questions like ‘can you scale your production up?’ which the user is expected to be able to answer. Blue is for ‘hazy-zone’ questions which do not come directly under the organization’s scope, but something they might have an idea about, or has been consid-ering. Examples would be ques-tions like ‘what problems can you solve?’ and ‘have you con-sidered partnerships?’. The red or ‘ambiguous-zone’ questions are the most difficult to answer and could be even beyond com-prehension at the present. An excellent example would be ‘how to reach the BoP?’—so simple, yet so startlingly difficult.

However, due to the very complex nature of BOP markets in India which demanded such a tool as the Infogram, it is not feasible to classify questions black and white. There are always overlap-ping and intersections and the most determinative questions, like ‘is your offering affordable?’ may fall under these.

5.3 The Information

A glance at this first part might leave the user(s) with an im-pression of how complex things can be at the Indian base of the pyramid, and it’s to assist the an-swering of these that the ‘hints’ section exists. These, again, span all the ‘business building blocks’ and are based on real-life obser-vations that the team had during

the field trip to India. Some are cultural insights, others factual data, yet all from the socio-eco-nomic fabric woven around the Indian BOP market. These could be hard to find elsewhere, in any theoretical references or busi-ness literature for that matter. As such, using this part in conjunc-tion with the infogram will prove to be a strong tool in assessing the suitability of your offering or organization with respect to the BOP and as a guide for contem-plating any future explorations into the same. One can even chart their progress by marking the white spots provided on the line for each question.



T his chapter gives a conclud-ing review of the study made

in this paper. A concise descrip-tion of what has been achieved is given and finally the implications and recommendations for future research are briefly discussed.

6.1 The Results

With its rapidly growing popu-lation, India serves huge poten-tial for new business around the diagnostics industry. The poten-tial is possible to reach, with one of the key elements being under-standing of the environment and the key actors in India. The Actors Map visualizes the complexity and relations between key actors in the diagnostics field.

From the Finnish side, col-laboration with relevant players seems be helpful for everyone in-terested in expanding their oper-ations in India. Therefore the role of FinNode seems to be of high importance since one could argue that no small to medium organi-sation can survive in India alone.

The ecosystem in India is a complex issue and this project aims to give insight on the key actors and issues concerning the key actors and their relations. Also, the cultural issues and other important factors in the operating environment around health care are in the focus of the project at hand. To overcome the complexity, collaborating with Indian organizations and com-panies seem to be a good way to access the markets. All in all,

CONCLUSIONSANDFUTURERESEARCH

there appears to be a technology gap, which has been indicated by Indian companies and which Finnish companies could tap into. There seems to be a constant need for new technology.

Although there are many chal-lenges in India, the huge poten-tial attracts new business also in health care. The health kiosk idea is a concrete example that doing business at the Base-of-the-Pyr-amid is possible and the govern-ment is not the only possible way to the health care system in rural areas in India. The Infogram tool aims to help companies test their potential for the BOP markets and provide useful hints about India.

6.1 Suggestions for Future Research

As the topic of our research is wide, there are many interesting points for future research under the topic.

• In the interviews with the Finnish companies, there were suggestions and questions on concrete issues that could be an-swered in detail if work continues around the India project:

• Are there start-up compa-nies in India that could lead to future collaboration with Finnish diagnostics companies? What kind of business models would be possible?

• How does the health care and diagnostics in the urban poor areas work? Does it differ from that of rural India?

In conclusion, we have pre-sented a real Actor Map providing links to health care actors in both India and Finland, and based on understanding of the complexity of the innovation ecosystem, a strategic tool is made that is suit-able for building up first step into Indian BOP market. The results achieved so far are satisfactory. The feasibility and applicability of this tool will motivate further improvement and research.


REFERENCES

Adner, R. (2006) ‘Match Your Innovation Strategy to Your Innovation Ecosystem’,Harvard Business Review.

Alajoutsi, K. & Tikkanen, H. (2001) Competence-based business processes within indus-trial networks: A theoretical and empirical analysis, Emerald Group Publishing Limited.

Anderson, Hakansson & Johans-son (1994) Corporate technologi-cal behaviour: Cooperation and networks, London and New York:Routledge Press.

Census India (2011) ProvisionalPopulation Totals : India,Available at http:// www.censusindia.gov.in/2011-prov-results/indiaatglance.html [Accessed on 5 May 2011]

Census India (2011) Area and Population, Available at http:// www.censusindia.gov.in/Census_And_You/area_and_population.aspx [Accessed on 5 May 2011]

Diagnostic Center Feasibility Study 2008 India,Finpro.

vi\\ AFFORDABLE DIAGNOSTICS FOR INDIAN BASE OF THE PYRAMID MARKETS

Dai, Weihui, Chen, Mingqi, & Ye, Nan. (2007) Research on the formation of innovation ecosys-tem in software industry and its development strategy. Proceed-ings of the The Sixth Wuhan International Conference on E-Business, Available athttp:// it.swufe.edu.cn/Upload-File/other/xsjl/sixwuhan/Paper/IM305.pdf

Estrin, J. (2008) Closing the Innovation Gap, McGraw-Hill 1st edition.

Estrin, J. (2009) Closing the Innovation Gap: Reigniting the Spark of Creativity in a Global Economy, McGraw-Hill.

Etzkowitch, H. & Leydesdorff (2000) The dynamics of innova-tion: from national systems and ‘Mode 2’ to a Triple Helix of university-industry-government relations, Elsevier Science B.V.

Indian Express Publication(2005) ‘India’s diagnostic industry headed for a major boom’.

Freeman, C. & Soete, L. (1997) The economics of industrial innovation, The MIT Press.

Fukuda, K. & Watanabe, C.(2007) Japanese and us perspectives on the national innovation ecosys-tem. Technology in Society, 30(1), Available at http://www.science-direct.com/science/article/pii/S0160791X0700067X, doi: 10.1016/j.techsoc.2007. 10.008

Hammond, A.L., Kramer, W.J., Katz, R.S., Tran, J.T., & Walker, C. (2007) The next 4 billion: market size and business strategy at the base of the pyramid, World Resources Institute, Washington DC. Available at http://pdf.wri.org/n4b_full_text_lowrez.pdf

Hannan, M.T., Freeman, J.H. (1989) Organizational Ecology, Cambridge, MA: Harvard Univer-sity Press

Hunter, Jeff. (2008, May 29)Creating an innovation ecosystem, Available at http://www.oecd.org/dataoecd/34/43/40808129.pdf

Japan Science and Technology Agency, Center for Research and Development Strategy(2011)Framework for an innovation ecosystem aimed at solving problem, Tokyo: JST/CRD,

AFFORDABLE DIAGNOSTICS FOR INDIAN BASE OF THE PYRAMID MARKETS //vi

Available at http://crds.jst.go.jp/output/pdf/10sp10.pdf

Kim, L. and Nelson, R.R. (2000) Technology, learning and innova-tion: experiences of newly indus-trializing economies, UK: Cam-bridge University Press.

London, T. (2007) A base-of-the-pyramid perspective on poverty alleviation, Manuscript submit-ted for publication, William Davidson Institute, University of Michigan, USA. Available at http://www.erb.umich.edu/News-and-Events/colloquium_papers/BoP_Perspective_on_Poverty_Alleviation_London %20(UNDP).pdf

London, T., & Hart, S.L. (2004) Reinventing strategies for emerg-ing markets: beyond the transna-tional model, International Business Studies.

Maja, R. (2007) An evaluation of the merits of targeting customers at the Bottom of the Pyramid, Graduate Institute of Interna-tional Studies, Geneva.

Nagy.K. H. (2010) Enabling enterprise transformation - busi-ness and grassroots innovation for the knowledge economy, New York: Springer Science+Business Media, LLC.

Osterwalder, A., Pigneur, Y .& Smith A. and 470 practitioners from 45 countries (2010)Business Model Generation, self published.

Prahalad, C.K. (2009) The fortune

at the bottom of the pyramid, revised and updated 5th anniver-sary edition: eradicating poverty through profits, Pearson Prentice Hall.

Prahalad, C. K., & Hart, S. L. (2002) The fortune at the bottom of the pyramid. Strategy + Business.

‘The Role of the District Public Health Nurses: A Study from Gujarat’, (2010) Indian Institute of Management, Ahmedabad.

Rangan, V. K., Quelch, A. J., Herrero, G., & Barton, B. (2007) Business solutions for the global poor: creating social and econom-ic value, Jossey-Bass.

Swanson, E. B., & Ramiller, N.C. (1997) The organizing vision in information systems innovation. Organization Science, 8(5), Available at http://www.jstor.org/stable/2635216Todeva, E.(2006) “Business networks: strategy and struc-ture” Publisher Routledge;1st edition, p25-33.

Turunen, I. (2010) ‘Open innova-tion strategies in Finland’ Research and Innovation Council of Finland.

United Nations Development Programme, (2008) Creating value for all: strategies for doing business with the poor, New York: Scanprint (Danmark). Available at http://www.undp.org/publica-tions/Report_growing_inclu-sive_markets.pdf

Ward, T. & Shackleford, R. (2003) ‘How to aid entry to business network using collective social processes’, Central Queensland University.

Wessner, C. (2005) Entrepreneurship and the innova-tion ecosystem policy lessons from the united states. In D. H. C. Audretsch (Ed.), Local Heroes in the Global Village Globalization and the New Entrepreneurship Policies (pp. 67-89). USA: National Academies.

APPENDICES

vii\\ AFFORDABLE DIAGNOSTICS FOR INDIAN BASE OF THE PYRAMID MARKETS

APPE

NDI

X A

AFFORDABLE DIAGNOSTICS FOR INDIAN BASE OF THE PYRAMID MARKETS //viI

APPENDIX A

vii\\ AFFORDABLE DIAGNOSTICS FOR INDIAN BASE OF THE PYRAMID MARKETS

APPE

NDI

X B

AFFORDABLE DIAGNOSTICS FOR INDIAN BASE OF THE PYRAMID MARKETS //vii

APPENDIX B

Final Report_

Documents

Transcript of Final Report_