You are on page 1of 21

Corporate Governance

Emerald Article: Enabling healthcare services for the rural and semi-urban segments in India: when shared value meets the bottom of the pyramid Mark Esposito, Amit Kapoor, Sandeep Goyal

Article information:
To cite this document: Mark Esposito, Amit Kapoor, Sandeep Goyal, (2012),"Enabling healthcare services for the rural and semi-urban segments in India: when shared value meets the bottom of the pyramid", Corporate Governance, Vol. 12 Iss: 4 pp. 514 533 Permanent link to this document: http://dx.doi.org/10.1108/14720701211267847 Downloaded on: 25-08-2012 References: This document contains references to 55 other documents To copy this document: permissions@emeraldinsight.com

Access to this document was granted through an Emerald subscription provided by GRENOBLE ECOLE DE MANAGEMENT For Authors: If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service. Information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.com With over forty years' experience, Emerald Group Publishing is a leading independent publisher of global research with impact in business, society, public policy and education. In total, Emerald publishes over 275 journals and more than 130 book series, as well as an extensive range of online products and services. Emerald is both COUNTER 3 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.
*Related content and download information correct at time of download.

Academic paper Enabling healthcare services for the rural and semi-urban segments in India: when shared value meets the bottom of the pyramid
Mark Esposito, Amit Kapoor and Sandeep Goyal

Mark Esposito is an Associate Professor of Business and Society in the Department of People, Organizations and Society, Grenoble Ecole de Management, Grenoble, France. Amit Kapoor is Honorary Chairman of the Institute for Competitiveness, Gurgaon, India. Sandeep Goyal is a Doctoral Candidate at the Management Development Institute, Gurgaon, India.

Abstract Purpose The access to high quality, a reliable and affordable basic healthcare service is one of the key challenges facing the rural and semi-urban population lying at base of the pyramid (BoP) in India. Realizing this as a social challenge and an economic opportunity (shared value), there has been an emergence of healthcare service providers who have bundled entrepreneurial attitude and passion with available scarce resources to design and implement cost-effective, reliable and scalable market solutions for the BoP. The purpose of this research paper is to understand the underlying operating principles of these self-sustainable business models aimed at providing healthcare services to the BoP segment in India. Design/methodology/approach The empirical context involves the use of case study research methodology, where the source of data is published case studies and the company websites of four healthcare organizations who have made a socio-economic difference in the lives of the rural and semi-urban population lying at the BoP in India. Findings The analysis and ndings reect the key operating principles for sustainable healthcare business ventures at the BoP. These include focus on 4As (accessible, affordable, acceptable and awareness), local engagement, local skills building, learning by experiment, exible organizational structure, dynamic leadership, technology integration and scalability. Research limitations/implications This research study has focused mainly on the published case studies as source of data. Originality/value The intent is to understand and bring forth the learning and guiding principles, which act as a catalyst for the future researchers and business ventures engaged in BoP context. Keywords Base of the pyramid, Rural healthcare, Low income markets, Emerging markets, Shared value, Developing countries, Poverty Paper type Research paper

1. Introduction
Prahalad and Hammond (2002) have described bottom of pyramid (BoP[1]) as both a challenge as well as an opportunity for organizations. This is an opportunity to solve the unique problems protably and to develop breakthrough business models for sustainability at BoP. This requires market based ecosystems and engagement of BoP segment across the value-chain. Schumpeter (1934) advocated the role of entrepreneur (actor), technology and innovation in bringing about an economic transformation for the organizations and nations as a whole. How the entrepreneur assesses the environment and makes use of environmental dynamics, actors, technology and innovation is what decides the

PAGE 514

CORPORATE GOVERNANCE

VOL. 12 NO. 4 2012, pp. 514-533, Q Emerald Group Publishing Limited, ISSN 1472-0701

DOI 10.1108/14720701211267847

competitiveness of a particular enterprise. Since 2006, the developed economies are growing at a rate of 1-2 percent as compared to developing economies, which are growing at a rate of 6-10 percent. The declining gross domestic product (GDP) growth rate and market saturation in developed economies is bringing about a paradigm shift in focus and attention towards the growing demands and potential business opportunities in developing economies. The predominant market in these developing economies is characterized as uncertain, informal, rural and heterogeneous having people lying in the BoP socio-economic segment. India is one such developing economy, which is emerging as a promising market having a consistent GDP growth rate of more than 7 percent since 2006 and having a huge population base (. 1.2 billion as in year 2011). As per UNICEF (2009), 70 percent of the population in India resides in rural areas. As per the World Bank estimates, 41.6 percent of Indias population lives below $1.25 per day and 75.6 percent live below $2 per day (Haub and Sharma, 2010). This is characterized as a BoP segment, which lives and resides in an informal market and differs from mid and high-income context with respect to increasingly prevalent market imperfections like information asymmetries, market fragmentation, weak legal institution, weak infrastructure, resource scarcity and poverty penalty (Viswanathan et al., 2007). The BoP segment lacks access to formal market conditions for the fulllment of their basic needs like food, energy, drinking water, healthcare, sanitation, education, nancial infrastructure, insurance etc. This presents a signicant business opportunity for the organizations to enter the BoP market using a differentiated business model and organizational mind-set. One such area is need for healthcare, where there exists a signicant demand-supply gap at BoP in India. There is a big gap between the pricing and quality of healthcare services provided by the private hospitals and government hospitals. There exists an unmet market need for an alternative option from the existing options. The existing options are:
B B

government hospitals with limited resources; large private hospitals whose high prices resulting in services beyond the reach of BoP segment; small private nursing homes that lack transparency in pricing and quality; or medical quacks.

B B

The lack of accessibility and availability of affordable healthcare products, services and information has created a big barrier in the social and economic development of the BoP population in India. With the organizations realizing this as a huge opportunity, there has been an emergence of self-sustainable/protable business models aimed at the healthcare related offerings for the BoP population. These organizations are bundling entrepreneurial attitude and passion, information and communication technology and innovation to design and implement cost-effective, reliable and scalable market solutions for the BoP segment. The objective of this paper is to understand the self-sustainable / protable business models aimed at providing healthcare services to the BoP in India. The empirical context involves the use of case study research methodology, where the source of data is the published case studies of four healthcare organizations. For data collection and analysis, the study follows the directives for case-based research (Yin, 2009) and is based on multiple sources of evidence as published case studies, archival data, industry publications, companies web sites and other literature available in an online public domain. The criteria for choosing case based research are the underlying complexity and heterogeneity of the BoP socio-economic segment. The BoP segment carries a different mindset and involves the application of a different set of rules as compared to the middle and upper segments. So, there is a need to undertake phenomenon driven research based upon analyzing and interpreting the data from multiple sources. The sample involves healthcare organizations, which are having a self-sustainable or for-prot business model at the BoP.

VOL. 12 NO. 4 2012 CORPORATE GOVERNANCE PAGE 515

This research work is an attempt to establish an understanding of the characteristics of the sustainable BoP healthcare business models. This will add value to the research literature by bringing forth an understanding of the operating principles for a sustainable and successful business model aimed at the BoP segment in emerging economies. This will add value to the practitioner community by bringing forth a practical view on what kind of business models work and what are the underlying operating principles for providing the healthcare offerings at BoP, especially in the emerging economies. The question related to what kind of business . . .? is still an unanswered one and will require clarity by looking at the existing models in the eld. The subsequent research study is divided into seven further sections. Section 2 will elaborate the existing literature regarding BoP, business models and healthcare in India. Sections 3-5 will elaborate the research design, sample selection and research methodology. Section 6 will present the analysis and ndings resulting from with-in and cross-case analysis. Section 7 will be the conclusion of the study and Section 8 will present the recommendations for future research.

2. Literature overview
2.1 BoP BoP is a collective reference to 3.7 billion people populating the lowest income strata in the world. The income threshold for this group is US$ 3,000 per person per year (as per year 2002 purchasing power parity (PPP)$), or roughly US$8 per person per day (Hammond et al., 2007; Prahalad and Hammond, 2002). Landrum (2007) and Karnani (2007, 2011) argued that the promised US$4 trillion worth market does not simply exist and has some misconstrued assumptions, which need be understood and corrected by organizations entering the BoP. Karnani (2011) argued that:
BoP is a fuzzy phrase. The poor should be considered in terms of absolute poor. What is unique about the BoP idea as Prahalad and Stuart Hart rst talked about it is that you could make a prot from it, not do it as a charity. I think we should impose three strict conditions on BoP logic: That its protable. Its actually (serving) the poor. Its good for the poor. Now, you put these three conditions together and there are very few positive examples (of BoP enterprises).

Despite the different perspectives on what constitute the BoP, the global organizations have realized this as a big untapped opportunity having its own unique set of underlying challenges, which require a differentiated mind-set and approach towards value proposition, value creation, delivery channels and revenues generation. There is a need for understanding that the criteria for the BoP differ by country. From business perspective, BoP should be looked upon as a heterogeneous segment, which can be further categorized into sub-segments like extreme poor (, $1 per person per day), $1-2, $2-8 and so on. India itself serves as a good example of differing estimates of the number of people who are below the poverty line (BPL[2]). Figure 1 reects the comparative numbers of Indian population classied as BoP, as projected by different studies. This research paper considers the World Bank denition as the classication of BoP segment (, $2 PPP per day). There is a need to look at an integrated view of the BoP segment in terms of opportunity, need and challenges (Figure 2). The opportunity dimension represents the BoP socio-economic segment, which presents a huge untapped market potential of 3.7 billion consumers worth having an annual household income of US$5 trillion (Hammond et al., 2007). The average daily income level of the BoP individuals lies between US$1 to US$8 (as per Year 2002 PPP $). The study by Hammond et al. (2007) quanties the potential market opportunity as follows. Asia represents a BoP market potential of 2.86 billion people having annual household income of $3.47 trillion. Eastern Europe represents a BoP market potential of 254 million people having annual

PAGE 516 CORPORATE GOVERNANCE VOL. 12 NO. 4 2012

Figure 1 India population comparative estimates below poverty line (millions)


887 710 903

413 328

436

488

Current ocial

NC Saxena Commiee (Rural only)

Proposed ocial

World Bank <$1.25 PPP per day

Economic World Bank Arjun Sengupta Survey <$2.00 PPP Commission 2008-2009 per day (India Budget)

Source: Haub and Sharma (2009) http://www.prb.org/Articles/2010/indiapoverty.aspx Last accessed on 26 Jan 2012

Figure 2 BoP market challenge or/and opportunity

household income of $458 billion. Latin America represents a BoP market potential of 360 million people having annual household income of $509 billion. Africa represents a BoP market potential of 486 million people having annual household income of $429 billion. The need dimension represents the key characteristics of the value offerings, which are required to build the market at the BoP. The BoP segment has to be looked upon from the market development perspective. This involves identifying the unmet basic need,

VOL. 12 NO. 4 2012 CORPORATE GOVERNANCE PAGE 517

understanding the price point (price minus rather than cost plus perspective), designing and offering the market based solution for the same, which is affordable, accessible, available and leads to formal market inclusion and awareness (Prahalad, 2004). Affordability involves understanding the price point of the target segment and work backward to identify the challenge cost after adjusting the margins. Accessibility and availability refers to the design of delivery channels to enable the reach and availability to the target segment. Awareness involves providing necessary information and education to the BoP segment, which helps them in understanding the formal markets, taking a decision, which is benecial to them. The market complexity dimension represents the key challenges faced by the organizations entering the BoP (Shukla and Bairiganjan, 2011). The BoP customer prole poses challenge to the organizations in terms of making market decisions based upon the unpredictable market dynamics like income volatility, low savings due to lack of access to formal nancial infrastructure, diversity in languages and literacy levels across regions, limited mobility and travel infrastructure and purchase decisions driven by social beliefs and frugal mindset. The BoP environment poses challenges in terms low population density across geographies, lack of government interventions and policy support and scarcity of data sets related to BoP population characteristics. The BoP infrastructure poses challenges in terms of lack of basic infrastructure like electricity, water, technology, roads, etc. as well as lack of complementary products and services, which can help to expand the market. This leads to barriers for reach and accessibility. The availability of skilled resources like doctors, paramedical staff, engineers, etc. is another challenge in terms of resources, which act as a major barrier in launch of products/services which require skilled manpower. 2.2 Business model The term business model is being used as a heterogeneous concept having diverse interpretations and growing typologies. While some researchers perceive business model as a business concept that explains the logic of value creation for a rm (Timmers, 1998; Linder and Cantrell, 2000; Hamel, 2000; Shafer et al., 2005; Mitchell and Coles, 2004a, b; Morris et al., 2005; Teece, 2010; etc.), others rely on it as a link between strategy, business processes and information systems (Amit and Zott, 2001; Chesbrough, 2007; Osterwalder and Pigneur, 2010). The difference between these two interpretations of business models concerns the relationship of business model with the concepts of strategy, business processes, and information and communication technology (ICT). While in the rst interpretation, the three concepts are included in the description of business model, the second interpretation considers them as inter-linked components. Chesbrough (2007) explained the business model as a combination of value proposition, customer segment, value-chain setup to create and distribute value, cost and revenue structure, rm position in value network and competitive strategy. Osterwalder and Pigneur (2010) emphasized that the business model is like a blueprint for a strategy to be implemented through organization structures, processes and systems. A business model describes the rationale of how an organization creates, delivers, and captures value. The framework proposed by Osterwalder and Pigneur (2010) follows a system approach, wherein business model for any product/service offering is evaluated on the basis of nine sub-systems/building blocks as value proposition, target customer segment, customer relationship, delivery channel), key resources, key activities, key partners, cost structure and revenue structure. 2.3 BoP business model The BoP phenomenon is characterized by divergent and multi-directional nature of research literature, which has focused on multi-dimensional themes like value proposition, disruptive innovation and value co-creation through local capacity building and native learning. In the context of BoP, value proposition refers to the offerings made for engaging the BoP segment. This not only includes BoP as consumers but also as employees, distributors, and suppliers (Viswanathan et al., 2007; Karnani, 2007). Local capacity building refers to the building of

PAGE 518 CORPORATE GOVERNANCE VOL. 12 NO. 4 2012

necessary skills and ecosystem for engagement of local community in BoP business operations. Chaskis et al. (2001) dened local capacity at the community level as:
[. . .] interaction of human capital, organizational resources, and social capital existing within a given community that can be leveraged to solve collective problems and improve and maintain the well-being of that community.

Local capacity building thus refers to a communitys increased collective ability to solve problems and identify opportunities. Local embeddedness refers to the engagement of an organization operating at BoP with the local community not only for business transactions but also as a long-term relationship. Miller (1996) dened embeddedness as:
[. . .] the extent to which a companys strategy reects or is inuenced by its social and institutional connections.

Hence, it could be understood that local embeddedness of business develops a local presence within peoples everyday life., One of the most effective approaches for local embeddedness is to work with non-traditional partners for value creation and delivery (Hart and London, 2005). Localized learning refers to the incorporation of bottom-up learning mechanisms by the organizations operating at BoP. There is a need to systematically identify, explore and integrate the views of the stakeholders on the fringe and to co-discover and co-create new business opportunities and business models with marginalized groups and communities (Hart and Sharma, 2004; Hart and London, 2005; Simanis and Hart, 2009). The different researchers have focused on different dimensions and have highlighted different attributes of BoP market. According to Hart and Milstein (2003), sustainable development requires multi-dimensional performance to manage multi-faceted challenges across social, economic and environmental aspects. This requires strategic business models to focus on sustainability drivers like, clean technology, product stewardship, pollution prevention and sustainability vision. Multinational companies (MNCs) that are facing tough situation in saturated markets in developed countries could shift their focus to emerging economies. However, they need to develop a global capability in social embeddedness for targeting the low-income segments in emerging markets (London and Hart, 2004). This includes developing relationships with non-traditional partners, co-inventing custom solutions, and building local capacity. It has also been highlighted in literature that social entrepreneurship has the potential to create new models for the provision of products and services that cater directly to basic human needs that remain unsatised by current economic or social institutions (Seelos and Mair, 2005). Social entrepreneurship is dened as a process that catalyzes social change and addresses important social needs in a way that is not dominated by direct nancial benets for the entrepreneurs. This requires embeddedness as a critical link between different theoretical perspectives as structuration theory, institutional entrepreneurship theory, social capital theory and social movement theory (Mair and Marti, 2006). Another area that has attracted attention of researchers is role of innovation in BoP markets. Anderson and Markides (2007) have highlighted the importance of strategic innovation and affordability, acceptability, availability and awareness as key dimensions for serving the base of the pyramid protably. Simanis and Hart (2009) argue that organizations need to adopt embedded innovation paradigm (EIP) as compared to structured innovation paradigm (SIP) at BoP. While SIP is transaction based having focus on fullling customer need by delivering product/service that is faster and cheaper than the ones by the competitors, EIP is relationship based having transformational stakeholder commitment. Moreover, affordability and sustainability are replacing premium pricing and abundance as innovations drivers (Prahalad and Mashelkar, 2010). To tackle this challenge and opportunity, companies are adopting inclusive growth and innovation via disrupting business models, modifying organizational capabilities and creating or sourcing new capabilities. This requires a clear vision, setting stretch targets, exercising entrepreneurial creativity within constraints, and focusing on people, not just prots or shareholder wealth.

VOL. 12 NO. 4 2012 CORPORATE GOVERNANCE PAGE 519

Lately researchers have identied that it is necessary to involve local resources to ensure BoP consumers are addressed in a meaningful manner. According to Dahan et al. (2010), Multinational enterprises (MNEs) should collaborate with non government organizations (NGOs) for value creation and delivery, while entering developing countries. This partnerships enable MNEs to gain market expertise, legitimacy with clients/customers, civil society players and governments, and access to local expertise and sourcing and distribution systems. It has been repeatedly emphasized that organizations having intention to enter the BoP market should not only focus on economic value, but also on social value. Porter and Kramer (2011) argue that when organizations would focus on shared value, which involves economic value creation, it leads to an inherent objective of creating value for the society by addressing its needs and challenges. This requires reconguration of products and markets, redening productivity in the value chain and enabling local cluster development. Further, Yunus et al. (2010) highlight the role of social business models at BoP, the underlying components, core objectives, comparison with CSR and prot maximizing businesses and resulting impact on the involved organizations as well as target segments and other stakeholders in the value-chain. This paper highlights ve lessons from Grameen Bank experience, which include challenging conventional thinking, nding complementary partners and undertaking continuous experimentation, recruiting social-prot-oriented shareholders, and specifying social prot objectives clearly and early. Thus, business models need to be tweaked to incorporate the social aspect and not only focus on economic aspects. 2.4 BoP healthcare in India The healthcare industry in India is on a strong growth curve and is growing at a CAGR of 14 percent. As per IBEF (2011), the market size is expected to grow from US$40 billion (Year 2009) to US$79 billion (Year 2012E). This includes hospitals (71 percent), pharmaceuticals (13 percent), medical equipment and supplies (9 percent), medical insurance (4 percent) and diagnostics (3 percent). The demand for primary, secondary and tertiary healthcare in India is in the ratio of 60:30:10. WHO (2010) has highlighted the comparative indicators to reect the urban-rural and public-private distribution of healthcare in India as compared with the rest of the world (Figure 3). India has an infrastructure of around 16,000 hospitals; though most of these are based in urban areas as against majority population living in rural areas (International Trade Administration, n.d.). The public-private contribution ratio is 20 percent:80 percent. This raises a big question mark on the availability of affordable and good quality healthcare for the majority of the population which lies in the BoP segment and lives primarily in rural areas. The private healthcare is mainly focused on protable urban markets. The lack of micro-insurance coverage for the BoP segment further excludes them in accessing the private healthcare services. As highlighted in Figure 4, India lags behind other developed and emerging economies in terms of the number of available skilled doctors, nurses and physicians for each one thousand population (PWC, 2007). These gures get skewed further when mapped to rural-urban distribution of population in India. As per IBEF (2011), India has 700 million people (approximately) residing in 636,000 villages (approximately). This accounts for 70 percent of the total population in India. The rural doctor to population ratio is lower by six times as compared with urban areas. The rural bed to population ratio is lower by 15 times as compared with urban areas. Considering all these factors, it becomes evident that there is a severe shortage of accessibility and availability of affordable healthcare facilities compounded by lack of skilled resources (doctors, nurses, physicians, medical equipments etc) in rural areas. The situation is further compounded by lack of adequate health insurance schemes for the people at BoP in both rural and urban areas. A World Bank Report on Indian Healthcare in the year 2002 noted that:

PAGE 520 CORPORATE GOVERNANCE VOL. 12 NO. 4 2012

Figure 3 Health care comparative indicators

Healthcare Spending (%age of GDP)


%age 15.70% 8.40% 4.10% 4.30% 606 China USA UK Global Brazil 8.40% 9.70%

Per Capita Spending (USD)


USD 7,285

3,867 802 USA UK Global

40 India

108 China

Brazil

India

Capita Spending (USD)


USD 7,285 120% 100% 80% 60% 40% 20% 0%

Healthcare Spending Comparison (%age)

2,992 837 Brazil 109 India 233 China USA UK 863 Global

%age

Brazil

India

China

USA

UK

Global

Private 58.40% 73.80% 55.30% 54.50% 18.30% 40.40% Public 41.60% 26.20% 44.70% 45.50% 81.70% 59.60%

Source: WHO World Health Statistics (2010)

Figure 4 Health care comparative resources


Count per '000 Popula on, 2001
8 7 6 5 4 3 2 1 0 High Income Countries (US, Europe etc.) Beds Physicians Nurses 7.4 1.8 7.5 Middle Income Countries (Brazil, China, South Africa etc.) 4.3 1.8 1.9 Other Low Income Countries (SubSaharan Africa) 1.5 1 1.6 200 180

Count Per 100,000 Popula on

160 140 120 100 80 60 40 20

India

World Average

1.5 1.2 0.9

3.3 1.5 3.3

0 Rural Urban

Beds 9.85 178.78

Hospitals 0.36 3.6

Dispensaries 1.49 3.6

Sources: PWC (2007); Gangolli et al. (2005)

One episode of hospitalization is estimated to account for 58 percent of per capita annual expenditure, pushing 2.2 percent of the population below the poverty line. 40 percent of those hospitalized have to borrow money or sell assets.

This reects that 22 million of the population is pushed below the poverty line annually due to healthcare expenditure alone. This is a cause for concern and attention for all.

VOL. 12 NO. 4 2012 CORPORATE GOVERNANCE PAGE 521

3. Research study design


The objective of this paper is to understand the self-sustainable business models aimed at providing healthcare services to the BoP in India. The empirical context involves the use of case study research methodology, where the source of data is the published case studies of four healthcare organizations. The case study approach is needed to analyze the issues and relationships which are complex and inter-disciplinary and which cannot be made evident by survey-based statistical analysis. A multi-organization case study design allows for an in-depth analysis across different contexts and enables researchers to better understand how and why outcomes occur (Huberman and Miles, 1994). The tentative explanations found in a within-case analysis can be tested across other cases, enhancing reliability and validity of the conclusions drawn (Yin, 1981).

4. Sample selection
The sample includes healthcare organizations, which have adopted a self-sustainable business model for offering services to the BoP in India (Table I).

5. Research methodology
The research methodology involves iterative data analysis process. The details for each of the selected case studies has been compiled from the multitude of secondary sources, which includes published case studies across publications like EMCS[3], UNDP[4], WDI[5], innovations[6] as well as published literature from online sources, websites of selected organizations, published books etc. The rst step involves identifying the sources of data for the required information on the selected organizations. The second step involves content analysis (with-in) of the published literature identied for each of the selected organizations using Atlas.ti[7] software. The third step involves doing the cross-case analysis to understand the similarities and differences across the different building blocks of the business models of the selected organizations. The fourth step involves compiling the overall ndings in a comparative table (Appendices 1-5) and building on that to bring forth the recommendations and ndings, which will enable the understanding of key operating principles at BoP in rural and semi-urban healthcare in India.

6. Analysis and ndings


The review of the business model and BoP literature brings forth the following key dimensions, which should be evaluated for understanding the BoP business models. The rst dimension is to identify the pain point and decide upon value offering. The second dimension is to understand the customer aspect. This includes answers to the questions like what are the target segments, how the customer relationships are being built, what kind of Table I Inclusive healthcare sample selection
S no. C1 C2 C3 C4 Company Aravind Eyecare Narayana Hrudalaya Vaatsalya LifeSpring Offering Eye care Heart care Primary and secondary care Maternal care Type Service, product Service Service Service BoP inclusion type Consumer, employee Consumer, employee Consumer Consumer, employee Source Kasturi Rangan and Thulasiraj (2007) Kothandaraman and Mookerjee (2007) Mukherji (2010) Krishnadas (2011) Published in Innovations UNDP UNDP Emerald EECS

Note: The selected cases had to describe a business model that included the poor in ways that could be protable and that clearly promoted human development

PAGE 522 CORPORATE GOVERNANCE VOL. 12 NO. 4 2012

delivery channels are being setup. The third dimension is to understand the value creation aspect. This includes answers to the questions like what kind of organizational form and structure is being setup, what is the leadership style, what kind of actions, competencies and capabilities are necessary to enable the market based ecosystem for value creation. The fourth dimension is to understand the value network. This includes answers to the questions like what is the signicance of partnerships and what kind of partnerships are undertaken to build market based ecosystem. The fth dimension is to understand the socio-economic aspect. This includes answers to the questions like what kind of cost structure and revenue streams are in place and what is the social impact. The four selected organizations are analyzed with respect to the key dimensions highlighted above, as the primary evaluation criteria. The starting point for analysis is need identication and value proposition. Aravind Eyecare (AE), Narayana Hrudayalaya (NH), Vaatsalya (V) and LifeSpring Hospitals (LH) started by segmenting the market as per the competency and vision of the founder. AE focused on enabling the access to affordable treatment for needless blindness. NH started with the focus on cardiac care but gradually diversied itself across the primary, secondary and tertiary healthcare services. V focused on enabling the access to affordable primary and secondary healthcare in rural and semi-urban areas. LH focused on enabling the access to affordable maternal care in semi-urban areas. The overall intent remained the same across the organizations that is to build a self-sustainable eco-system for offering affordable, accessible and high quality (performance/price) healthcare to the rural and semi-urban population. Depending upon the competency and vision of the founder, these organizations segmented the market accordingly. The main intent was not only to enable access to healthcare but also to build a healthcare awareness ecosystem, which could lead to preventive healthcare. The second point of analysis is the customer aspect. The BoP market is a non-homogenous market having several sub-segments, which can be determined by income level (, $1 per day, $1-2 per day, $2-4 per day, $5-8 per day and so on), by geographical concentration (rural BoP, urban BoP, etc.), by gender (men or women or children or aged etc) and so on. So, the identication of target segment before nalizing the value offering is found to be extremely important for successful venture at BoP. Regarding target segments, all these four healthcare service organizations identied the unfullled specic or generic healthcare need at the BoP and went for a scalable and replicable business model aimed at market development for fullling that particular need. All these healthcare organizations focused on providing healthcare services across the socio-economic segments with the primary focus on BoP segment. This enabled them to cross-subsidize the margins while maintaining the affordability for the masses. While AE and NH enabled the healthcare services to all irrespective of the paying capacity, V and LS focused on the paying patients only thereby missing out the extreme poor. Regarding customer relationship, all the four organizations realized the need to build trust and transparency apart from affordability and accessibility to pull the BoP segment from informal market substitutes. To enable this, these organizations adopted the last mile connectivity by adopting the inclusive approach, which involved engaging the locals as para-medical staff and nurses. On one hand, this helped to provide income opportunity to the BoP segment and on the other hand, this helped to gain trust and transparency with the BoP segment. Another relationship aspect that stood common among all these healthcare organizations was that all these organizations realized the need to focus on building healthcare awareness among the BoP segment. The common belief was that access to preventive healthcare awareness and information is more important than access to reactive healthcare services. AE focused on customer relationship by ensuring the treatment for all irrespective of the paying capacity, by organizing eye-care camps to spread awareness and mobilize the masses into a system to get treated and by providing bets quality treatment and eye-care products at fraction of the imported costs. NH created a dynamic shift in customer relationship by enabling the affordability of healthcare for BoP consumers through private micro-insurance schemes like Yeshaswini and Arogya Raksha. V complemented its primary and secondary healthcare services with preventive healthcare

VOL. 12 NO. 4 2012 CORPORATE GOVERNANCE PAGE 523

camps like rural birth centers, test lab for checking the uoride content in water etc. LS focused on preventive healthcare by organizing community outreach programmes among the semi-urban poor. Regarding delivery channel, the main focus of the healthcare organizations was to overcome the accessibility issues with cost effective measures. V and LS implemented hub model by building a network of hospitals as a solution to increase access to the masses. The idea behind the hub model was to be big enough to gain more acceptance in the market as compared to existing government community health centers and small private clinics. NH and AE adopted the hub-n-spoke model for value delivery. This included building an integrated network of hospital setups, mobile outreach vans and tele-network. All the issues for remote patients are screened via teleconferencing or video-conferencing and mobile outreach vans and whoever required an advanced treatment were being treated at the main hospital facility. This made a signicant contribution in bridging the accessibility gap for remote BoP patients. The third point for analysis is value creation aspect. This includes analyzing the type of organizational structure, leadership type, operational focus areas and key resources. Cost efciency, performance price ratio, experimentation, centralization or decentralization and scalability are some of the decision points, which require action during value creation. Regarding organizational structure, all these organizations realized the importance of the productive utilization of their core resources doctors and paramedical staff. These organizations went about the same by ensuring the minimal administrative involvement of doctors and paramedical staff. This resulted in better productive as compared to the industry average thereby resulting in increased capacity utilization and access to the masses. Regarding the leadership type, all these ve organizations were driven by the philosophy and goals of the founders. The founders of these organizations had a clear focus driven by passion, positive attitude, experimentation, innovation and willingness to learn. The focus was on balancing the speed of execution, cost of execution and outreach. They always aimed at the business venture to be self-sustainable rather than relying on charity and grants. Regarding core resources and capabilities, all these organizations focused on building the BoP market knowledge, building the pool of doctors and paramedical staff and innovation capacity complemented by standardization of processes. AEs capabilities included leadership, customer focus, in-house funding, in-house training programs for training locals as nurses, continuous focus on technology and innovation to reduce cost and increase access, backward integration into manufacturing eye-products, permanent hiring of doctors, ability to scale and to build no-frills, asset-light infrastructure. NHs capabilities included leadership, customer focus, strategic partnerships for funding, in-house training programs for training locals as nurses, continuous focus on technology and innovation to reduce cost and increase access, short term contracts with suppliers, permanent hiring of doctors, ability to scale and no-frills, asset-light infrastructure. Vs and LSs capabilities included leadership, customer focus, strategic partnerships for funding, ability to scale, competency in setting up cost-efcient asset light infrastructure set-up, engagement of locals as paramedical staff. Regarding operational activities, the focus of all these organizations was on adopting a bottom-up approach for design and delivery of healthcare offerings. Also termed as challenge cost or price minus, this included nalizing the end price rst based upon market capacity and then worked backward to meet the challenge cost while keeping some scope for margins. To effectively meet the challenge cost, all these organizations adopted the asset-light and local engagement model where they undertook the continuous cost efciency measures across the value-chain via short term agreements with suppliers, leased infrastructure, outsourcing of allied activities, standard operating procedures and equipments, engagement of locals (in-house training) as customer contacts and paramedical staff, minimal administrative involvement of specialists, prolonged use of OTs, technology adoption, experimentation, innovations and local capacity building. AE and NH achieved the same by adopting a no-frills-assembly line model. This included a lean organizational structure with specialists focusing only on surgeries and consultations rather than administrative tasks, in-house of training of girls from poor communities as nurses for doing the intensive and complex healthcare related tasks, facilitating high volumes of

PAGE 524 CORPORATE GOVERNANCE VOL. 12 NO. 4 2012

surgeries by adopting capacity utilization and productivity as well as extended working hours for doctors and extended availability of operation theatres. NHs cost control measures also included short term (weekly) procurement contracts with suppliers to have increased bargaining power, preferring lease over buy-outs for most of the medical equipments, volume based purchase agreements, integration of technology wherever applicable, unbundling of hardware and software for ECG machines, use of digital x-ray plate, use of software to transmit images over internet, use of mobile outreach van and use of telemedicine network. AEs cost control measures also included assembly line setup for surgeries measures (For example: AE conducted 10X number of surgeries, each taking 10-15 min as compared to X number of surgeries each by other hospitals using the same resources), vertical integration (manufacturing of IOLs, sutures, ophthalmic products via AuroLab setup) and standardization of equipments, systems and processes. V and LS achieved the same by adopting a no-frills approach. The no-frill approach included minimizing the non-core expenditure on hospital infrastructure set-up like choice of location in cheaper semi-urban areas, having building on lease, having equipments on rent, having rooms with only essential items and so on. Other cost control measures included engaging locals as nurses and paramedical staff, having centralized procurement terms and conditions to attain bargaining power with suppliers. Other operational measures included focusing on achieving a capacity utilization of at least 80 percent at each hospital and having rapid expansion of the network of hospitals. The fourth point for analysis is value network aspect. This includes analyzing the type of partnerships in creating a market-based ecosystem. For a sustainable and scalable venture, these healthcare services organizations realized the importance of technology integration to enable reach to the BoP, the importance of funding to enable the scale-up and scale-out, the importance of operational partnerships to enable cost innovation and the importance of local skill and capacity building and BoP inclusion as nurses and paramedical staff to enable trust and transparency. AE was the only exception here as it mainly relied on internal sources for funding rather than focusing on funding partners. The key aspect, which was found missing and needed attention, was that most of these healthcare services business ventures were operating individually in their respective area of expertise. Considering the complexity and the magnitude of the healthcare services required at BoP, it would be better to integrate the individual BoP healthcare organizations into a uniform network. This development of an integrated ecosystem of inclusive healthcare is required to maximize the reach and impact and resolve the scalability limitations. The fth point of analysis is socio-economic impact. Regarding social impact, all these organizations kept the primary focus on serving the low-income segments in semi-urban and rural areas. At the same time, these organizations adopted the local engagement model, which helped in building the trust and transparency with the low-income communities and also provided the avenues for increased earnings and professional skill building as nurses and paramedical staff, to the low-income segment. The details are highlighted in Appendix 3. Regarding economic impact, all these organizations had an ongoing focus on cost control and optimization by integrating technology based innovations in their operational processes, bargaining with suppliers on volumes and inventory, taking decisions on lease versus buy, hiring locals for operations and customer interface and no-frills offerings having best of quality with optimal packaging. All these organizations maintained the operational cost and salary overheads much below industry average. Regarding revenues, all these organizations focused on scale and volume by productive utilization of core resources and by charging much below industry rates for the high quality service offerings. AE and NH followed the cross-subsidized approach, wherein they targeted the high and mid-income segments as well apart from low income segment and charged them as per their paying capacity. This helped them to offer a high performance/price ratio to the BoP segment. V and LS focused on revenues generation from surgeries and consulting fees from the paying patients.

VOL. 12 NO. 4 2012 CORPORATE GOVERNANCE PAGE 525

7. Conclusion
The healthcare services organizations displayed the common intent, objective and passion of creating an ecosystem to deliver the inclusive healthcare services to the poor. All these organizations were driven by the passion, vision and mission of the founders, which over rid the operating challenges and infrastructural constraints. This brings an interesting question for the future. That is, how to build sustainable and scalable healthcare services organizations at the BoP, which are driven by multi-national enterprises. The key operating principles, which act as recommendations for the sustainability of healthcare services organizations at the BoP are as follows:
B

Segment, segment and segment. There is a need to clearly identify the need and target segment at BoP, which the organization wants to focus. BoP is a non-homogeneous and complex market, which requires clear understanding and focus before the launch of business venture. Focus on 4As. To enable a successful venture at BoP, the organizations need to focus on product/service offerings, which are affordable, accessible, available and lead to awareness among the masses. Do not assume. One of the most common mistakes being done by the organizations venturing into BoP is that they go by their own perception and assumption as to what is required by the BoP segment. Engage the BoP. To build trust, transparency and buy-in, there is a need to engage BoP across the value-chain as employees, suppliers, entrepreneurs, innovators and distributors. Local capacity building. There is a need to build a pool of skilled resources for ensuring quality services at the BoP. For example, regarding healthcare, the demand for doctors and nurses is much more than the availability. There is a need to follow the AE and NH approach of having focused training and education programs for the inclusion of the low-income local population as nurses, support staff and intermediate specialists. This is required to bridge the demand-supply gap of these skilled resources as well as contribute in local skill building and economic welfare of the BoP segment. Experiment, experiment, experiment. There is no business plan, which can succeed in rst go at the BoP. Considering the complexity of the BoP market, there is a need to experiment during design and implementation of products and services at BoP. Build a network. There is an increasing role for technology and funding in the success of business ventures at BoP. This signies the importance of collaborative network of strategic partners for funding, technology and operational efciency, which will lead to sustainable business venture at BoP. Focus on end-to-end need. The BoP market is served by the informal market players like local money-lenders, uneducated quacks as doctors etc. To replace the informal market players and to encourage the BoP segment to adopt the offerings in formal market, there is a need to complement the product/service offerings with complementary access to information, technology and funding support. For example, regarding healthcare, there is a need to offer preventive healthcare related awareness as well as access to micro healthcare insurance. A major part of the rural BoP segment suffers from lacks of basic education (literacy), lack of regular per-capita income, low disposable income and lack of access to savings infrastructure. This limits their capacity to withstand any major economic shock. V ensured the same by complementing their value offerings by organizing preventive healthcare camps like rural birth centers, test lab for checking the uoride content in water, etc. NH ensured the same by establishing tele-medicine network, mobile outreach vans and launching micro-insurance schemes like Yeshaswini and Arogya Raksha. Align with the government and regulatory framework. The BoP business ventures need to ensure that they are in sync and complement the government offerings and fulll the regulatory requirements while entering into BoP.

PAGE 526 CORPORATE GOVERNANCE VOL. 12 NO. 4 2012

Technology is the key. Considering the affordability, accessibility and availability challenges in emerging economies, technology is a key stakeholder for any business. With this in mind, business models designed for emerging economies should focus on technology integration as a key aspect in value creation and delivery. Organization structure and leadership. The business ventures at the BoP require a decentralized organizational structure, which has the exibility to take dynamic decisions in dynamic environment. Regarding leadership, there is a need for a passionate and dynamic leadership to drive the business ventures at BoP. The founders of the respective healthcare organizations analyzed in this paper, had the passion, positive attitude, willingness to experiment, innovate and learn. They maintained focus on balancing the speed of execution, cost of execution and outreach. Focus on scale. The business ventures at the BoP need to focus on scale to neutralize the high operational and infrastructure costs and low margins. It becomes necessary to have the ability and capacity to drive volume based revenues as well as being able to target the mid and upper segments to get higher margins to balance the lower margins from the BoP segment. This has proved to be quite successful because there is an institutional void in the fulllment of basic needs (healthcare, energy, education, nance, etc.) for the BoP population in India. Regarding healthcare, NH diversied into availability of non-cardiac related healthcare facilities to increase the economies of scale and scope. V specialized into treatment of wide range of primary and secondary healthcare diseases. Build a collaborative platform. At a macro level, there is a need to move from isolation to collaboration among different BoP business ventures. For example, regarding healthcare, most of the healthcare business ventures are operating individually in their respective area of expertise. Considering the complexity and the magnitude of the healthcare issue at BoP, it would be better to integrate the individual BoP healthcare organizations into a uniform network. This development of an integrated ecosystem of inclusive healthcare is required to maximize the reach and impact with shared resources and to resolve the scalability limitations with individual organizations.

To conclude, this research article is an original attempt to understand the key operating principles for sustainable healthcare services and other similar business ventures at BoP. This research holds an implication both for the research community and the practitioner community. For the research community, this paper acts as a deeper insight into the emerging business models and key operating principles in the context of BoP, primarily in healthcare services. For the practitioner community, this paper acts as a reference guide on the key essentials and steps to be taken care of, while entering the BoP. The intent is to understand and bring forth the learning and guiding principles, which act as a catalyst for the future researchers and business ventures in BoP service offerings especially inclusive healthcare.

8. Future research
This research study has been limited to in-depth evaluation of published case studies and other secondary data pertaining to four healthcare services organizations operating at BoP in India. The ndings from this research can be enhanced further by extending the scope of this study with eld studies of other prominent healthcare products/services providers at BoP in India. Also, the source of data for this research study has brought forth the inputs from the organizational perspective. To add value to the same, it is recommended to undertake a survey research of the BoP stakeholders (BoP consumers, civil society organizations, BoP suppliers, BoP employees, BoP entrepreneurs, etc.) to get the perspective of the intermediaries and the target segments. This will bring forth the quantitative analysis of the inputs regarding key expectations of the BoP segment from the organizations and whether there exists a gap in assumptions and expectations.

VOL. 12 NO. 4 2012 CORPORATE GOVERNANCE PAGE 527

Notes
1. As per Hammond et al. (2007), The Base of the Pyramid (also referred to as the Bottom of the Pyramid or Low Income Segment) refers to the estimated 4 billion people around the world who are poor by any measure and have limited or no access to essential products and services such as energy, clean water, and communications. Globally, people in this socioeconomic group earn US$1 to US$8 in purchasing power parity (PPP) per day. Yet these households often pay higher prices (poverty penalty) than wealthier consumers do for lower-quality goods and services because of uncompetitive markets. As per London (2008), BoP is dened as the socio-economic segment that primarily lives and transacts in the informal economy. 2. As per Haub and Sharma (2009), Indias ofcial poverty measure has long been based solely upon the ability to purchase a minimum recommended daily diet of 2,400 kilocalories (kcal) in rural areas where about 70 percent of people live, and 2,100 kcal in urban areas. 3. EMCS refers to Emerald Emerging Markets Case Studies 4. UNDP refers to UNDP growing inclusive markets 5. WDI refers to The William Davidson Institute 6. Innovations refers to peer-review academic journal published by MIT Press. 7. www.atlasti.com

References
Amit, R. and Zott, C. (2001), Value creation in e-business, Strategic Management Journal, Vol. 22 Nos 6-7, pp. 493-520. Anderson, J. and Markides, C. (2007), Strategic innovation at the base of the pyramid, MIT Sloan Management Review, Vol. 49 No. 1, pp. 83-8. Chaskis, R.J., Brown, P., Venkatesh, S. and Vidal, A. (2001), Building Community Capacity, Aldine Transaction, New Brunswick, NJ. Chen, S. and Ravallion, M. (2001), How did the worlds poorest fare in the 1990s? Review of income and wealth, Review of Income and Wealth, Vol. 47 No. 3, pp. 283-300. Chesbrough, H. (2007), Business model innovation: its not just about technology anymore, Strategy & Leadership, Vol. 35 No. 6, pp. 12-17. Dahan, N.M., Doh, J.P., Oetzel, J. and Yaziji, M. (2010), Corporate-NGO collaboration: co-creating new business models for developing markets, Long Range Planning, Vol. 43 Nos 2-3, pp. 326-42. Gangolli, L.V., Duggal, R. and Shukla, A. (2005), Review of Healthcare in India, Centre for Enquiry into Health and Allied Themes, available at: www.cehat.org/publications/PDf%20les/r51.pdf (accessed April 28, 2012). Hamel, G. (2000), Leading the Revolution, Harvard Business Press, Boston, MA. Hammond, A., Kramer, W.J., Tran, J. and Katz, R. (2007), The next 4 billion market size and business strategy at the base of the pyramid, World Resources Institute, Washington DC, available at: www.wri. org/publication/the-next-4-billion (accessed April 26, 2012). Hart, S.L. and London, T. (2005), Developing native capability: what multinational corporations can learn from the base of the pyramid, Stanford Social Innovation Review, Vol. 3 No. 2, pp. 28-33. Hart, S.L. and Miles, M.B. (1994), Data management and analysis methods, in Denzin, N.K. and Lincoln, Y.S. (Eds), Handbook of Qualitative Research, Sage Publications, Lomdon. Hart, S.L. and Milstein, M.B. (2003), Creating sustainable value, Academy of Management Executive, Vol. 17 No. 2, pp. 56-69. Hart, S.L. and Sharma, S. (2004), Engaging fringe stakeholders for competitive imagination, Academy of Management Executive, Vol. 18 No. 1, pp. 7-18. Haub, C. and Sharma, O.P. (2010), What is poverty really? The case of India, available at: http://www. prb.org/Articles/2010/indiapoverty.aspx (accessed January 26, 2012). IBEF (2011), available at: www.ibef.org/industry/healthcare.aspx (accessed April 26, 2012).

PAGE 528 CORPORATE GOVERNANCE VOL. 12 NO. 4 2012

International Trade Administration (n.d.), Healthcare indicators, available at: www.ita.doc.gov/td/ health/india_indicators05.pdf (accessed January 30, 2012). Karnani, A. (2007), Mirage of marketing to the bottom of the pyramid: how the private sector can help alleviate poverty, California Management Review, Vol. 49 No. 4, pp. 90-111. Karnani, A. (2011), Fighting Poverty Together: Rethinking Strategies for Business, Governments, and Civil Society to Reduce Poverty, Palgrave Macmillan, New York, NY. Kasturi Rangan, V. and Thulasiraj, R.D. (2007), Making sight affordable innovations case narrative: the Aravind eye care system, Innovations: Technology, Governance, Globalization, Vol. 2 No. 4, pp. 35-49. Kothandaraman, P. and Mookerjee, S. (2007), Healthcare for all: Narayana Hrudayalaya, Bangalore, GIM Case Study No. B098, UNDP, New York, NY, available at: http://growinginclusivemarkets.org/ media/cases/India_Narayana_2008.pdf (accessed April 26, 2012). Krishnadas, N. (2011), LifeSpring hospitals: a social innovation in India healthcare, Emerald Emerging Markets Case Studies, Vol. 1 No. 1, pp. 1-14. Landrum, N.E. (2007), Advancing the base of the pyramid debate, Strategic Management Review, Vol. 1 No. 1, pp. 1-12. Linder, J. and Cantrell, S. (2000), Changing Business Models: Surveying the Landscape, Accenture Institute for Strategic Change, London. London, T. (2008), The base-of-the-pyramid perspective: a new approach to poverty alleviation, in Solomon, G.T. (Ed.), Proceedings of the Academy of Management Meeting. London, T. and Hart, S.L. (2004), Reinventing strategies for emerging markets: beyond the transnational model, Journal of International Business Studies, Vol. 35 No. 5, pp. 350-70. Mair, J. and Marti, I. (2006), Social entrepreneurship research: a source of explanation, prediction, and delight, Journal of World Business, Vol. 41, pp. 36-44. Miller, D. (1996), Commentary: The embeddedness of corporate strategy: isomorphism vs differentiation, in Baum, J.A.C. and Dutton, J.E. (Eds), Advances in Strategic Management, JAI Press, Greenwich, CT. Mitchell, D. and Coles, C. (2004a), Business model innovation breakthrough moves, Journal of Business Strategy, Vol. 25 No. 1, pp. 16-26. Mitchell, D. and Coles, C. (2004b), Establishing a continuing business model innovation process, Journal of Business Strategy, Vol. 25 No. 3, pp. 39-49. Morris, M., Schindehutte, M. and Allen, J. (2005), The entrepreneurs business model: toward a unied perspective, Journal of Business Research, Vol. 58, pp. 726-35. Mukherji, S. (2010), Vaatsalya hospitals: affordable healthcare in proximity, GIM Case Study No. B098, UNDP, New York, available at: http://growinginclusivemarkets.org/media/cases/India_Vaatsalya_2011. pdf (accessed April 26, 2012). Osterwalder, A. and Pigneur, Y. (2010), Business Model Generation, John Wiley & Sons, Hoboken, NJ. Porter, M.E. and Kramer, M.R. (2011), Creating Shared Value How to Reinvent Capitalism and Unleash a Wave of Innovation and Growth, Harvard Business School, Boston, MA. Prahalad, C.K. (2004), The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Prots, Pearson Education, Upper Saddle River, NJ. Prahalad, C.K. and Hammond, A. (2002), Serving the worlds poor, protably, Harvard Business Review, Vol. 80 No. 9, pp. 48-57. Prahalad, C.K. and Hart, S.L. (2002), The fortune at the bottom of the pyramid, Strategy Business, Vol. 26, January, pp. 54-67. Prahalad, C.K. and Mashelkar, R.A. (2010), Innovations Holy Grail, Harvard Business Review, July-August, pp. 116-26. PWC (2007), Healthcare in India emerging market report, available at: http://www.pwc.com/en_GX/ gx/healthcare/pdf/emerging-market-report-hc-in-india.pdf (accessed April 28, 2012). Schumpeter, J.A. (1934), The Theory of Economic Development an Inquiry into Prots, Capital, Credit, Interest, and the Business Cycle, Oxford University Press, Oxford.

VOL. 12 NO. 4 2012 CORPORATE GOVERNANCE PAGE 529

Seelos, C. and Mair, J. (2005), Social entrepreneurship: creating new business models to serve the poor, Business Horizons, Vol. 48 No. 3, pp. 241-6. Shafer, S.M., Smith, H.J. and Linder, J.C. (2005), The power of business models, Business Horizons, Vol. 48 No. 3, pp. 199-207. Shukla, S. and Bairiganjan, S. (2011), The Base of Pyramid Distribution Challenge: Evaluating Alternate Distribution Models of Energy Products for Rural Base of Pyramid in India, IFMR-CDF Report, IFMR-CDF, Chennai. Simanis, E. and Hart, S.L. (2009), Innovation from the inside out, MIT Sloan Management Review, Vol. 50 No. 4, pp. 77-86. Teece, D.J. (2010), Business models, business strategy and innovation, Long Range Planning, Vol. 43 Nos 2-3, pp. 172-94. Timmers, P. (1998), Business models for electronic markets, Electronic Markets, Vol. 8 No. 2, pp. 3-8. UNICEF (2009), available at: www.unicef.org/infobycountry/india_statistics.html (accessed April 26, 2012). Viswanathan, M., Seth, A., Gau, R. and Chaturvedi, A. (2007), Doing well by doing good: pursuing commercial success by internalizing social good in subsistence markets, Best Paper Proceedings of the Annual Meeting of the Academy of Management, Philadelphia, USA. WDI (2008), Health, available at: http://data.worldbank.org/topic/health (accessed April 28, 2012). WHO (2010), available at: www.who.int/gho/en/ (accessed April 28, 2012). Yin, R.K. (1981), The case study crisis: some answers, Administrative Science Quarterly, Vol. 26 No. 1, pp. 58-65. Yin, R.K. (2009), Case Study Research: Design and Methods, 4th ed., Sage Publications, Beverly Hills, CA. Yunus, M., Moingeon, B. and Lehmann-Ortega, L. (2010), Building social business models: lessons from the Grameen experience, Long Range Planning, Vol. 43 Nos 2-3, pp. 308-25.

Further reading
Miles, M.B. and Huberman, A.M. (1994), Data management and analysis methods, in Denzin, N.K. and Lincoln, Y.S. (Eds), Handbook of Qualitative Research, Sage Publications, London. Sanchez, P. and Ricart, J.E. (2010), Business model innovation and sources of value creation in low-income markets, European Management Review, Vol. 7 No. 3, pp. 138-54. Srinivasan, S. (2002), Disease burden in India, public health infrastructure: what we need and what we have, NCMH Paper, NCMH, New Delhi.

Appendix 1
Table AI BoP healthcare services providers in India scenario
Aravind Eyecare Scenario As per WHO (2010), 285 million people who are visually impaired worldwide, which includes 39 million as blind and 246 million people having low vision. About 90 percent of the worlds visually impaired live in developing countries. About 80 percent of all visual impairment can be avoided or cured Narayana Hrudayalaya India needs 2.5 million heart surgeries per year whereas all the hospitals in India, together perform around 80k-90k surgeries per year. There is a huge demand-supply gap. Another issue is the huge cost of heart surgery, which is unaffordable for the majority of the population in India Vaatsalya 70 percent of India is living in semi-urban and rural areas while 80 percent of Indias healthcare facilities are located in urban (Tier I) areas. This large gap in demand-supply requires focus on increasing availability of primary and secondary healthcare in rural and semi-urban areas LifeSpring Hospitals As per WDI (2008), India has a maternal mortality of 450 (per 100k live births) and infant mortality of 57 (per 1k live births). Only 43 percent of Indian women are cared for by a skilled attendant during birth and more than 100k women die every year from pregnancy-related causes. Health insurance, especially for the poor, is virtually nonexistent

PAGE 530 CORPORATE GOVERNANCE VOL. 12 NO. 4 2012

Appendix 2
Table AII BoP healthcare service providers in India overview
Aravind Eyecare Year of setup Founder/managed by Business model philosophy 1976 Dr G. Venkataswamy Assembly line (value creation); no-frills hub-n-spoke (outreach); hybrid (multi-tiered pricing and cross-subsidization) revenues V: Eradicates needless blindness in India Narayana Hrudayalaya 2001 Dr Devi Prasad Shetty No-frills hub-n-spoke (outreach); hybrid (multi-tiered pricing and cross-subsidization) revenues V: Affordable quality healthcare for the masses worldwide M: A dream to making quality healthcare accessible to the masses worldwide Provide primary, secondary and tertiary care for all India (mainly Kamataka) Consumers, employees Depends on paying capacity The Economist (2011), Schwab Foundation (2005), E&Y (2003) Vaatsalya 2004 Dr A. Naik/Dr V. Hiremath No-frills hub (outreach) LifeSpring Hospitals 2005 Dr Anant Kumar No-frills hub (outreach)

Vision/mission

Issue addressed

Treatment for needless blindness for all India (mainly Tamil Nadu) Consumers, employees Depends on paying capacity Conrad (2010), Gates Award (2008), Antonio Champalimaud Vision Award (2007)

Outreach BoP engagement Price challenge Awards

To set up an ecosystem of providing for affordable and high-quality primary and secondary healthcare services in rural and semi-urban areas Provide primary and secondary healthcare in rural and semi-urban areas India (mainly Kamataka and Andhra Pradesh) Consumers, employees @15 percent-20 percent ` -vis other cost vis-a hospitals Sankalp (2009), LRAMP (2008), BiD Challenge (2007)

M: To be the leading healthcare provider delivering high-quality, affordable core maternal healthcare to low-income mothers across India Provide maternal healthcare to low-income segment India (mainly Andhra Pradesh) Consumers, employees @30 percent-50 percent cheaper than other hospitals World Business Development Awards (2010), Frost & Sullivan Award, ETNow award

Appendix 3
Table AIII BoP healthcare service providers in India outreach socio-economic impact
Aravind Eyecare Year 2010-2011 Eye hospitals (8), vision centers (40), community clinics (7), PG and research institutes, AuroLab, LAICO Productivity 2k surgeries per surgeon per year, 10-12 min. per surgery (10x) Economic Year 2010-2011 impact 70:30: Free:Paying; . 30 percent margins Capacity Narayana Hrudayalaya Year 2008 12 hospitals, 1,000 beds, tele-medicine network, 24 OTs 30 major heart surgeries/day Year 2008 Revenues: individuals (68 percent), corporate (22 percent), philanthropic funds (9 percent), margins: 22 percent (EBIDTA) Year 2008 35k surgeries, 70k catheterization, benet ($2.5 million) Tele-medicine (30k consultation, 144k ECG image, 33k angiogram) Micro-insurance (1.8 million farmers by 2006) Skill building (19 PG courses for nurses and doctors) Year 2012E Revenues: INR 1,378 million Net prots: INR 47.9 million Revenues: each setup gets protable in two years Vaatsalya Year 2012E 14 hospitals (45-50 beds each), 800 beds, 14k employees LifeSpring Hospitals Year 2011 12 hospitals (25-30 beds each)

Social impact

Year 2010-2011 AEH (2.6 million consultations, 0.3 million surgeries) 2,600 camps (0.7 million screened, 76k surgeries) Training (6,500 candidates from 94 countries) Aurolab (7.8 percent global share, 120 countries) Eye bank (procured 4,300 eyes) LAICO (consulting to 280 hospitals)

Year 2009 No. of patients covered (175,000) Access to affordable (@15 percent costs) healthcare

Year 2011 200,000 customers, 12,000 babies delivered Awareness via community outreach programs Affordable (services cheaper by at least 30-50 percent vs private clinics/hospitals) Customer focus LifeSpring CARES

VOL. 12 NO. 4 2012 CORPORATE GOVERNANCE PAGE 531

Appendix 4
Table AIV BoP healthcare service providers in India key attributes
Aravind Eyecare Value offering Enable access to high quality and affordable eye care for needless blindness for all, irrespective of the paying capacity Narayana Hrudayalaya Vaatsalya Enable access to affordable and high quality primary and secondary care for mid and low income population in semi-urban and rural areas Focus on primary and secondary, health care needs Dynamic leadership having belief in rapid scale based expansion Rely on funding partners (equity, loan, grants) Focus on 4As* and price-minus Pay-for-service model Focus on technology, innovation and scale Accessibility by choice of strategic locations for maximum outreach Doctor-centric model break-even (12-18 months), capacity utilization (. 80 percent) Affordability ongoing focus on productivity, standardization and cost of innovation across the value-chain Focus on scale-up and scale-out Transition from hub-n-spoke (hospitals-daycare-clinics) to hub model (50 bed hospital) to differentiate from government setups and private clinics LifeSpring Hospitals Enable access to affordable and high quality maternal care and pediatrics for low-income mothers in urban slums Focused maternal care Dynamic leadership having belief in rapid scale-based expansion Rely on funding partners (JV with Acumen Fund) Focus on 4As* and price-minus Pay-for-service model Focus on process-driven model (standardized across 180 processes) ensuring ease in scaling up Accessible choice of locations closer to urban slums Awareness community outreach programs Affordability ongoing focus on productivity, standardization and cost innovation across the value chain

Enable access to affordable and high quality primary, secondary and tertiary healthcare with specialization in cardiac care for all, irrespective of the paying capacity Diversify primary, Key Focused eye care needs secondary, tertiary health care operating Dynamic leadership having needs principles belief in experimentation and Dynamic leadership having cost-based innovation belief in technology-driven Rely on self-funding innovation Focus on 4As* and Rely on funding partners price-minus (equity, loan, grants) Hybrid revenue model free Focus on 4As* and and paying patients price-minus Focus on innovation, Hybrid revenue model free experimentation and and paying patients learning-by-doing Focus on technology, Accessibility eye hospitals innovation and (hubs) supported by spokes experimentation as vision care centers and Accessibility mobile community camps. Mobile outreach vans, tele-medicine outreach van and ICT for network (CCUs, integrating hub-n-spokes tele-consultation), ICT and Skilled staff eco-system video-conferencing access, being set up to identify and e-image conversion software train locals as nurses Affordability ongoing focus Skilled staff eco-system being set up to identify, train on productivity, locals as nurses standardization and cost of Affordability ongoing focus innovation across the on productivity, value-chain standardization and cost of Backward and forward innovation across the integration into eye care products and consulting setup value-chain Low cost, cross-subsidized Focus on volume-based scalability within eye care only and micro-insurance (Yeshaswini and Arogya Raksha) for the poor sections Focus on scale-up and scale-out

Appendix 5
Table AV BoP healthcare service providers in India areas of future consideration
Aravind Eyecare Areas of Belief in philosophy of future expansion by self-funding Centralized decision-making. This inhibits the scalability and diversication Eye camps could reach 7-10 percent of the needy population Retention of core resources skilled doctors and paramedical staff How to undertake geographic expansion? Narayana Hrudayalaya Government support for nancial incentives, tax subsidies, resources for medical training centers, or public land for constructing newer medical facilities Lack of adequate number of skilled manpower Need for micro-insurance coverage and government recognition of private sector for availing government healthcare schemes Funds for expansion How to undertake geographic expansion? Vaatsalya Prices are still unaffordable for the poorest of the poor the bottom 30 percent Retention of core resources skilled doctors and paramedical staff Lack of nancial and insurance tie-ups to help economically weak patients Lack of government support like RSBY health insurance scheme for private treatment Lack of nanicial viability of extending the portfolio of services like dialysis How to undertake geographic expansion? LifeSpring Hospitals Lack of adequate pool of skilled manpower Decision to scale-up or scale-out Availability and choice of funds for expansion How to undertake geographic expansion? How to reach the extreme poor, who are unable to pay?

PAGE 532 CORPORATE GOVERNANCE VOL. 12 NO. 4 2012

About the authors


Dr Mark Esposito is an Associate Professor of Business and Society in the Department of People, Organizations and Society at Grenoble School of Management in France and has been a member of the faculty at Harvard University since 2011. He is the founding Director of the Lab-Center for Competitiveness, a think-tank afliated with the microeconomics of competitiveness network at Harvard Business School, which studies competitiveness as a bottom-up approach towards the creation of equality in society. Through the Lab-Center, Professor Esposito has worked extensively on the topics of the creation of prosperity and sustainable business practices. He is a fellow of the Center for Business and Sustainability at Ashridge Business School as well as a member of the visiting faculty for the University of Cambridge Masters in Sustainable Leadership. He is the author and co-author of eight books and more than 20 published case studies, and is a regular guest editor for academic journals. His academic work appears regularly in Academy of Management, as well as in Harvard Business Review. Mark Esposito is the corresponding author and can be contacted at: mark.esposito@grenoble-em.com Dr Amit Kapoor is a Professor of Strategy and Industrial Economics, Management Development Institute (MDI), Gurgaon, India. He is also an Honorary Chairman of Institute for Competitiveness, India and Afliate Faculty, Microeconomics of Competitiveness, Institute of Strategy and Competitiveness, Harvard Business School. He holds a PhD in Industrial Economics and Business Strategy and has received the ESSID Scholarship and MIT DCA Scholarship and Ruth Green Memorial Award. He is also a reviewer with Academy of Management and Case Research Journal. Prior to his appointment with MDI, Gurgaon, he was with IIM, Lucknow, the S.P. Jain Institute of Management and Research and has also been Chief Economist with Datamonitor plc. His research interest lies in the elds of enhancing competitiveness, competitive advantage and leveraging technology for success. He is the author of the India City Competitiveness Report and the India State Competitiveness Report. In addition he has written numerous cases, memos, reports, articles in academic journals and popular media publications. Sandeep Goyal is pursuing doctoral program in Strategic Management at the Management Development Institute (MDI), Gurgaon, India. He holds a MBA and a BE (Computer Science) and is a Techno-Management Consultant having over 14 years professional experience in the IT industry. He is certied in Six Sigma (Black Belt), PMP, USA and IT service management (ITSM). His research areas include understanding the design and implementation of business models, primarily at the base of the pyramid in emerging economies. His research has been published or accepted for publication in journals such as Strategic Management Review, International Journal of Trade and Global Markets, Journal of Competitiveness & Strategy, Research Journal of Economics and Business Studies and Emerald Emerging Case Studies. He has participated, submitted papers to and organized workshops in international conferences such as the IFCs Asia Competitiveness Forum (April, 2012), the JKPS Conference on Creativity & Innovation (February 2012) and the LKY School of Public Policy Conference (October 2011).

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints

VOL. 12 NO. 4 2012 CORPORATE GOVERNANCE PAGE 533