Monday, February 15, 2010

Market Failure in Global Health Technologies

New ideas for Benetech projects come to us from interesting people all the time. The challenges that people bring are rarely technology problems: they are market problems. One repeating theme came to me during a recent and fascinating meeting with Professor Rebecca Richards-Kortum, the Director of Rice 360, the Institute for Global Health Technologies.

Rebecca was looking for help with a familiar problem. Her students at Rice University have been busy inventing new tools and equipment for global health. Many universities do similar things, but Rice goes a key step further. Their students actually go into the field, work with local medical professionals, and learn their real problems, their real pain points. They design solutions in response to these pain points, and bring them back into the field for real-world feedback.

So far, so good. But, what happens after doctors in Africa rave about how successful this or that invention are in their hospital? How do you go from ten or twenty prototype units to scale?

And that's where things break down. The big vendors of medical gear that sell into the developed world have no practical interest in deploying products at a third, a fifth or a tenth of their current price points. The market isn't that elastic. So, the established players rebuff such approaches as being impractical. And, through the lens of a successful company, that rebuff makes perfect financial sense.

But, Rebecca passionately explained that this means that people die in the developing world all of the time from lack of medical gear (and medicine) that we take for granted in the rich world. Or, they don't have as successful medical outcomes that translate into poor health or disability.

I am convinced that there are many exciting social enterprises here. Ones that should make money in the long run, but may need a jump start. Clayton Christensen of Harvard in an article entitled Disruptive Innovation for Social Change has noted the need for disruptive innovations in health care. These "catalytic innovations" may not be quite as good as the status quo solutions, but are meeting an unmet need by virtue of being simpler and less costly.

There is a great deal of opportunity to help get more of these started. There are many brilliant people, both students and experienced professionals, who would love to do these kinds of products. The opportunity to transfer this kind of technology to enterprises in the developing world is also exciting, and one that I expect to see more and more. A Silicon Valley entrepreneur (or VC) can't afford to look at a $5 million revenue opportunity, but that is probably much more attractive to a Kenya entrepreneur. We just have to marshal some capital and know-how to lower the barriers to creating and distributing these products.

I am not yet convinced that this is something Benetech should do, though. Although our social enterprise skills are strong, our specialty has been social applications of information technology. These have the benefits of being purely virtual products, without the need to have inventory or warehouses. But, seeing a gaping social need for social enterprises to bridge this gap is tempting. Someone needs to fill that gap and save a lot of lives.

2 comments:

Toshi said...

Dear Jim,

We are co-founders of Kopernik, who came across your article, and thought you are spot on.

We are partnering with a number of technology providers who possess innovative and appropriate products in health and other areas for the developing countries. When speaking to over 40 of these technology providers, two common challenges emerged.

One is the distribution channel. While the technology providers have a few distribution channels, they face difficulty with expanding them, due to lack of access to other countries beyond where prototype is tested. The other is the price. However they tried to make it affordable, the products will still be way more expensive than the poor people living under 2 dollars a day could purchase.

These are the gap we are addressing at Kopernik. Kopernik showcases the innovative technologies designed for the poor on the site, and local NGOs will develop a proposal on how to use these technologies to serve their beneficiaries, and the proposals will be put on our site to get ‘crowd-funded’. As Kiva has demonstrated, collective power of small individual funds is large, and this will act as the ‘micro subsidies’ to lower the product price down, and make the products much more scalable.

Check out our site (www.thekopernik.org) when you have time!

Toshi/Ewa

Jim Fruchterman said...

Thanks, Toshi and Ewa. I agree with you that distribution is a huge problem. It will be interesting to see if your approach can make a dent in the distribution issues.