DR C K PRAHALAD, PROFESSOR OF COPROATE STRATEGY, UNIVERSITY OF MICHIGAN, USA

Talk Organised By Dr Mohan’s Diabetes Specialities Centre & Madras Management Association. Synopsis of the talk contributed by Ms Sudha Umashanker, Freelance Journalist & Social Activist.

It was vintage C K Prahalad. Brilliant, insightful, refreshingly original and what’s more convincingly argued and forcefully delivered. He asked questions, provoked and stimulated thought, gave us a glimpse of what the future holds and indicated how it should be. Not for nothing has he been acclaimed as a management guru.
Delivering the Dr Anji Reddy Gold Medal Oration award at Hotel Taj Coromandel he held the audience spell bound.
If anyone in the audience wondered why Dr Mohan’s Diabetes Specialities Centre and Madras Management Association was honouring a Management guru he had a revelation .Prof Prahalad disclosed that as a young MBA student he spent a lot of time at the Vellore Medical Hospital trying to apply management principles.
When he went to Harvard his first book was on health care not on Corporate Strategy - he co authored the first book on health care finance and health technology in the US_ a case book with theory behind it. We were the first to look at complicated procedures like kidney dialysis to understand the economics of it. Then I realized it was too restrictive because the reimbursement mechanism was so complex, and I switched to the other extreme and started looking at multinational companies.” Hence his fondness for health care.
Taking a look at how India could be in the forefront of health care even though the picture of health care in India is complex and very very poorly managed he said “We learn by looking at success stories not by debating failures “
Setting the global context and showing how we could create innovations in India by looking at constraints as opportunities he pointed out that there’s a lot of discussion about benchmarking best practices. “It’s a good start but if we all benchmark best practices we will all start gravitating towards mediocrity.
Next practice is what the game all about . I would prefer to be the benchmark company or benchmark institution rather than benchmark some one else .That means we are following someone else’s idea instead of coming up with our own.”
According to him if innovation does not create value it cannot be entertained. The innovation debate and value creation debate were one and the same thing.
One needed to have a perspective not about whether innovation is good or not but in the process of innovation and the changes that needed to be made in one’s firm or institution in which context a global perspective was important.
Secondly he also underscored the fact that one can never create the future if one stands where one is today and looks into the future.
“If you want to create the future you must develop a point of view on how the world can be. If you cannot imagine an India that is different you cannot create it and therefore my focus is going to be India as it can be, not as it is”
Talking about the impact of science on critical businesses, he stressed upon the need to ask important questions and come up with different answers. “We need to think of what business are likely to be created and if this process of creation of new opportunities be matched and how the process of innovation would change because of the time, space and other considerations.“
Turning the spotlight on the strides made by science he noted that science had become extremely specialized today.
“The major opportunities and problems science can address today are ageing, climate change and chronic disease.
That will change the economic models in traditional industries like in insurance. Just imagine what would happen if every body lives to be 110. What will happen to our actuary tables? How do we deal with that?
What will change in the way we provide food for people. I may still want to eat my kebabs. But at 110 you better have it predigested. Its no different from food that we give children. The interesting question for me is why is nobody in the food business thinking about aging and food.”
The challenge he pointed out was to take highly specialized knowledge, think of broad global opportunities and understand the economic models-Scientific discoveries are also increasingly focusing on a very narrow field of specialization. (for eg. there are more than 3000 journals only on brain studies, and about 1000 journals dealing with diabetes in its broadest sense) and becoming geographically dispersed. “There was a time when the US was the premier research community and to some extent Europe.
Today Japan and South Korea are catching up. China in many areas is next to US only in scientific research and not as we all think not in cheap labour. If you look at nano technology they are probably better equipped to write a paper than any other country except US. So I think we have a lot of catching up to do. Singapore our neighbor is doing a phenomenal job. India will get there and in some areas is already there. Its not just about R&D spend, or about the number of scientists or the number of patents-its about understanding how to build something together
So there’s intellectual diversity and geographical diversity that means you cannot sit here in India and say we know all the answers - The question is how do we create the capacity to tap into the knowledge that is around the world.”
Whether its ageing , climate change or chronic disease management, commercial value is created only when you put things that are different together - and harmonize multiple specialties to create commercially viable solutions., he explained
Citing the example of aging he said it is not one discipline but a composite “What are the sciences that are required? Do I need to worry about brain studies if I want to understand human cognition and memory and motor skills? The answer is yes. Do I need to understand genetics if I want to understand what’s likely to happen? - the answer is yes. Do I need to understand sociology, and the family structure and context? (the role of the family and community can be quite critical for keeping people active mentally and emotionally and in ensuring a healthy life style and diet).
Do I need to understand large scale data bases to understand what is happening to and make comparisons with the cohorts? How do I look at a large number of people and understand whether I am normal or not, whether the progress of the disease is normal?
How do I do statistical modeling and math modeling to understand what is likely to happen not what has happened and finally how do you bring about new material and nano technology to repair problems.
I think it’s a challenge not necessarily being world class in any one area but in stitching together an ideal portfolio“. That was the first paradox.
Moving on to innovation paradox No 2 and taking brain studies he pointed out that all of us are born with the same brain but differ in terms of personality because of the way in which brain gets connected in the first year –thanks to the stimuli and interactions .Arguing that the mind is a personalization of the brain he observed that with nano technology one could, design a personal structure which is unique and personalized for everyone. “So I can look at my genetic make up and start looking at nanostructure to repair my bones rather than something else.”- The technology being available in the lab.
“The most interesting thing is that people can’t think about the mathematical skills that are required for targeting behavior of one person at a time that’s what Google does , that’s what Amazon does in a very primitive fashion. We should be able to do it even far better. We need to focus on the centrality of the individual and create nano technology of the personalized experience part of the brain“. Studying investment patterns in a technology area like Nano the work he said is already global and not confined to the USA.
“Today IBM thinks collaboration and co creation is critical for them to reduce time , cost etc Fifteen years ago I wouldn’t have believed IBM would do anything outside their own company.”
He also drew the attention of the audience to the fact that Indian pharma is becoming an integral part of the global pharma network. Hence the need to collaborate and create world wide pharma capability and the criticality of collaboration including the pooling of resources. Problems such as sustainability, global warming and the future of energy were to him all obvious problems -past national boundaries for which solutions existed.
“Water is a big problem already in Madras, how long can we go on? Its all about governance, its all about planning.
There is a disconnect between opportunities on one side and how managers think.
In the area of diabetes too we have gone from mass customization to personalized association and the emergence of nodal firms. So the patient can use any channel for eg if he gets into the clinic he should be able to get information about the disease on the phone, on SMS, while on the web. Think about it”
In his view India provided an ideal market for innovation. ”Take any disease and you have a large market. Scalability, universal access,remote diagnostics, remote delivery, leveraging of resources, affordability (cutting the cost to 1/50th of what it is in the US at a minimum or may be 1/100th), new price performance levels and innovating the process of delivery (you can’t treat the patient for 8 days ask for 4 visits) were all key issues as was world class quality.
“Price – Profit must equal cost. Not cost + profit = price. Remember western models will not work here. Always start small, learn fast, build a new business model and scale rapidly. Let learning be investment and not investment be learning.
We know how to innovate if we focus on ordinary people. When you focus on the top of the pyramid you imitate the west.
All innovations I am very proud of, have come by looking at ordinary people so let us not forget that is our strength not our weakness.” he advised
Urging that one had to start with constraints-you cannot have innovation without constraints. He said if one looked at complexity and risk the Jaipur foot in prosthetics is not complicated compared to heart surgery.
“If your leg does not work you‘re not going to die But if you mess up cardiac care people can die. We have made fundamental innovations from low in prosthetics to extremely high in cardiac care-The Jaipur foot is the largest in the world in prosthetics- 60,000 per year and the quality is as good as in the United States. The quality of eye care at Aravind Eye hospital in Madurai pre and post surgery is as good as in the UK.
In paediatric cardiac care too, Narayana Hrudayalaya which does 7500 surgeries annually is as good as hospitals in New York state or even better in terms of quality” he revealed. In terms of cost in the case of the Jaipur foot it is given free and in the case of eye surgeries it could vary depending on the room accommodation provided (however 60% of patients are treated free of cost). With Cardiac surgery if you are lucky in the US it is $5000. It can go upto $10000. Its a complication based pricing not a fixed pricing. Indian hospitals charge between $4000 to $5000. (Narayana Hrudayalaya has a fixed price of $1500) so what are the common threats here – it takes a sand box to have made many innovations in work flow, in pricing in volumes in terms of patient acquisitions. Eye camps in Aravind being a case in point ie finding out who the patient can be rather than waiting for them to come to the hospital etc.”
Comparing the West and India he noted “We are a credentials oriented society not skill oriented. We don’t respect skill as much as credentials. It is the system that produces quality not the individuals. That is a huge difference between what happens in the rest of the world and here “Thankfully at Narayana Hrudayalaya he elaborated that they have taken a complex integrated task like the entire process of surgery from admitting the patient to all the way post care, desegregated the task into specific skills, focused on specific skill building and used people with low credentials with intense training for eg high school graduates are trained to read echo cardiograms and that’s all they do all day ,and people with medium level of formal training and intensive specialization a BSc for eg. (Some body running a heart lung machine or getting the blood sorted out may be just a BSc.) for many of the tasks-High level of formal training for the surgeons is mandatory but intense specialization is common across all of them and a protocol has been developed for co- ordination.
“The surgeon is important but not critical and volume is very important to get all the skill based training. Finally beliefs and values are very important and that’s what they have done- that is phase one.
Going back to Diabetes he said diabetes may be a disease but you are not going to get rid of it and therefore you may just as well figure out how to live with it, whether its health care food, mobility, insurance, financial services.“ But just living is alone is not enough. If all the time somebody is telling you don’t do this or that at least you want to rebel. You have to do all that to be able to survive but you also want to have some fun. If I travel what do I do? Entertainment, connectivity, safety, community all that is also important. That means you have to break down all the traditional industry models. (one stop shops for all related complications are helpful)You also need extreme levels of compliance and life style management because it’s a silent killer. Life style diseases need effective management and compliance by individuals and cannot be done by others.”
Economic incentives can be a source of feedback to the individual which is what resulted in the concept of variable pricing for insurance which he was instrumental in pioneering “If you adopt the necessary lifestyle changes you reduce the risk and premium goes down. You must also get access to doctors, medication and testing, hospital networks, gyms across cities (so that people can’t say I don’t walk because I don’t have a place that’s convenient) etc. The focus has changed from illness to health. That is the innovation here. You still do insurance - if you have any episode of a disaster like a kidney transplant they will pay you for it. That’s not the issue -the issue is to reduce personal risk and improve personal health. But you can’t do it without a common and shared data base and analysis of targeting one person at a time, first the Indian then global consumer.”
Taking a peek at the future he said treatment capacities for cardiac care also need to be built. “If you are going to have 50 million diabetic patients you just do not have treatment capacities for any one of these in any region or certainly nationally.”
Excited about this innovation because it was the first time any where in the world that variable pricing on insurance was offered he said “don’t be surprised if this innovation moves faster around the world than even in India .This is the start of a new journey for us because if you can pull this off in diabetes for the next 2 or 3 years the next target is HIV .India is a source of innovation. For as long as I can remember we thought all innovations will come from the west. Its time for us to reverse the trend .So that is our challenge and that’s my hope” he concluded.
Earlier Dr V Mohan , Chairman and Chief Diabetologist, Dr Mohan’s Diabetes Specialities Centre read out the citation and Dr Ranjit Unnikrishnan Director and Diabetologist Dr Mohan’s Diabetes Specialities Centre welcomed the gathering.
The award was presented to Dr C K Prahalad by Mr C K Ranganathan, President Madras Management Association.
Dr K Anji Reddy of Dr Reddy’s laboratories offered his felicitations?