Disruptive Innovations in Healthcare at the Bottom of the Pyramid Markets

Aditi Ramdorai

Disruptive Innovations in Healthcare at the Bottom of the Pyramid Markets

Companies are increasingly seeking growth in the Bottom of the Pyramid (BOP) -that is, the roughly 4 billion people living in low-income markets. Disruptive innovations, which significantly open up markets by introducing large populations of non-consumers to the product/service by making it more affordable, more convenient or easier to use have the potential to create growth at the BOP market.

lt has, however, been pointed out previously in literature that large established firms generally ignore or are incapable of introducing disruptive innovations. The key reasons for this is the existing resource allocation processes and senior executives' decision making process that favor ideas and innovations that cater to the companies' core and most profitable customers. To overcome this dilemma research proposes companies to spin-off their disruptive projects.

Several examples of disruptive innovations for the BOP exist in India, particularly in the healthcare sector. Low-cost, specialty hospital chains like Aravind Eye Care and Narayana Hrudayalaya that are specialized in certain procedures have managed to bring down the cost of care dramatically through process and business model innovations. Several examples of product innovations are also available. However, two cases stand out where companies have developed affordable products targeted at the BOP, namely the Indian conglomerate Tata with its low-cost water filter and the American healthcare giant GE Healthcare with its MACi ("i" stands for India) ECG machine and other products. These two cases are of large established players that have successfully launched disruptive innovations from within the organization.

The first part of this research explores the innovation capacity of the two low-cost specialty hospital chains in order to embed this frugal innovation phenomenon at the BOP into theory, by linking it with disruptive innovation theory. The second part of this research involves exploratory case studies of GE Healthcare and Tata in order to examine the organizational conditions that enable large companies to develop disruptive innovations. Secondary data, including company press releases, annual reports, and primary data in the form of interviews as well as internal company documentation have been analyzed.

A key element for an organization's long-term success is to be ambidextrous, i.e., capable of balancing exploration and exploitation. This study adopts the lens of ambidexterity on these organizations, which have successfully commercialized disruptive innovations from within. GE Healthcare has adopted formal organizational structures and resource allocation mechanisms to integrate the development of low cost products for the emerging markets within its organization. In contrast, Tata does not have any formal structures, but a senior executive who incubates disruptive projects for the BOP projects before integrating them into existing business units.

This work will leverage these two contrasting cases to explore organizational structures and senior leadership role in enabling disruptive innovations. Thus, this work contributes not only to the ongoing theory development on disruptive innovation, but also to organizational ambidexterity theory. Companies intending to develop disruptive innovations for the BOP markets can learn from these insights and build necessary organizational conditions, structures and processes.