Posted in Operations & IT Articles, Total Reads: 1220
, Published on 26 November 2013
Let’s begin by taking a hypothetical case.
Mr. Krishnan is a real estate sales man living in Hassan, Karnataka, approximately 100 km west of Bangalore. He extensively travels on his motorcycle for business. On one fateful day, Mr. Krishnan was seriously injured while trying to avoid an erratically driven tractor. The tractor driver fled and thirty minutes later, an auto-rickshaw driver arrived to Mr. Krishnan’s rescue and drove him to the nearest clinic. Although the clinic rendered basic first aid, hospitalization was necessary. This meant another 50 km travel to Hassan. The admitting doctor immediately prescribed for a CT scan. The CT scan was performed in less than 5 minutes and the doctors found severe internal bleeding of the brain. He was rendered emergency surgery but…it was too late.
Mr. Krishnan’s story happens on a daily basis in every city, town and village across India. A few, who find a nearby hospital with adequate facilities including a CT scanner, are diagnosed quickly, treated immediately and given the opportunity to recover well. Others are not so lucky. To them the access to life-saving healthcare facilities with equipment like CT scanners at this critical moment remains a distant dream.
Computed Tomography (CT) is like the Swiss army knife tool in radiology as it is used in a variety of clinical care areas from injury, trauma, stroke, cardio-vascular, GI, oncology to name a few. It is preferred for its ability to perform a scan within a few seconds, provide high quality and high resolution 3-dimensional images of cross-section of the body to allow doctors diagnose the problem quickly. India leads the world in the number of non-fatal injuries, occurrence of stroke and cardio-vascular disease, and with rising awareness a large incidence rate of cancer. CT is becoming a lifeline to diagnose and manage disease with such high prevalence.
The total CT market is estimated to be around $125MM with a total installed base of around 4000 scanners across India. Yearly volumes are estimated to be around 400 units. Access to CT scanners is lopsided, with 75% of the installed base serving less than 25% of the population. Patients in tier 2/ tier 3 cities typically get access to diagnostic services with imaging at ~20000 private diagnostic centre or small private hospitals. However, only a fraction of these facilities have CT scanners and charge an average price of INR 2000 per scan. As one of the leading suppliers in the CT scan market in India, GE has a strong brand image and its products are held in high regard by medical practitioners. GE offers a wide product portfolio with varying price points to attract customers. The typical product lifecycle is 3-4 years. For each product segment, vendors refresh their products every 3 years approximately with small enhancements along the way.
CT scanners allow clinics and hospitals to expand their service and also enhance their reputation within their market. However, viability and low patient load are the biggest barriers towards purchasing a CT despite the known benefits. They either refrain from investing in a CT due to the financial risk or purchase an old refurbished CT at a very low cost despite the limitations and lack of reliability. Customers in these markets are neither trained nor skilled enough to use CT scanners. The poor infrastructure and connectivity of these markets makes it difficult for both GE personnel and external engineers who are not readily available to service these markets. The ability to use GE equipment is critical for winning in this market and depends on the following parameters:
Ease of use & intuitiveness of operation
Parts & Service Delivery
Maintenance (regular maintenance and replacement of parts)
Logistics to serve the population in tier 2/3 towns
GE Healthcare provides transformational medical technologies and services that are shaping a new age of patient care. Our broad expertise in medical imaging and information technologies, medical diagnostics, patient monitoring systems, drug discovery, biopharmaceutical manufacturing technologies, performance improvement and performance solutions services help our customers to deliver better care to more people around the world at a lower cost. GE has a unique capability of providing wing to wing solutions including hospital equipment, software, lighting, financing and water purification.
GE Healthcare is basically structured around 2 pillars. A “Product organization”, that consists of Regional Product Managers who are sales specialists with deep product knowledge. They are organized based on the segment of CT products being offered by GE (premium CT, performance CT, Value CT for example).
The parallel pillar “Sales organization” is a direct sales force that extends from metros and tier II/III towns. This sales force provides reach and coverage across segments of customers and across regions pan India and handles multiple products based on needs of the segment they serve.
For a product like CT, our current reach goes down to tier II towns with the aim of going down to tier III and tier IV towns based on regional dynamics. In addition, GE Healthcare business in India also has a marketing team with functional marketing teams that cover business analytics, MarCom, pricing etc.
Although not perfect substitutes, diagnostic centres currently invest heavily higher in X-rays and Ultrasounds as they cost less, effectively increasing the ROI and lowering the BEP. There are 10x more ultrasounds & X-ray installations compared to CT scanners.
A key issue for the buyers is getting financing. The PSU banks typically operating in these areas have limited understanding of the product and thus securing funding is a challenge. Furthermore, while GE has a financing business, GE Capital, its footprint in Tier 2 -3 cities is limited.
To put it in a nutshell, GE Healthcare had to face the following problems in order to cater to Tier3 and Tier 4 cities:-
1) Viability of this plan as in these cities the patient load is considerably very less.
2) Customers are neither trained nor skilled to use CT scanners
3) Customers purchase old and refurbished CT scanners at a low cost inspite of lack of reliability.
4) Poor infrastructure and connectivity issues make it even more difficult for both GE personnel and engineers to provide after sales services.
5) CT scanners are also subject to regulation by Atomic Energy Regulatory Body.
6) Diagnostic centres are currently investing heavily in X rays and Ultrasound technologies as they cost less but these are not perfect substitutes to CT scanners.
7) CT scanners typically cost between 40 lakhs and 80 lakhs and it takes 3 to 4 years to breakeven as compared to ultrasound which costs 40,000 and takes 1 year.
8) Customers don’t get financial assistance. PSU banks do not understand the product and it becomes very difficult for them to finance. GE capital too has a very limited presence in these cities.
9) There are a lot of non-traditional competitors in this field.
GE started to tackle each problem one by one. The immediate objective was to create awareness and to install CT scanners in these cities. For this GE sales people visited several Tier 3 and Tier 4 cities and met the doctors and informed them of the several benefits of a CT scanner. As far as what the competitors like Seimens and Toshiba were offering, GE’s cost was high upfront but the cost of annual maintenance was pretty low and the replaceable parts were easily available. GE went for B2B marketing and convinced a lot of small and medium scale hospitals to purchase the CT scanners.
As far as financing was concerned, GE went for deferred credit capital offering system wherein it allowed the customers to pay back the amount in instalments with minimum interest rates applicable on them. This gave a huge impetus to the customers to buy their products. GE having its own financing institute called GE capital helped a lot in this cause.
All in all GE Healthcare could see a market that was untapped for a long time and considering the opportunities available it was a very good decision to enter in this segment. How much is GE going to make out of this is left to be seen but prima facie it seems GE has converted an evil into an opportunity to not only help its cause but also help people like Mr. Krishnan who lose their lives because of lack of proper treatment available on time.
This article is authored by Rahul Gupta from XLRI, who had a brief chance of working with M/s GE.
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