Changing the rules of the market with an impossible business model
You have the feeling that your organisation really has to do it differently, but have no idea yet how to do so. But the market compels you to change tack with your business model. Why do you not allow yourself to be inspired by companies that have a taken a fundamentally different approach? You can learn a great deal by doing precisely that.
Consider Aravind Eye Hospital in India, which performs eye operations at 5% of the cost, with a higher success rate compared to anywhere else in the world. The organisation is also highly profitable with a margin of around 40% even though only 50% of customers are charged a normal fee. Millions of people are now able to see again. How does Aravind make this happen?
Vision: impossible goals
The hospital’s founder, Dr. Venkataswamy (also known as Dr. V), had a vision: eliminate needless blindness in India. He opened a hospital with eleven beds but wanted more, namely to give one million people their sight back by 2015. He wished to offer the best-quality eye care and make this accessible to everyone, including poor people unable to afford it. And…, he wanted to be able to operate with financial independence without having to depend on donor funds, subsidies, sponsors, etc. But how do you achieve this in concrete terms? You must be creative if you impose such requirements upon yourself. These constitute the key elements of the business model used by Aravind Eye Hospital.
How much are you willing to pay?
Aravind’s target group comprises all needlessly blind people in India, be they wealthy or poor. Patients do not necessarily need to pay to have their sight restored. If they do choose to pay, they can choose from various packages ranging from 110 to 1000 dollars (lower than the 1,650 dollars charged in the USA). The extras patients receive are provided in the service, such as a more luxurious and spacious room, a more comfortable bed, greater privacy and a range of meals. But the ultimate value offered to all patients is: I can see again! This is coupled with a feeling of assurance as Aravind makes you feel at ease. Aravind’s friendly staff watch over patients continuously, make them feel comfortable, show them the way and are there for them.
Aravind has also focused extensively on efficiency. Surgeons spend all their time performing operations and making diagnoses. And these are not all kinds of tasks without any added value or that can be done by someone else. A surgeon can perform up to one hundred operations in a single day. All the other work is done by friendly nurses who take care of patients and make them feel at ease. They make patients feel safe by guiding them through all medical steps of the process in a compassionate and attentive manner. They help them navigate their way through the medical care labyrinth. The nurses, often from villages themselves, are highly dedicated and a source of support for patients. In the corridors you repeatedly hear elderly patients being addressed as ‘Paati’ and ‘Thatha’, which mean grandmother and grandfather respectively. Recruitment and selection is crucial in this case, which is why a match must exist between prospective staff and the Aravind culture. Every doctor and sister has been carefully selected for their role since the hospital was established. People applying for a nursing position do not necessarily require a diploma. Aravind organises its own training courses that people from around the world can participate in. Participants are happy to pay for this since they receive a high level of education.
Some costs even 50 times lower
They also examined the greatest cost items and reduced these drastically. Consider, for example, the lenses implanted during cataract operations. Instead of importing these at 150 dollars per lens, Aravind now manufactures them itself which means they are 50 times cheaper. Furthermore, Aravind uses these lenses in its own hospital and sells them to other parties for a profit. The result, once again, is a win-win situation.
Patients can simply walk into an Aravind hospital and do actually do so, queuing in front of the doors every day. But many who live too far away without any access to transport cannot get there, which is why Aravind also visits villages to find patients. Five to six eye camps are organised daily in smaller, more remote villages, occasionally screening up to eight hundred patients at a time. The organisation can reach people who live further away from the city without the financial means to travel to the hospital. Where possible, Aravind organises everything as close to the patient as possible in order to limit any obstacles. Patients at eye camps are screened in the morning and informed about the following steps immediately, such as taking measurements for a pair of glasses or an operation in one of the hospitals. If an operation is required, patients are taken to a hospital by bus the very same day. After the operation and recovery period, which takes around three days, they are transported back to the eye camp and collected by their family. The eye camps are also routine. One to three weeks before the eye camp is held, public announcements are made in stores, newspapers and pamphlets within the village and a 20-km radius. The eye camp is promoted by a sponsor and Aravind plays a supporting role. The sponsor pays all publicity costs as well as patients’ transportation and food. Aravind pays screening, operation and medical costs. Those in need of an operation are clustered per village and taken by bus to the hospital, making them feel safe and eliminating the need for someone to accompany them. They are returned to their village a few days later with their sight restored. That is how Aravind does it. Brilliant, don’t you think?
Three lessons for your business model
Aravind is located in India, of course, and not comparable with our situation. You could say that our world of care functions differently. A wonderful tale, but of no use to us. But that is unfair as Aravind can most certainly teach us lessons. What does Aravind teach us about brilliant and innovative business models? In any event, it imparts the following three lessons.
Vision: It starts with a vision, based on a strong and deep conviction about how it really should be done differently. Dr. V wanted to help alleviate blindness in India. His aim was to remain independent, provide the highest level of quality and also help poor people unable to afford such care. That was his starting point and motive. He bound himself to that and had to be creative and businesslike. What is my vision? How do I wish to help resolve social issues? What impossible goals do I set in this regard? These are the questions you can ask yourself.
Radical translation: Dr. V translated the vision into the Aravind business model using a radical, consistent and persistent approach. He did so up to the smallest details. This did not entail a single smart move or one brilliant idea, but the interplay of many different intervening elements. Examples include the admissions policy for people, the efficiency-focused approach, the attention to culture, the self-manufacture of implant lenses and the organisation of eye camps to attract new patients. All these elements can be traced back directly back to the vision, and are self-reinforcing. You can ask yourself the following questions in this regard. Which employees do I really need to make the vision a reality? What do I really have to focus on now to achieve the vision? How can I earn money with my marketing strategy?
Think in terms of value for all stakeholders: Dr. V thought not only think about profits nor was he an idealistic philanthropist who ‘wanted to do good things for people’. No, he thought in terms of value for all stakeholders. He sought opportunities that would help patients, make employees happy and generate money. This makes you a pioneer in the lives of people and allows you to change the rules of the market. A question you can ask yourself in relation to this is: how can I reduce my costs by 40% in a way that yields more for my customers and my staff? At first glance, this appears to be an impossible question, but what if it is possible?
With such a business model, entrepreneurship and leading a company become truly interesting, creative and challenging.