CK Prahalad: A unique combination of strategic vision and financial acumen

Wednesday, July 8, 2009

Renowned management thinker CK Prahalad has been watching Devi Shetty for the last six years now. Back then Narayana Hrudyalaya was still a relatively small facility. But even then Prahalad believed that the model held immense promise. “My job has always been to look at models that are different, models that are scalable. And it was clear to me, even at that time, while talking to him that this model is going to grow and he is going to be able to execute it because he is not only a very good visionary on what the world can be, but he is extremely good at making it happen,” says Prahalad. In 2004, Prahalad wrote about Shetty’s unique hospital model in his bestseller The Fortune at the Bottom of the Pyramid. In a free-wheeling interview, Prahalad explains why Devi Shetty’s model of healthcare stands out as unique. Excerpts:

Q. You have been an observer of Narayana Hrudyalaya for a long time now. What do you think makes this model unique?

I think there are 3-4 distinct features that define Devi Shetty’s ability to create something fundamentally different. One, I think he has a point of view on how to create world-class healthcare facilities for the poorest people of the world. Therefore, his entire healthcare model is based on reducing cost without sacrificing world-class quality. Essentially, the mortality rate in Narayana Hrudyalaya is much lower than in New York State for similar kinds of heart disease. So the first principle is having a deep conviction that you have to bring world-class (quality) at affordable prices to the poorest people in the world so that you get for the first time, the ability to provide world-class (healthcare). I think that’s the motivating principle. The second thing I think is the willingness to implement entirely different work processes. For example, somebody reading the echocardiogram (in Narayana Hrudyalaya) is someone who has just done high-school graduation or who has done just the first year of college.

In other words, it’s an orientation towards skill development rather than credentials. So you don’t have to be an MD. In other words, because of the large volumes of people, he is able to attract highly-specialised people who are oriented towards world-class skills, not necessarily world-class credentials. The third is the ability to mobilize very large human resources as well as financial resources. Because if you see how he is building enormous facilities, especially his Health City idea, that has 2-3 principles involved. One I think is enormous ability to leverage capital. So you have highly-centrallised specialized services like MRI, CAT scans, IT and so on. Second, he has highly specialized practitioners of not only cardiac care, but neurology, orthopaedics, etc. But in every one of them he has sufficient scale so that he can have people who specialize. So it’s not people who are general practitioners of surgery but who also do cardiac care plus something else, plus something else. Here the cardiac care folks do only cardiac care, and within that, only certain kinds of cardiac care.

But you cannot do that without enormous scale which I think what he has been able to generate.

Finally, I think (he has) the ability to look at the opportunity very differently. Rather than accept Western practices because they want to develop better than Western quality of medicine, so he has been able to change these practices. Those would be the major lessons to be learnt: that you can combine world-class quality, affordability and scale simultaneously. Therefore, it creates a fundamentally different economic model.

He gets large scale, economies of scale, creates enormous efficiencies in the supply chain – whether it is insurance for poor people through Yeshasvini, whether it is buying of sutures or buying CAT scanners and MRIs. He applies the same principles as Wal-Mart does and thus, makes it affordable to ordinary people.

Source: Forbes India (link opens in a new window)