Strategic thinking for developing markets
Cost pressures in the NHS and a crowded market make it essential for the UK's digital health providers to have a strategic view of developing markets with high growth opportunities. Having the right strategy for these markets will depend on each organisation's answers to key questions such as where, what, when how and who. Due to the complex nature of such markets, the winners will be those who are most daring, committed and have sound market knowledge.
In the past, UK-based digital health providers focused their activity on the NHS. More recently a combination of uncertain economic conditions and belt-tightening in the NHS has made the UK a much more challenging market. The outlook for the core part of the digital health market is also one of limited growth, as rates of adoption are high and the market is increasingly competitive.
While the UK appears less attractive, the situation is very different overseas. Many developing economies, for example, have earmarked major investments in e-health initiatives. For the UK's digital health community, these markets offer significant and largely untapped commercial opportunities. The combination of NHS bodies and providers, commercial suppliers and academic institutions has a strong global reputation for innovation in digital health aligned with the standing of the NHS. Common challenges around interconnected health records, assistive technology, and centralised demand and performance management make the UK's experience transferable and therefore highly valuable.
And yet, many of UK's best-known digital health providers are SMEs. For them, making a serious investment in developing markets can be a risky and daunting venture. If they do nothing, they are at risk of missing out on opportunities. If they do take action, they are in danger of wasting resources by adopting the wrong approach and eventually failing in their endeavour.
To enter and operate in developing markets, these organisations need to develop a strategy that answers the fundamental questions in business planning: where, what, how, when and who.
Determining the right level of demand for the product or service portfolio means taking into account the presence of a national strategy and specific digital health plans.
Saudi Arabia's national eHealth strategy and China's 35212 project are examples of governments setting clear goals and identifying areas of focus. While developing markets are associated with big numbers in terms of planned spend, the accessibility of opportunities and ease of doing business often counterbalance the big bucks. Given the complexities of these markets, professionally commissioned market research is therefore worth the investment.
In addition, lack of clear tendering processes in China and the country's emphasis on 'relationship selling' means opportunities are not quickly and easily accessible without the initial investment in building the required levels of trust and familiarity. Anecdotal evidence from both Saudi Arabia and China suggests that the US and other European countries have been successful through 'wooing' business in those countries.
The organisation and its proposition must be sufficiently localised to operate in a specific market. The most critical aspect to consider here is the business model. What works for the NHS is inevitably going to be very different from the typically unstructured health systems of emerging economies.
Revenue opportunities are likely to be very different, so comprehensive knowledge of these opportunities is necessary. For example, a self-care portal in the UK is likely to be funded by a government department (as in the case of NHS Direct in the UK) but, in India or China, it could be a subscription-based model where the patient pays.
To achieve product or solution localisation, you need to do more than just speak the local language. You also need sufficient cultural sensitivity and the technical ability to integrate with other systems within the wider health system, such as the national insurance IT system in China.
What should your market entry approach be? You should consider local partnerships, free-trade zones and working relationships with trade support bodies (such as UKTI).
Choosing a local partner with the best connections and synergy, and the least threat of becoming a competitor over the long term, could provide a credible local presence and introductions to buyers.
Intellectual property protection can be better addressed by taking proactive steps rather than depending on implied protection. Remember that some markets, such as China, do not recognise inherent IP rights.
"Political and economic risks must be assessed for those markets where digital health programmes are closely linked to elected governments."
Political and economic risks must be assessed for those markets where digital health programmes are closely linked to elected governments. For example, Brazil is heading into general elections in 2014. As a result, the country's expenditure on various digital health initiatives is likely to slow down. These initiatives may even be suspended for the time being.
Timing is important, not just from the perspective of what is going on in the market, but also from the organisation's perspective. Developing markets can require significant investment and organisational focus. Other corporate activity, such as mergers or acquisitions, must therefore be taken into account.
Identifying the right buying, influencing and partnering organisations may not be straightforward. While Saudi Arabia's Ministry of Health may be consolidated and powerful buyers of services, China and India are much more fragmented in this respect. In the case of China and India, relationships with different departments within provincial and state governments therefore need to be built over time, at considerable effort.
There is little doubt that the financial downside of getting a strategy wrong may be significant, but so is the potential reward of getting it right. Ultimately the choice of each organisation to engage or refrain from these markets may well reflect its desire to grow and its attitude towards risk. As it will undoubtedly turn out – who dares, wins.
1. Healthcare in China: Entering uncharted waters'", McKinsey & Company, July 2012,
2. GCC Healthcare: Growing investment opportunities for private sector players, Deloitte consulting, Spring 2012
3. World Bank stats - % of GDP spent on healthcare and current GDP in US$, 2013
4. UKTI market briefing on India, 2012
About the author:
Madhukar Bose is a healthcare IT expert at PA Consulting Group
Madhukar is currently advising UK Trade and Investment as a digital health specialist.
For more information visit, www.paconsulting.com/healthcare
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Closing thought: What considerations should you take before engaging with developing markets?