Where Is the BOP Health Care Fortune?
Research shows that healthcare social enterprises are segmenting the BOP and leaving the bottom 50 percent of consumers behind.
The bottom of the pyramid (BOP) is a big market; that’s its appeal. Its allure lies in its potential for social impact, new customers, and profits. But like any big market, it can—and indeed must—be segmented by social enterprises that seek to tap that potential. I saw this put into action first hand in our recent global study of healthcare social enterprises. The market is getting carved up, and early front-runners are accessing the easiest profits, not necessarily serving the highest need. I don’t believe this system is intrinsically a problem—quality healthcare services to any part of the BOP are innately valuable. However, market builders and funders must be clear about which segment of the BOP their activities are benefitting, and they should innovate to ensure that those at the very bottom do not get left behind.
An Indian impact investor broke it down for me as follows:
• 50 percent of the Indian BOP live on less than $2 a day.
• 40 percent earn between $2 to $4 per day.
• 10 percent earn more than $4 per day.
The majority of the new wave of social enterprises targets those who live on $2 or more per day. This leaves 50 percent of the market ignored, or at least underserved, by the current social enterprise ecosystem. In one sense, this bias is not a problem, as the much-lauded Lifespring Maternity Hospitals demonstrate. During the last 5 years, it has become “the largest chain of maternity hospitals in South India, treating more than 70,000 patients and delivering more than 7,000 healthy babies.” The hospitals’ price point is one-third of the private cost at 4,000 rupees (about $70) per delivery. Unit level profitability is achieved through a pioneering public-private partnership, innovative land and building lease agreements, and efficient usage of para-skilled labor. The model currently operates 25 hospitals, and its potential for greater economies of scale through planned expansion makes them an attractive prospect. In my opinion, Lifespring is an outstanding and groundbreaking social enterprise. It clearly selects a median BOP market and provides high-quality, essential services that were previously unaffordable to the BOP in the private sector. However, it remains fundamentally inaccessible for 50 percent of the BOP.
We encountered initiatives like this time and again throughout our research. The bottom of the BOP are more risk-averse, exhibit less health-seeking behaviors, require a lower price point for services, and are more dispersed, living in more rural areas that are unattractive to healthcare professionals. This is a tough market to serve, and consequently, fewer entrepreneurs try. It is natural for the social enterprise community to seek early successes, but I believe that this incentivises entrepreneurs to “cream off” the easier markets, drawing money and attention away from the more intractable problems in the sector. The enterprises that we did find at the bottom of the BOP—though limited in number—are exciting. Care Hospitals and the Byrraju Foundation are working to make their network clinics in 220 villages financially sustainable through a complex layering of services, including primary care, chronic care, point-of-care tests, micro-insurance programs, diagnostics, and tele-health. Experimenting with and managing this complexity takes time and money that is unlikely to meet conventional impact investing schedules or target returns.
I would like to see more collaboration between grant funders and social enterprise proponents to enable risk-taking in more challenging markets. Without this, natural standard incentives will reduce the potential of social enterprise models to reach those who need it most.
This article is the second post focusing on insights gained from a collaborative project that sought to examine how the Developing Countries and Market Access team of the pharmaceutical giant GlaxoSmithKline (GSK) could catalyze the replication of healthcare delivery models that have significant social impact, and simultaneously build markets and drive social change. The project was delivered by the International Centre for Social Franchising (ICSF), in partnership with Oxford University’s Said Business School. For background on the methodology of the project, read my previous Stanford Social Innovation Review blog post, “Big Business and Healthcare: It’s Not About the Money,” and the newly released public report on the research.