David Green, CEO Project Impact (PP 190, 10/12/2004)

David Green, CEO of Project Impact gave an inspiring talk on the provision of low-cost medical devices to the developing world. He has set up several sustaining businesses in developing countries. His efforts have (justifiably) netted much recognition, inclusing an Ashoka fellowship, Schwab Fellowship, and a recent MacArthur Genius Grant.

Although he has a basic medical/public health background (Bachelors and Masters of Public Health), his real expertise is in process refinement, both business processes and manufacturing. For example, he worked on the challenge of making cheap intra-ocular lenses (replacements for cataracts surgery). On the production side, his cost $4.50 compared to $100-200 for competitive lenses. The manufacturer, Aurolab, employs 400 people, and had net income of $2.2M on $4.4M in sales. By re-vamping the service process, the clinic that he helped was, with 6 opthamologists, treating more patients than a nearby hospital with 135. The Lions have sponsored this health care project; 75% of the clinics they sponsor are able to double their output and become profitable in Year 1. Green has similar successes in reducing the costs of hearing aids and sutures, though those projects are more recent, and haven't yet been rolled out at the same scale.

His central, repeatable lessons are:

• There's more money in the marketplace (from the patients themselves) than there ever will be from top-down donations.
  
• Multi-tier pricing means that those who are able to pay (generally self-selecting) subsidize those that receive cut-rate or free treatment. A typical example:
  
  
  • 47% are treated for free
    
  • 18% are treated at 2/3 actual costs
    
  • 35% are treated above cost
    
  The blended mix allows a small profit.
  
• Doctors are paid at the high-end of the market rate, retention is high
  
• Doctors also get the prestige of modern equipment, international partnerships, and typically more control (over personnel issues, financial issues) than they would at alternative positions
  
• Traditional medical suppliers ignore these markets:
  
  
  • Can get much higher margins in developed markets
    
  • Have come to rely on higher margins (higher cost structure)
    
  • Don't see the need to develop nascent markets
    
  • Are constrained to maximize ROI for shareholders
  
  
• The biggest challenge is finding a distribution partner (Project Impact is evaluating Grameen for the hearing aid project)
  
• Don't skimp on quality of service or technology. They have always gotten FDA or European equivalent, even when not necessary, to prove they aren't undercutting price at lower quality.
  

The 5 biggest challenges in starting a new venture:

1. Finding the right people to work with
   
2. Dealing with egos
   
3. Technical hurdles
   
4. Financing
   
5. Selling (esp. distribution)