Everyone’s abuzz about the Tata Nano. The world’s cheapest car is taking India, and the world, by storm. It’s partly about the car and partly about the design and marketing process that led to this revolutionary vehicle. Leveraging the wundercar’s impending launch, Business Week (on March 18, 2009) asked the critical question in its eponymous article: What Can Tata’s Nano Teach Detroit? I immediately tried to leverage their question to your advantage – so I began to wonder about what the Nano can teach healthcare leaders.
What’s exciting about the Nano, according to Business Week, is that it turned auto design on its head. Instead of asking how to creatively shrink existing cars into smaller, cheaper versions Tata innovated the Nano by reverse engineering from the customer’s cost and functionality requirements to the solution. How refreshing.
Instead of deciding what the customer should have in mind, Tata went directly to the customer asking the right questions and making the important observations through the customers’ eyes: “What do your customers need? What do they really want? What can they afford? The customer was ever-present in the development of the Nano. Tata didn’t set the price of the Nano by calculating the cost of production and then adding a margin. Rather it set $2,500 as the price that it thought customers could pay and then worked back, with the help of partners willing to take on a challenge, to build a $2,500 car that would reward all involved with a small profit.”
Could this mean something for the design of some health care benefits and programs? Do we have it all wrong by beginning with an expert paradigm (albeit evidence and scientifically based) and engineering to what existing providers must earn and what employers and payors can afford? And then measuring patient satisfaction on the back end? Or could there be benefits in Tata-using the process at the front end?
Tata looked at motorcycles as the prototype for low-cost transportation. It reasoned that most Indian drivers ride motorcycles and already pay about $ 1,000 for a bike that carries only two people – extrapolating to what it would take to get basic family transportation they came up with a $2,500 target price for a car and designed the vehicle to that price. By beginning with what consumers believe they must have and the price they can pay (or already pay for out of pocket health-related costs) can we innovate insured offerings that have features they need at a cost they can afford?
“Back to the Future” Partnering
Tata’s other radical technique is really more of a “getting back to basics” supply chain approach. By effective partnering to get to the desired goal – as seen by the consumer. It used to be that manufacturers created specifications for parts or components to be used to produce products desired by the consumer within his budget. These were put them out to bid – the lowest bidder to meet specifications got the contract. This became the basis for valued partnerships between manufacturers and suppliers.
Tata brought this approach back by identifying partners (high-quality ones such as Bosch and Delphi) who were willing to go back to doing it the old way in the interest of developing a new market of loyal customers who could get what they want at a price they can afford. Tata and the suppliers put their heads together to get to the goal – albeit at a lower margin than they get in other activities. They will make it up in volume.
We have tried partnering, to some degree, between payors and preferred health care provider networks (providers being the suppliers in our system) as well as through employer-payor coalitions. But again, “solutions” are mostly built on discounting fees rather on stimulating the innovation of an offering that is more efficient and less costly. Providers hate it and aren’t exactly enthusiastic about building panels of patients paying discounted fees. Even “pay for performance” programs are largely built on meeting standards that come from scientists and professionals, not predominantly from consumers. These are generally good medical standards, but do they represent the right balance of what the patient believes we should be doing for the money?
So this makes me wonder if we are sufficiently engaging, challenging, and rewarding providers to innovate offerings that can be contracted and willingly delivered at affordable prices? The Business Week article quotes a senior partner at Boston Consulting Group on this issue: “Building partnerships with a limited number of suppliers and putting everyone in the same room to work through problems and make suggestions–that has enormous value, it’s very efficient.” I don’t think we do much of that.
We Are Not in India, Health Care is Not Auto Manufacturing
This commentary has been a bit whimsical. But only a bit. I’m really not a nut for democratization or socialization of medicine. But Tata may have something here that we have in short supply. Really designing health care with the customer, tailored to the customer, at the customer’s price point, and for the customer’s benefit.