GE has its finger on the Indian pulse, at last
he pride on Ashish Shah’s face is unmistakable as he opens a white carton lying on the conference room table. General manager for GE Healthcare’s Technology Organization in India, he pulls out a contraption — slightly bigger than a landline phone, but a lot less complicated with far fewer buttons. This is the world’s first ultra-portable electrocardiogram (ECG) machine.
The MAC 400, as it is called, has a lot riding on it for GE India. Two years ago, Shah and his team tried to figure out the average Indian customer’s propensity to pay for an ECG. “That was the wake-up call for a company like ours — the answer was only $1,” says Shah. Then they looked at the same question from another angle: What can the person providing the service afford to pay for the device? The answer: $700. This, when the average price point of ECG machines in the market was $2,000.
Image: Amit Verma
By then Shah had figured this much. The earlier approach of getting global products, defeaturing them and putting them out into the local market wouldn’t work. So with his team, he decided to start from scratch and build a product for Indian conditions. “For instance, villages don’t have power. So the device had to be battery operated and take at least 100 ECGs once charged.” It had to be lightweight and fit into a backpack. The user interface had to be simple. Taking costs out was the other challenge. The printer accounts for a big portion of the cost of an ECG machine. So the proprietary printer in the machine was replaced with what you find in buses to print tickets. Fifteen months down the line and investments of half a million dollars later, the MAC 400 was born.
The product was a hit globally. It sold close to 5,000 units in 50-plus countries across the world, including some in Europe — only 20 percent were sold in India. In China demand was so high, GE decided to manufacture it there. As we go to press, a newer version of the MAC 400 is ready to hit the market at a price point close to half that of its predecessor.
The success caught the attention of GE’s top brass. For the first time, GE’s annual report devoted two pages in the document to a single product. CEO Jeff Immelt teamed up with Vijay Govindarajan of Tuck School of Business at Dartmouth College and Chief Innovation Consultant at GE to write an article in the Harvard Business Review on how multinationals can use emerging markets for “reverse innovation”. Instead of making products in the developed world and adapting them for developing countries, create products in developing countries and take them to the developed world.
Gunning for the India Opportunity
GE’s intent to grow healthcare R&D in India was apparent in 2006, when Joe Hogan, then CEO of GE Healthcare, called Shah in the US. He wanted Shah to relocate to India and head the Healthcare Technology Organization. Shah was keen but apprehensive. But Hogan’s brief was compelling: Develop engineering talent, develop R&D infrastructure and understand the specific needs of the India market. He bit the bait and is glad for it.
His team has grown from 600 engineers in 2006 to 1,200. The MAC 400 aside, this centre has created 12 products — like a digital X-Ray, a surgical table and a baby warmer. “I’m confident many game-changing initiatives that will come from GE Healthcare tomorrow are being developed in Bangalore today,” says John Dineen, president and CEO of GE Healthcare. The changes happening in GE Healthcare point to a larger change sweeping across the company in India.
GE has been present in India for over a century now. But for most part, it was no better than an outpost barring stray successes. In January 2008, the top 600 leaders at GE converged at Boca Raton in Florida for their Global Leadership meeting. One full day out of this one-and-a-half day session was spent on conceptualising GE as an emerging market tiger.
“They were clearly thinking of shifting the gravity to where growth is — focussing on resource-rich and people-rich countries,” says Govindarajan. “GE has clearly realised that there is a big gap between what we have traditionally got out of this market vis-a-vis what we could potentially get out of this market,” says V. Raja, president and CEO, GE Healthcare, India.
The focus on India, in a sense, is also pre-emptive. Says Govindarajan, “If GE doesn’t solve India’s problems, local companies will.” Adds Raja, “We see MNCs and local companies scaling the kind of revenues they get here and we think, ‘Why we can’t be an L&T, a Bharti-Airtel, or a Nokia?’ That’s clearly dawned on us.”
So in line with what was discussed at the Boca Raton meeting, a slew of new initiatives were rolled out and GE India finally found its place in the sun. The focus on healthcare R&D in India was one. Reporting relationships across all businesses were streamlined. Take Raja for instance, who earlier reported to someone in France who in turn reported to Joe Hogan. Raja now reports directly to Dineen, Hogan’s successor.
“We will treat India the same way as we treat any other business in the company,” says Guillermo Wille, managing director, John F Welch Technology Centre (JFWTC), GE’s multidisciplinary R&D facility in Bangalore. “This is a big difference for us. Previously, countries were never treated like a business, a P&L.” The idea is that the India team in different businesses will define what products they want and the technology team here will develop those products.
But the biggest change yet is still in the process of being rolled out. About a month ago, GE announced that John Flannery, president and CEO for GE Capital in Asia, will now head India. At GE this is significant because for the first time in its history, GE will have someone of the rank of senior vice-president heading India.
The Task on Hand
Now, Flannery has quite a task on his hands because for all these years, GE India always fell short of everybody’s expectations. Theoretically, here is an MNC that has virtually everything in its portfolio a growing economy like India needs — be it consumer appliances, building infrastructure, or financial services. But GE’s India revenues across all businesses add up to approximately $2.9 billion. To put this figure into perspective, contrast it with, say, a Nokia which came to India in 1995: The company’s 2008
revenues in India stood at approximately $4.7 billion. So how did things come to such a pass?