For about a decade now, the big three medtech companies—Wipro GE Healthcare, Philips Healthcare and Siemens Healthineers—have desperately tried their luck in rural India. And had little success.
They’ve made repeated attempts to sell everything from ECGs to X-rays and infant warmers to the rural population.
So, when S Ganeshprasad, the then-director at GE, spotted Aravamudan Krishna Kumar, the then-managing director at Philips, at a radiology conference in 2015, he was curious about Philips’ latest attempt.
After pleasantries, Kumar told him, “Ganesh, our rural experiment failed. It’s so difficult, you know, to maintain. Business is not very predictable; somewhere it works, somewhere it doesn’t work.”
From 2010 onwards, all device makers adjusted and readjusted to the market’s needs, building brand-new products from the ground up. Low-cost ultrasounds, ECGs and infant warmers. But the target market didn’t make an easy switch. Philips, it appeared, was the latest casualty. Ganeshprasad’s heart skipped.
You see, GE was to announce its latest experiment that very day. It had a minority 26% stake in GenWorks Health Private Limited, an independent startup that would sell affordable GE devices to rural India, primarily for a commission. This would be the first such investment for the conglomerate. Ganeshprasad would helm GenWorks.
Sales of ultrasounds
He had been with GE for 18 years, heading sales of ultrasounds, cardiology and other products. Under his tenure, the ultrasound business grew to $100 million in sales, with a 48% marketshare, making it among the most successful portfolios at GE.
“Oh my god, I’m getting into it today!” Ganeshprasad recalled thinking last month at his office, which is in an IT park, a 15-minute drive from the GE campus in Bengaluru.
Following GE’s announcement of GenWorks, colleagues had crowded around Ganeshprasad at the conference, he recalled.
All of them had questions. “Why did you do this? You’re so successful!” “Why did you even do this man, c’mon!” “This is stupid, this is a risk you’re taking at this stage of your life. Now GE will just forget this, what will happen to you?”
Tough challenges faced though
Selling healthcare to rural Indians is a tough proposition, so medtech companies focus on urban residents. Today, a major portion of the revenue of many companies comes from selling to corporate hospitals and large diagnostic centers in metro cities.
That’s unfortunate because most of India’s population—about 833 million people—live in the countryside and go to the government or rural hospitals. Many do not have access to MRIs, CT scanners or even low-cost devices (or “boxes”, in industry parlance) such as ECGs. A whole market remains under-tapped.
GenWorks has succeeded – to an extent. In the past three years, Ganeshprasad’s team has penetrated tier-2 cities and beyond. They have created a streamlined, pan-India distribution network of more than 300 distributors for selling GE products in 450-plus districts. India has a total of 640 districts. As a result, sales of GE products to these areas have doubled over three years, to Rs 420 crore ($59 million), according to Ganeshprasad.
For GE, this has been a win. Selling to rural India used to be roughly 12% of the cost of a device (a figure that GE neither confirms nor denies). That’s come way down, as its commission to GenWorks is in the single digits. By spinning off the division, they get to have the cake and eat it too. For now.
But Ganeshprasad senses his limits. He is flying with one wing tied to GE and the other clipped. Genworks’ revenue has grown year-on-year to about Rs 90 crore ($12.7 million) in 2018, up from Rs 33 crore ($4.7 million) three years ago.
But small cities have only so much demand – there are few doctors, fewer nursing homes and even fewer specialists who know how to use ECGs or CT scanners. That pool isn’t going to magically widen. “If there are only 100 people who’ll buy there, there are only 100 people who’ll buy,” Ganeshprasad said. “My expecting the 100 to become 200 is wishful thinking. If it happens, we’re all happy. But it’s not going to happen.”