Outsourcing => Import Innovation

So says, management professor and guru C.K. Prahalad. Conventional thinking equates outsourcing with exporting white-collar and other professional jobs. Prahalad believes companies need to start importing innovative ideas to remain competitive. He sites many examples, including the IndiaOne Hotel:

... Indian Hotels dubs its new room format "smart basic." To free up space in the very compact rooms, TVs are mounted on the wall. The furniture, flooring, and bathroom fixtures are made of easy-to-clean materials. Even so, guests are asked to eat only in the cafeteria, which offers cheap meals. "This is a great hotel if you know how to use it," says one regular, a Silicon Valley venture capitalist.

Indian Hotels got one lucky break: It bought the site before land prices in Bangalore and other Indian cities skyrocketed. But the company has an innovative strategy for coping with expensive real estate: It hopes to find one-acre lots by offering landowners a share of the hotels' profits. Indian Hotels is modifying the format to cater to families, rather than business-people, in tourist cities. Krishna Kumar believes the company can also adapt the concept in nations such as Pakistan, China, and Brazil.

What about America? Not yet. Pricing a room at a U.S. business hotel at $22 would be a stretch, concedes Prahalad. But he believes strategies pioneered at indiOne could one day lower the price of a room in many big U.S. cities to around $40.

How about importing some ideas from one of India's best healthcare providers:

Prahalad thinks globalization also can help rein in America's soaring health-care costs. That's one reason he is studying Indian hospitals such as Narayana Hrudayalaya, founded by cardiac surgeon Dr. Devi Shetty. Some reasons for its low costs can't be easily replicated elsewhere. The land was owned by Shetty's family. The hospital's 25 foreign-trained surgeons earn half what they could in the U.S. Outsize malpractice awards are rare in India, so insurance costs are low. But the hospital also operates for free on anyone who cannot pay and on any infant younger than one month. For the rural poor, it runs 39 remote clinics and mobile-testing labs with satellite links that so far have treated 17,000 patients.

Some the of the biggest savings come from its business model. In the U.S., the chief surgeon manages the entire patient process, from testing and diagnosis to supervising the operating room, recuperation, and billing. Narayana works more like an assembly line: The surgeons perform only surgery.

That may seem like a recipe for shoddy care. But Shetty asserts it actually translates into fewer mistakes because specialists focus on what they do best. The 1.35% mortality rate for coronary bypasses and 2.7% rate for aortic valve replacements reported by Narayana are roughly half the average of U.S. hospitals, according to federal statistics, though those aren't the only measures of quality care. "The importance of volume isn't well understood in our industry," Shetty says. "A surgeon doing three or four operations a day does much better work than one doing three or four in a week." The factory approach also leads to economies of scale. The hospital uses all of its expensive CAT scanners and X-ray and magnetic-resonance machines to the max. "In the U.S., a lot of this infrastructure is used five days a week," says Shetty. "We use ours 14 hours a day, 7 days a week."

This raises intriguing questions. If Indian doctors can effectively diagnose and treat heart conditions in farmers in distant villages, why can't American consumers use videoconferencing to consult offshore specialists 24/7? Why can't an enterprising hospital chain bring Narayana's model to the U.S., or at least set up hospitals in Mexico or the Caribbean charging a fraction of U.S. prices? There are plenty of reasons this seems unlikely: Few Americans would tolerate the inability to collect big damages for mistakes, and it seems far-fetched that the U.S. medical Establishment would back sweeping liberalization to license offshore doctors to prescribe treatments. Or does such change seem impossible only because we are blinded by our "dominant logic"? Prahalad is confident that superior business models will eventually prevail. Just gaze into the kaleidoscope, give it a twist, and the implausible in the 21st century global economy becomes more realistic than you might ever imagine.