Take the company Aravind Eye Care in India. It was founded in 1976 specifically to provide cataract eye surgery. They modeled their operations on McDonalds: high volume, highly efficient operations, based on division of labor and cost efficiency. It is a very profitable operation; the company has a gross margin of 50 percent. Yet, the remarkable thing is that they treat 70 percent of their customers for free. The 30 percent that do pay are relatively affluent people who can afford the operation, but who receive pretty much the same service. In fact, the company goes out of its way to actively recruit non-paying customers. It goes to look for them systematically in the countryside and transports them to their clinics for free.
This, while the clinical quality of their service – the cataract operation – is second to none. Similarly, other medical clinics are operating in India – for instance in heart surgery – that combine extremely efficient, low-cost operations, but at very high quality in terms of clinical outcome. To such an extent that various National Health Service hospitals in the United Kingdom are considering sending their patients to India; to save money, while providing them with superior quality treatment.
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How can these organizations combine higher quality with lower costs? How can they combine doing well by doing good, and treat 70 percent of patients for free at 50 percent gross margins? The trick is that their business models are built for the long-term. Paradoxically, in the long-run, the lower costs enable them to provide better quality.
Ask yourself this: Could Aravind Eye Care make more money if it did not treat the 70 percent non-paying patients? Although it may seem that this would save them a lot of costs, in fact, the answer is very likely “no”. Every organization learns with experience. We call this effect “the learning curve”. With experience, firms increase the efficiency and quality of their production. These curves have been documented for airplanes, cars, bottles, pizzas, and so on. And cataract eye surgery is no exception.
Jim Woods is a leadership development and training consultant deploying his unique abilities in character based training and strategy.
Jim is president of InnoThink Group a human resources and leadership management consulting firm | Skype ID – jim.woods79 http://www.innothinkgroup.com Click here to schedule an appointment.m. He has an absolute passion for people development and are constantly refining and adapting his programs in order to ensure that they have the maximum impact on those we serve.