There is no question that the healthcare industry in India is booming. Everyone can see that the present health care system is broken and there are many systemic problems. This obviously means that there is a huge opportunity for whosoever can find a clever solution to address these problems ! This is why venture capitalists and private equity funds are very keen to find medical entrepreneurs who can deliver effective solutions in the healthcare space.
However, it can be surprisingly hard for VCs to find doctors and clinics which they can fund. VCs are looking for services which can scale up ; be quickly profitable and be sustainable, so they can exit with a comfortable return on their investment. However, they find that though there are many doctors who are extremely busy and very successful , often these doctors are not fundable for many reasons.
For one thing, most doctors don't have a very good sense for business ; and while they’re extremely efficient moneymaking machines , their entire practice revolves around them. While this does mean that they are very profitable and very successful, it also means that this is a major bottleneck towards scaling up , since it's not possible for the doctor to clone himself. Unfortunately doctors have large egos and most of them think they are irreplaceable. They think that they are the best ; and that it’s simply not possible for any other doctor to possess the high quality of technical skills and compassionate care which they provide. If this is the mindset with which a doctor approaches his clinical practice, it's easy to see why it's not possible for him to set up a chain of clinics , because he feels that it is not possible to duplicate his clinical acumen and his skill set. He believes he has so much experience and expertise , that it's not possible to transmit this to his juniors, which is why he wants all patients to come to him, rather than go elsewhere. This is why it's very hard for this brand name doctor to set up a chain of clinics, which will provide the same quality of service he does. In order to address this problem , a lot of star doctors will travel from one clinic to another , all over the country, to treat patients . While this can work for a few years , because patients are attracted to their brand-name, this is really not a sustainable model because it's too dependent on an individual doctor.
What doctors need to do is to learn to set up processes which are not dependent on the individual doctor. They need to be able to offer training and systems which are replicated across all their clinics, irrespective of whether they are actually physically present or not. However, doctors are often not very process oriented. They are very used to making their own decisions for themselves , and will often tailor the protocol or modify their approach on an ad hoc basis, depending upon the patient who is in front of them and their “gut feel”. While a senior doctor can do this very well, because he has a lot of expertise and experience, unfortunately, if they're not able to document this and convert their tacit knowledge into an explicit protocol, it’s not possible for them to educate their assistants.
This means that even though there are many successful doctors , VCs in India are hard pressed to find doctors whom they can fund in order to be able to create a business which provides the kind of financial return they're looking for. This often means that they will fund models which are doomed to fail, simply because they have not thought about them clearly. When you are flush with funds ( as many VCs today are), and the market is “hot”, it’s very easy for the money to burn lots of holes in some very deep pockets extremely quickly !
Because VCs need to invest the money they have been entrusted with by their partners , and because healthcare in India seems to be full of opportunities, they will often end up pumping money into clinical ventures which are doomed to fail , simply because they are not thinking long-term.
A lot of VCs also forget that healthcare is not the same as other service industries. They sometimes delude themselves that because they have MBAs and are very smart , that it is always possible to find healthcare managers who can implement clinical processes . Thanks to their financial clout and the huge amounts of funds they have, it’s always possible to demonstrate a few early successes – but they are not able to scale these up . Healthcare is a different ballgame altogether , as shown by the number of healthcare startups, which have failed to deliver on their initial promise.
Another problem is that lots of VCs are shortsighted and do not have patient money . They are looking for clinics from which they plan to exit in 4- 5 years. This is extremely hard to achieve within our healthcare industry setting , because it takes time to be able to create a chain of clinics which is doctor agnostic. However , VCs who do have the maturity to understand that it's worth investing the time and money for the long term , will be able to create a model which will be hard for anyone else to be able to compete with in the future. They will then be able to create a sustainable advantage by creating a moat which will provide huge payoffs for many years in the future ! The tragedy is that VCs can sense the opportunity, but they do not know how to partner with doctors to execute this.
The trick is to create a chain of clinics which provide only one service, and provide this one service extremely well ! This is the " focused factory" approach. Thanks to the internet, it's possible to get traction very quickly, if you provide a high quality branded service in healthcare today. Patients are desperately looking for doctors they can trust - and a trust worthy healthcare service brand is worth its weight in gold. Marry the provision of high quality clinical services with openness, transparency and information therapy, and you have an unbeatable formula for success !