Viewpoint January 20, 2010, 2:31PM EST

So You Want to Innovate?

Apply a mindset of scarcity and resourcefulness, and bring about a revolution. Are you listening, health-care industry reformers?

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When I was a product design student at San Jose State in 1978, our senior project was to reduce the cost of health care. Aside from my design training, another experience guided my decision-making: the fact that I grew up in Iran. As a developing country, Iran lives with material scarcity, not abundance. A mindset of scarcity and resourcefulness helps to cut costs. It's also a mindset that can benefit change-makers in the current health-care discussions.

The health-care industry can use the lens of resourcefulness to focus its problem-solving on creating relevant solutions that create true value: lower costs, improved outcomes, and increased accessibility. It can take cues from a few companies that are already leading the way. Here are three examples of inspired resourcefulness that have disruption and the reimagining of an industry at their heart.

Business Innovation

General Electric (GE) built its business on designing robust products and distributing them globally. However, in an article published in the Harvard Business Review in October 2009, GE CEO Jeffrey Immelt with consultants Vijay Govindarajan and Chris Trimble wrote that "those days are over." To accommodate the growth of the emerging markets in China and India—and the slowing growth of wealthy nations—GE recognized that it needed to focus on making products for the needs and budgets of new customers.

During the development process, GE learned two things about this new opportunity: First, those in emerging markets do not require the product bells and whistles that wealthier nations have come to expect, so GE can offer solid performance at a low cost. Immelt, Govindarajan, and Trimble refer to providing "a 50% solution at a 15% price."

Second, GE learned that these products can also find uses and success in developed countries, a process it has called reverse innovation. For example, GE designed a compact ultrasound machine for the large population dependent on low-tech hospitals or clinics in rural villages in China. The machine cost $15,000, less than 15% of the cost of GE's high-end ultrasound machines. Then it found a market in the U.S., in locations "where portability is critical or space is constrained," wrote the authors. Addressing the specific needs of the Chinese market grew into a global success: The compact ultrasound became a $278 million global product line that was growing at 50% to 60% a year before the global recession hit.

GE admits that reverse innovation is, in part, a defensive move to stave off competitors from the developing world. However, as this example demonstrates, companies can be resourceful and innovate by creating value-based, tiered offerings to accommodate an array of needs.

Product Innovation

To date, the health-care industry has not organized itself around the long-term health of its own consumers. The industry must shift from managing symptoms to caring for health.

In South Africa, the Freeplay Fetal Heart Rate Monitor was designed for rural areas where electricity is unavailable. A simple, electronic monitoring device like this can provide the basic care that could mean the difference between life and death.

The Lung Flute costs $40 and can be employed for both diagnostic and therapeutic uses for patients with lung disease. Already in use in Japan, Europe, and Canada, U.S. clinical trials demonstrate that it is at least as effective as the existing treatments, whose costs annually run more than $27 billion for the necessary drugs and oxygen tanks. The Lung Flute is a fraction of the cost and can be used and reused on patients with a diverse array of lung ailments.

Resourceful innovations such as these can revolutionize an industry and the lives of patients. U.S. health care has for too long focused on high-end, expensive products and services.