“Innovation has nothing to do with how many research and development dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.”
Steve Jobs
The intrinsic relationship between innovation and economic development has been demonstrated throughout economic history, which is why this argument has been used to explain the progress and backwardness of several nations. The evolution of the term “innovation” has gone from being the small introduction of changes in the productive processes to being a tool for the codification of new knowledge. In the era of telecommunications and the internet, this represents a great opportunity for all. On the one hand, for developed countries it implies congruence with their current model of knowledge generation and, on the other, for developing countries it means an opportunity to take advantage of innovation to grow. Despite this great opportunity, Mexico is one of the countries that invest the least in innovation: only 0.57% of GDP is allocated to innovation in sectors such as health, so that these areas are increasingly lagging behind (CONACYT, 2016).
This article will present the situation of the health sector in Mexico and demonstrate the urgency of allocating greater funds to the sectorization of innovation. The proposal will be illustrated by analyzing the following statement made in the last OECD report (2016), OECD Reviews of Health Systems: Mexico: “All the main actors agree that Mexico needs to build a more equitable, efficient and sustainable health care system.” The presentation covers three sections: first, we will discuss sectorial innovation as a vehicle for economic development and strategic regional positioning; second, the elements that explain the current lag observed in the sector will be presented, from the great fragmentation of the system to the low quality in the supply of health providers; and finally the integration of entrepreneurs will be proposed in an experimentation environment that creates bridges between the public and private sector, with the aim of speeding up the dissemination of innovation to sectors such as health, which are in great need of sustained change.
During the last decade, there has been a very dynamic revolution in the information technology sector, which has facilitated the interconnectivity between sectors, such as agriculture, military, medical and even aerospace. This propeller of economic growth has not been an isolated consequence, but a result of the effect of modernization and innovation as a vehicle of development for an increasingly globalized era. However, the concept of modernization in regions such as Latin America has had very different results, compared to the European or U.S. construction project. We live in a disparate world. Worldwide, 20% of the population earns 86% of the total income; the poorest 20% receives 1.1%; developed countries consume 70% of the planet’s available energy, 75% of metals and 60% of the food (Gestiopolis, 2013,s.p.). This scheme becomes alarming if we analyze countries with dissimilar realities within the same region, such as the United States and Mexico.
National innovation is a complex phenomenon, which used to be measured by the single injection of resources into research and development and the number of research staff (OECD, 1996). In the 1990s, it was considered to be a useful theoretical framework, until the difficulty in measuring the general innovation of the economy became increasingly evident. The complexity of its measurement was based on a greater number of coordinated actions between several economic and social agents, both public and private, which caused a substantial change in the way of conceptualizing it. Currently, innovation in a country is conceived in a different way, because its diffusion depends on its effective institutionalization. Today national innovation is conceived as a tool of internal policy making to achieve a regional positioning, in such a way that within the national system different agents are assembled, for example, government agencies and institutions, universities, businesses, productive sectors, research centers, technological institutes, job training centers, intermediary organizations that support business activity and the financial system (Dutrénit, 2010).
In the case of Mexico, the constitution of the National Innovation System has been late. Historically, the social assessment of science and technology and innovation activities has been low, and despite recent efforts such as the Special Program in Science, Technology and Innovation – for the period 2007-2013 – it is clear that there is fragmentation in the interactions between public and private agents. A bibliographic review concludes three fundamental points: first, it is important to achieve a greater linkage between the public sector and the private sector’s intermediary and financial institutions; second, it is necessary to design better mechanisms to transfer knowledge generated in the projects to the end user; third, it is necessary to sectorize innovation with specific demands, for example, detailed calls can go out so that the entrepreneur talent can focus on what the country truly needs.
Faced with an investment of 0.57% of GDP for innovation in sectors such as health, and general investment in the sector equivalent to 10% of GDP, it is clear that there is a discrepancy (AMIIF, 2015, p.3) not only because the health budget exceeds 9.1% of GDP recommended by the OECD, but because of the simple reason that the return on investment in innovation is minimal. Now then we are either taking into account funds for truncated research or we must rethink the fate of the resources.
The Mexican health system continues to be fragmented. One of the more important challenges is that attention to the public is provided through a conglomeration of disjointed subsystems. Each subsystem offers different levels of care at different prices and with different results, so each one has its own network of clinics, specialized doctors, hospitals, pharmacies, treatment centers and unions. For example, parastatal companies such as Petróleos Mexicanos and government entities such as the Secretariat of National Defense, the Secretariat of the Navy and the Secretariat of the Armed Forces have their own health services. The approach and the strategies of these institutions vary, and although the complexity of the system makes it appear solid, until a few months ago it was not possible to access services between institutions. In addition to the problem of fragmentation, according to the OECD, Mexico faces a general challenge due to the lack of a long-term health care system that serves an inverted population pyramid, in addition to dealing with the low productivity of health professionals, which prevents greater effectiveness in the results.
These inefficiencies require reform: first, quality care centered on the individual is needed; second, Mexicans must be informed about access to health benefit packages regardless of employment or social status; third, the fragmented approach to health financing needs to be unified; finally, evaluation of the performance of medical services in relation to quality and efficiency (OECD, 2016, pp 1-10) should be included within the reform requirements. The previous requirements point to a profound need for change, which cannot come exclusively from the government sector, since the transformation of the Mexican health system depends on several actors. It is necessary to reverse this situation and create greater links to sectorize innovation, especially in health. This is strengthened by links between academia, the private sector, coordination agencies and entrepreneurs. Even though it may take time, the first efforts toward this approach and linkage could be through the innovators themselves who deal with the specific demands.
It is well known that Joseph Schumpeter (1942) emphasizes the role of the entrepreneur as an agent of innovation who implements new combinations of productive and material forces, whether it be the introduction of a new good, a new product, the opening of a new market, a new source of raw materials or the creation of a new organization within any industry. Thus, the activity involves the use of existing resources in a different way. The case of the Mexican entrepreneur is no exception. The Amway Global Entrepreneurs Report 2014 (AGER) revealed that entrepreneurship is highly valued throughout the world, with China (83%) and Mexico (82%) occupying the top two places. Specifically, e-commerce is the most popular among the average Mexican entrepreneur; however, in the past five years, the application of information technology and the use of low-cost materials have been the driving force behind more health projects.
According to the portfolio analysis of several venture capital funds, about 1,000 health projects have been identified, from those focused on the early detection of chronic diseases or ophthalmological services for the base of the pyramid, to services of accompaniment and transportation for the elderly. More than ever, collaboration in entrepreneurship has been fundamental in this sector, given the complexity of the system in which it operates. This, along with the desire to break with new proposals for the population, have promoted a laboratory of experimentation with cross-alliances and dynamics that have the potential to create new bridges of diffusion that take the initial steps to sectorize innovation.
To demonstrate the above, the following project will be presented as a case study: Adult Care Services, Emma, S.A.P.I. de C.V., hereinafter referred to as “Emma.”
Emma was created in the summer of 2015 to compete in a university contest convened by the ITAM Center of Creativity, Innovation and Entrepreneurship (EPIC Lab) and the Martin Trust Center for MIT Entrepreneurship. This student project focused on creating a new market in Mexico: the non-medical accompaniment for the elderly. The basic idea was to generate a high value added service that promoted self-sufficient aging for seniors who wanted to grow old at home, with a focus on combating social isolation of the elderly and the lack of professionalization of non-medical care.
The problem was clear: in a few years, the inversion of the population pyramid would lead to a population growth from 11 million elderly adults reported in the last census, to more than 30 million in 20 years (INEGI, 2016). In a demographic transition context, the risk of early symptoms of dementia and depression would be five times greater in socially isolated older adults. In addition to the above, the lack of a formal long-term care system, plus the targeting of resources of only 6.2% of GDP for care of the elderly and a pension problem created an unfavorable forecast for the Mexican health system in the next few years.
Emma was founded on the conclusions of previous research and the desire to innovate for a sector that for years had been neglected. Thus, a Mexican company was established that provides transportation services and accompaniment for seniors. Through a digital platform, relatives of the elderly select a companion who their loved ones like, as well as an individual plan with activities which translate into well-being, learning and activating interests such as, for example, from recuperating the enjoyment for playing chess or cards to learning how to use an iPad. In this way, a trilateral service is provided: to the family, to the elderly, and to the companions – called “Emmas” – with great human warmth and with surveillance on the internet.
With a small founding team, an administrator, an engineer and a doctor, a network development team made up of five young entrepreneurs, an Emmas team, a mentoring council and more than 500 hours of accompaniment sold in the first pilot, an operational team with a well established purpose and procedure manuals was established. At the head, there is a general director (in charge of strategy, sales – B2C and B2B -, content management, creation of alliances), an operational director (in charge of accounting and finance, legal framework, human resources and design) and a quality director (medical supervision, evaluation of Emmas performance, management of accompaniment methodology and medical alliances).
Emma relied on the market economy, such as Uber or Airbnb, which has self-regulation capability and dynamic prices, profile of the collaborators and top quality services. The platform retains 25% commission and frees up the rest (75%) for Emma for its service, which incorporates the companions as independent collaborators in a flexible legal and tax scheme that allows them to enter and leave whenever they wish. For that reason, Emma manages to recruit the best companion profiles, which ensures quality and safety through a rigorous selection process.
Innovation and leverage in information technology allowed the creation of a scalable entrepreneurship project with great potential for social impact. In recent months, Emma has collaborated closely with the National Institute of Geriatrics (INGER) and leading companies in its industry, with the purpose of conducting experimental pilot projects that favor synergy schemes. While much remains to be done, Emma’s corporate vision is to reach out to more people and benefit those who really need it, with the goal of occupying an important place in the Mexican healthcare system, concretely, long-term care for the elderly.
In conclusion, there is room for maneuver in innovation in the healthcare sector. While the idea of innovation can be misunderstood as scientific discoveries, inventions or unique creation of hardware, the space for the optimization of information is immense. Emma is a clear example of the combination of software development and the work of a highly qualified accompanying staff. However, the implementation of innovation does not come alone, but must be driven by a national body that prioritizes needs by sector, so that, as an instrument to capture opportunities, it creates solutions. The National Innovation System must go from being an uncoordinated system to becoming a facilitator to execute innovation policy. The national paradigm should seek to improve each social component to achieve greater efficiency, productivity, effectiveness, and above all, job opportunities that inspire others. In my case, as Emma’s co-founder, my motivation is in knowing that “investing in health is equivalent to doing it in all areas of development for a more just, equitable and sustainable Mexico.”
Bibliography
Asociación Mexicana de Industrias de Investigación Farmacéutica (AMIIF) (2015), <http://funsalud.org.mx/portal/wp-content/uploads/2016/02/memorias-AMIFF-FUNSALUD.pdf>, consulted on December 5, 2016>
CONACYT (2015), “Recibirá ciencia, tecnología e innovación inversión de 91 mil 650 mdp del gobierno federal”, Mexico, press release, on <http://conacyt.gob.mx/index.php/comunicacion/comunicados-prensa/566-recibira-ciencia-tecnologia-e-innovacion-inversion-de-91-mil-650-mdp-del-gobierno-federal-conacyt>, consulted on December 5, 2016.
Dutrénit, Gabriela et al. (2010), El Sistema Nacional de Innovación mexicano: instituciones, políticas, desempeño y desafíos, México, UAM, 1a. ed., 2010.
Garita Roberto (2013). Teoría económica del comercio internacional, en <http://www.gestiopolis.com/teoria-economica-del-comercio-internacional/>, consulted on November 29, 2013.
OCDE (1996), “Sectorial Cases of Innovation”, on <http://www.oecd.org/sti/inno/sectoralcasestudiesininnovation.htm>, consulted on November 20, 2016.
OCDE (2016), “Estudios de la OCDE sobre los sistemas de salud: México”, pp.1-10, 20-35.
Innovation, Entrepreneurship and Economic Development: A case study in the health sector
“Innovation has nothing to do with how many research and development dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.”
Steve Jobs
The intrinsic relationship between innovation and economic development has been demonstrated throughout economic history, which is why this argument has been used to explain the progress and backwardness of several nations. The evolution of the term “innovation” has gone from being the small introduction of changes in the productive processes to being a tool for the codification of new knowledge. In the era of telecommunications and the internet, this represents a great opportunity for all. On the one hand, for developed countries it implies congruence with their current model of knowledge generation and, on the other, for developing countries it means an opportunity to take advantage of innovation to grow. Despite this great opportunity, Mexico is one of the countries that invest the least in innovation: only 0.57% of GDP is allocated to innovation in sectors such as health, so that these areas are increasingly lagging behind (CONACYT, 2016).
This article will present the situation of the health sector in Mexico and demonstrate the urgency of allocating greater funds to the sectorization of innovation. The proposal will be illustrated by analyzing the following statement made in the last OECD report (2016), OECD Reviews of Health Systems: Mexico: “All the main actors agree that Mexico needs to build a more equitable, efficient and sustainable health care system.” The presentation covers three sections: first, we will discuss sectorial innovation as a vehicle for economic development and strategic regional positioning; second, the elements that explain the current lag observed in the sector will be presented, from the great fragmentation of the system to the low quality in the supply of health providers; and finally the integration of entrepreneurs will be proposed in an experimentation environment that creates bridges between the public and private sector, with the aim of speeding up the dissemination of innovation to sectors such as health, which are in great need of sustained change.
During the last decade, there has been a very dynamic revolution in the information technology sector, which has facilitated the interconnectivity between sectors, such as agriculture, military, medical and even aerospace. This propeller of economic growth has not been an isolated consequence, but a result of the effect of modernization and innovation as a vehicle of development for an increasingly globalized era. However, the concept of modernization in regions such as Latin America has had very different results, compared to the European or U.S. construction project. We live in a disparate world. Worldwide, 20% of the population earns 86% of the total income; the poorest 20% receives 1.1%; developed countries consume 70% of the planet’s available energy, 75% of metals and 60% of the food (Gestiopolis, 2013,s.p.). This scheme becomes alarming if we analyze countries with dissimilar realities within the same region, such as the United States and Mexico.
National innovation is a complex phenomenon, which used to be measured by the single injection of resources into research and development and the number of research staff (OECD, 1996). In the 1990s, it was considered to be a useful theoretical framework, until the difficulty in measuring the general innovation of the economy became increasingly evident. The complexity of its measurement was based on a greater number of coordinated actions between several economic and social agents, both public and private, which caused a substantial change in the way of conceptualizing it. Currently, innovation in a country is conceived in a different way, because its diffusion depends on its effective institutionalization. Today national innovation is conceived as a tool of internal policy making to achieve a regional positioning, in such a way that within the national system different agents are assembled, for example, government agencies and institutions, universities, businesses, productive sectors, research centers, technological institutes, job training centers, intermediary organizations that support business activity and the financial system (Dutrénit, 2010).
In the case of Mexico, the constitution of the National Innovation System has been late. Historically, the social assessment of science and technology and innovation activities has been low, and despite recent efforts such as the Special Program in Science, Technology and Innovation – for the period 2007-2013 – it is clear that there is fragmentation in the interactions between public and private agents. A bibliographic review concludes three fundamental points: first, it is important to achieve a greater linkage between the public sector and the private sector’s intermediary and financial institutions; second, it is necessary to design better mechanisms to transfer knowledge generated in the projects to the end user; third, it is necessary to sectorize innovation with specific demands, for example, detailed calls can go out so that the entrepreneur talent can focus on what the country truly needs.
Faced with an investment of 0.57% of GDP for innovation in sectors such as health, and general investment in the sector equivalent to 10% of GDP, it is clear that there is a discrepancy (AMIIF, 2015, p.3) not only because the health budget exceeds 9.1% of GDP recommended by the OECD, but because of the simple reason that the return on investment in innovation is minimal. Now then we are either taking into account funds for truncated research or we must rethink the fate of the resources.
The Mexican health system continues to be fragmented. One of the more important challenges is that attention to the public is provided through a conglomeration of disjointed subsystems. Each subsystem offers different levels of care at different prices and with different results, so each one has its own network of clinics, specialized doctors, hospitals, pharmacies, treatment centers and unions. For example, parastatal companies such as Petróleos Mexicanos and government entities such as the Secretariat of National Defense, the Secretariat of the Navy and the Secretariat of the Armed Forces have their own health services. The approach and the strategies of these institutions vary, and although the complexity of the system makes it appear solid, until a few months ago it was not possible to access services between institutions. In addition to the problem of fragmentation, according to the OECD, Mexico faces a general challenge due to the lack of a long-term health care system that serves an inverted population pyramid, in addition to dealing with the low productivity of health professionals, which prevents greater effectiveness in the results.
These inefficiencies require reform: first, quality care centered on the individual is needed; second, Mexicans must be informed about access to health benefit packages regardless of employment or social status; third, the fragmented approach to health financing needs to be unified; finally, evaluation of the performance of medical services in relation to quality and efficiency (OECD, 2016, pp 1-10) should be included within the reform requirements. The previous requirements point to a profound need for change, which cannot come exclusively from the government sector, since the transformation of the Mexican health system depends on several actors. It is necessary to reverse this situation and create greater links to sectorize innovation, especially in health. This is strengthened by links between academia, the private sector, coordination agencies and entrepreneurs. Even though it may take time, the first efforts toward this approach and linkage could be through the innovators themselves who deal with the specific demands.
It is well known that Joseph Schumpeter (1942) emphasizes the role of the entrepreneur as an agent of innovation who implements new combinations of productive and material forces, whether it be the introduction of a new good, a new product, the opening of a new market, a new source of raw materials or the creation of a new organization within any industry. Thus, the activity involves the use of existing resources in a different way. The case of the Mexican entrepreneur is no exception. The Amway Global Entrepreneurs Report 2014 (AGER) revealed that entrepreneurship is highly valued throughout the world, with China (83%) and Mexico (82%) occupying the top two places. Specifically, e-commerce is the most popular among the average Mexican entrepreneur; however, in the past five years, the application of information technology and the use of low-cost materials have been the driving force behind more health projects.
According to the portfolio analysis of several venture capital funds, about 1,000 health projects have been identified, from those focused on the early detection of chronic diseases or ophthalmological services for the base of the pyramid, to services of accompaniment and transportation for the elderly. More than ever, collaboration in entrepreneurship has been fundamental in this sector, given the complexity of the system in which it operates. This, along with the desire to break with new proposals for the population, have promoted a laboratory of experimentation with cross-alliances and dynamics that have the potential to create new bridges of diffusion that take the initial steps to sectorize innovation.
To demonstrate the above, the following project will be presented as a case study: Adult Care Services, Emma, S.A.P.I. de C.V., hereinafter referred to as “Emma.”
Emma was created in the summer of 2015 to compete in a university contest convened by the ITAM Center of Creativity, Innovation and Entrepreneurship (EPIC Lab) and the Martin Trust Center for MIT Entrepreneurship. This student project focused on creating a new market in Mexico: the non-medical accompaniment for the elderly. The basic idea was to generate a high value added service that promoted self-sufficient aging for seniors who wanted to grow old at home, with a focus on combating social isolation of the elderly and the lack of professionalization of non-medical care.
The problem was clear: in a few years, the inversion of the population pyramid would lead to a population growth from 11 million elderly adults reported in the last census, to more than 30 million in 20 years (INEGI, 2016). In a demographic transition context, the risk of early symptoms of dementia and depression would be five times greater in socially isolated older adults. In addition to the above, the lack of a formal long-term care system, plus the targeting of resources of only 6.2% of GDP for care of the elderly and a pension problem created an unfavorable forecast for the Mexican health system in the next few years.
Emma was founded on the conclusions of previous research and the desire to innovate for a sector that for years had been neglected. Thus, a Mexican company was established that provides transportation services and accompaniment for seniors. Through a digital platform, relatives of the elderly select a companion who their loved ones like, as well as an individual plan with activities which translate into well-being, learning and activating interests such as, for example, from recuperating the enjoyment for playing chess or cards to learning how to use an iPad. In this way, a trilateral service is provided: to the family, to the elderly, and to the companions – called “Emmas” – with great human warmth and with surveillance on the internet.
With a small founding team, an administrator, an engineer and a doctor, a network development team made up of five young entrepreneurs, an Emmas team, a mentoring council and more than 500 hours of accompaniment sold in the first pilot, an operational team with a well established purpose and procedure manuals was established. At the head, there is a general director (in charge of strategy, sales – B2C and B2B -, content management, creation of alliances), an operational director (in charge of accounting and finance, legal framework, human resources and design) and a quality director (medical supervision, evaluation of Emmas performance, management of accompaniment methodology and medical alliances).
Emma relied on the market economy, such as Uber or Airbnb, which has self-regulation capability and dynamic prices, profile of the collaborators and top quality services. The platform retains 25% commission and frees up the rest (75%) for Emma for its service, which incorporates the companions as independent collaborators in a flexible legal and tax scheme that allows them to enter and leave whenever they wish. For that reason, Emma manages to recruit the best companion profiles, which ensures quality and safety through a rigorous selection process.
Innovation and leverage in information technology allowed the creation of a scalable entrepreneurship project with great potential for social impact. In recent months, Emma has collaborated closely with the National Institute of Geriatrics (INGER) and leading companies in its industry, with the purpose of conducting experimental pilot projects that favor synergy schemes. While much remains to be done, Emma’s corporate vision is to reach out to more people and benefit those who really need it, with the goal of occupying an important place in the Mexican healthcare system, concretely, long-term care for the elderly.
In conclusion, there is room for maneuver in innovation in the healthcare sector. While the idea of innovation can be misunderstood as scientific discoveries, inventions or unique creation of hardware, the space for the optimization of information is immense. Emma is a clear example of the combination of software development and the work of a highly qualified accompanying staff. However, the implementation of innovation does not come alone, but must be driven by a national body that prioritizes needs by sector, so that, as an instrument to capture opportunities, it creates solutions. The National Innovation System must go from being an uncoordinated system to becoming a facilitator to execute innovation policy. The national paradigm should seek to improve each social component to achieve greater efficiency, productivity, effectiveness, and above all, job opportunities that inspire others. In my case, as Emma’s co-founder, my motivation is in knowing that “investing in health is equivalent to doing it in all areas of development for a more just, equitable and sustainable Mexico.”
Bibliography
CONACYT (2015), “Recibirá ciencia, tecnología e innovación inversión de 91 mil 650 mdp del gobierno federal”, Mexico, press release, on <http://conacyt.gob.mx/index.php/comunicacion/comunicados-prensa/566-recibira-ciencia-tecnologia-e-innovacion-inversion-de-91-mil-650-mdp-del-gobierno-federal-conacyt>, consulted on December 5, 2016.