пятница, 27 мая 2011 г.

Where do the Partners Have a Button?

Here is the translation of Vedomosti article about “Knopka Zhizni” (“Life Button”), a project of SKOLKOVO MBA graduates. The original text in Russian can be found here

This January, Dmitry Yurchenko, the SKOLKOVO graduate, created a company for selling the fall sensors for the elderly people. Will the idea popular in the West work in Russia?

“During the final stage of the MBA programme at the Moscow School of Management SKOLKOVO we were to present the business projects we would like to implement.” – Yurchenko who precedently was heading the Derivative Operations’ department at Renaissance Capital says. – “I studied the markets of energy efficiency, IT and mobile medicine – estimating them in terms of competitiveness and capital intensity. I decided to focus on the medicine.”

Four months before graduation, when Dmitry was studying Entrepreneurship at the Massachusetts Institute of Technology (MIT), he involved Irina Linnik, his classmate, into the project – first as a marketing specialist and then as a partner. This January they have registered “A-clever” LLC. (According to the Register of Legal Entities Dmitry has 57% of charter capital and Irina has 43%.)

No-Doctor Business
The initial plan was to sell devices that would enable people do cardiograms, measure blood pressure and blood sugar level, remotely, without going to the doctor – and then to send the data through internet connection to their therapist or an insurance company. According to Yurchenko, such devices have been quite popular in the Western countries for the past 30 years. “Yet our doctors are too conservative and hard to convince that such things can be practical,” – he says. Consequently there had to be found a business model not involving the doctors. “We decided to focus on the services market for the elderly and disabled persons’ relatives.” Thus the “Knopka Zhizni” (the company’s brand) appeared – the service of calling for help in emergency situations. “We studied statistics and learned that in case of a downfall more than 50% of the elderly and disabled can not get up themselves and more than 80% - can not dial a telephone number”.

“Pressing the SOS-button, that also can be inbuilt into the cell phone, enables voice connectivity with the operator of the company’s call-center, and if the emergency is confirmed we contact relatives, neighbors or an ambulance,” – Irina says. – “According to the contract terms, like a satellite signaling company, we guarantee that we will accept the call and process it. Unfortunately we can not influence the work of ambulances, but we do increase the probability of receiving help.” The company doesn’t have their own ambulance team, now they can only use the municipal services, but they plan to start working with private ambulances in future. “That may become either a joint project with insurance companies that provide an emergency calling service or we will buy that service from them and offer it with the button to our clients.” – Irina explains.

Precious Sensor
“In the core of it, our business consists of three parts,” – Yurchenko says. – “These are: the device, the software and the marketing. We do only the business model development and everything else goes to outsource.”
The initial financing takes around $250 000, and today $100 000 is already invested into the project, Dmitry says and explains that the investments come from the business-angel Nikolay Kaguinyan. $70 000 went for buying the buttons and $30 000 more – for setting-up the call-center (actually for the salaries of the staff). There are five employees in the company, not to count the founders themselves: Head of the call-center, Technical Director and three Operators. The office lease costs nothing, as the call-center is located in the SKOLKOVO business incubator.

The buttons are not being sold yet; the company gives them out for free. “Because of the fact that our service is about life and death, the cost of any mistake is too high – so we must be sure that everything works properly.” – Yurchenko explains.

“That business may be interesting in terms of various partnerships with mobile operators and insurance companies, he says. Mobile operators will get a new niche product and an opportunity to offer a specialized rate plan to their clients; and the insurance companies may be able to offer discount rates due to risks’ reduction at our cost – and thus to broaden their client base.” 

When the free trial period is over (that is in three-four months), the entrepreneurs plan to sell the buttons at the highest price: a sensor mounted into the wall will cost around $1000, less sophisticated portable device (that can be carried on the neck or a wrist) – 6000-8000 rubles. “Now we need to see the market sensitivity and find ways to reduce the device’s net cost.” – Yurchenko said and explained that the net cost includes the purchase costs, custom duty, shipping and localization. 1500 clients will make the project break even.

A Little Something
“Most of the persons insured with our company are corporate clients,” – says Pavel Ivanushko, CEO of the Otechestvo insurance company, when estimating the prospects of such partnership. – “Elderly people form less than 0.1% of our customers.” He thinks that the fall sensors don’t seriously reduce the insurer’s risks: if a person falls down because of apoplexy, for instance, the insurable event has already happened. “There are various preventive devices which can influence the life prolongation – say, cardiac monitor which helps define the maximum strain level, but the button traces only the fact of a fall,” – he continues.

“We have an experience of implementing a similar project, “So-obschenie”, – developing the rate plan for the aurally challenged people,” – says Evgenia Chistova, Head of Corporate Social Responsibility projects at Vympelcom. – “The idea of that project belonged to Alexander Zhuchenko, the author of the specialized internet-project “The country of the deaf”, who asked to reduce the price for text messaging for the hearing impaired people in the Ural region.”

According to Chistova, the number of new clients who bought that rate plan during the first two weeks of the project pilot launching amounted only in 500 (10% of the previously estimated market). Then the first wave of new connections’ pace slowed up, and now “So-obschenie” has a minimum share in the company’s sales, though still remains their socially-oriented service.

Not just a button
“Such devices make the life of the disabled athletes substantively easier, especially during their training ahead of competitions.”Nikolay Durmanov, a well-known expert in sport medicine (developing several projects together with the Paralympic Committee), says. He mentions that “Knopka Zhizni” will give his mentees several dozens of free sensors. “This all is not about putting some device into your pocket, but about creating a whole information sharing system,” – he emphasizes.

“The main issue in implementing such kind of projects concerns the readiness of emergency services to react on the SOS-signals,” Chistova adds. “Means of mobile medicine are commonly used by small businesses mostly in the USA and Europe where healthcare and emergency services work on the highest level.” – She speculates. – “Here in Russia we first have to set up the work of ambulance services which are used to communicate directly to the sufferer or their immediate relatives and learn the call reasons in details before they send a car. The approach to responsiveness should change dramatically,” – Chistova concludes.

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