I would like to profile an innovative business venture started by a former classmate I have been following for sometime now. That business is Embrace a for profit business that has developed a low-cost infant warmer for babies in developing countries. It is a social business idea that is so good that it recently was recognized as one of the 2013 winners of the WEF Social Entrepreneur of the Year award and also recently won the Nokia Health Tech Award and McKinsey Social Innovation Video Contest.
WHAT IS THE BUSINESS ABOUT?
Embrace developed a low-cost infant warmer (you can see it here) designed for babies born at home in developing countries. The infant warmer is a low-cost way to regulate the temperature of vulnerable newborns, without the need for constant electricity, and at a fraction of the cost of existing solutions. The product is essentially a miniature sleeping bag with a heater that keeps babies warm at a constant temperature for about 6 hours. This solution helps to prevent premature infant mortality – a huge problem in many countries.
HOW DID IT START?
The idea for Embrace was started by an interdisciplinary team of business, design and engineering students as part of a Stanford design course in 2007. The idea was so good that the students decided to continue with it after the class ended. Good thing they did, since then has grown quickly and received many accolades (see above). However it has not been an easy ride since 2007. Much of the success of the product can be attributed to the dedication of the team and their constant interaction and feedback from the intended beneficiaries. Thanks to this the product has gone through many design improvements (early versions had many problems) and also changes in target market – from Nepal to Sub-Saharan Africa to its current focus on India.
WHAT IS THE SOCIAL NEED IT ADDRESSES?
Basically it is a business designed to reduce premature infant mortality. According to Embrace over 20 million low-birth-weight and premature babies are born every year around the world, and over 4 million die within their first month of life. Temperature regulation is a key problem among many of these infants. Embrace’s mission is to advance maternal and child health by delivering innovative solutions to the world’s most vulnerable populations. The infant warmer is just one of a series of products they hope to develop to improve the health outcomes in developing countries.
WHAT IS THE BUSINESS MODEL?
Embrace is registered as a nonprofit in the United States, principally because of the inherent risks and uncertainties of the commercial viability of the product. Being a non-profit allows them at the beginning to collect needed donor support without having to guarantee a return on investment as would be in the case of an early stage traditional for profit venture. However it is run like a business, selling the product at a margin, and “profits” are reinvested back into the company. And once the product concept is proven they hope to turn into a full for profit venture.
WHAT ARE SOME CONCERNS I SEE WITH THE MODEL?
First of all the choice of going for the non-profit route instead of the for profit route while I agree it makes sense exposes the organization to the possibility that it may never become profitable and still exist. This may not push the team to create something truly sustainable for the communities they are trying to serve. In addition since this is essentially a low-tech product design solution, I believe the organization is exposed to competition and potential entrants of even better technology solutions to the problem they are trying to address. Finally there are the classic problems of affordability and distribution in developing countries. Serving customers at the bottom of the pyramid is hard. How can they price the infant warmer so that is affordable and encourage people living on less than $2 a day to save enough money to buy it? And on the distribution side how can they actually get the product to the people who need it most in a way that doesn’t increase costs so much that it is no longer affordable. Despite these concerns I hope Embrace becomes a success. I think it is a wonderful idea led by a wonderful team of people.
WHAT IS YOUR VOTE?