DUBAI HEALTH CARE CITY: a World-Class Innovation Evolving in a Dynamic Environment
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DUBAI HEALTH CARE CITY: A World-class Innovation Evolving in a Dynamic Environment. Michael Matly Managing Medicine, Harvard Business School, February 27, 2007 Partially funded by the DUBAI INITIATIVE, Belfer Center for Science and International Affairs, John F. Kennedy School of Government, Harvard University Purpose City, a discussion of challenges, as well as potential recommendations. Dubai Health Care City (DHCC) is the world’s first business park/cluster, 20 million square feet devoted to health Context care along the entire value chain from education, clinical care, wellness/CAM, “To become the internationally spas, business (pharma/biotech), and recognized location of choice for quality health care entrepreneurship. Sheikh healthcare and an integrated centre of Mohammed, ruler of Dubai, intended to excellence for clinical and wellness set DHCC as a regional center of services, medical education and excellence while improving the quality research” (DHCC vision statement) of health care delivery in Dubai. In addition, the DHCC model serves to be Dubai, a tiny city-state, in the Arabian an opportunity to attract a significant Peninsula has undergone an impressive amount of Federal Direct Investment transformation in the last decade, into Dubai. Clustering health care has transitioning from a trade-hub to a become an attractive model in developed regional and global center of financial and developing countries alike with services, media, IT, energy, tourism, and India and Australia announcing their in the last three years: Health Care. own health care cities. From its first days, DHCC has been successful in Dubai can attribute much of its attracting a number of brand names economic success to the including Harvard Medical School, freezone/clustering strategy with the Mayo Clinic, Johnson & Johnson, creation of JAFZA (Jabel Ali Free Zone Wyeth, University of Pennsylvania, Area) nearly 15 years ago, one of the Boston University, American Academy world’s largest import/re-export port. of Cosmetic Surgery, and many more. This was quickly followed by the creation of Dubai Internet City, Dubai However, DHCC, despite its great Media City, and Dubai Industrial City. potential for innovating health care Freezones serve to attract foreign delivery, is facing a number of investment by providing a tax-free challenges. This paper serves to explore the context of the Dubai Health Care environment, 100% foreign ownership1, Creating a health care community, and government liaison services. focused geographically in arms length, would provide a number of exciting It became clear however that as the opportunities in terms of quality, region underwent its transformation, the competition, and economic development health care sector was still struggling. for the government. As Professor As one government official puts it, Michael Porter explains: “Dubai has become a leader internationally in a number of industries; clusters affect competition in however, Dubai’s health care arena was three broad ways: first, by still in the third world.”2 The Gulf increasing the productivity of Cooperation Countries (GCC) (Saudi companies based in the area; Arabia, Kuwait, Qatar, Bahrain, United second, by driving the direction Arab Emirates, and Oman) region was and pace of innovation; and third, undergoing a health care overhaul itself. by stimulating the formation of With Cornell’s entry to Qatar (thanks to new businesses within the a $750 million check from Sheikh cluster. Geographic, cultural, and Hamdan bin Khalifa Al-Thani) to institutional proximity provides establish a medical school, the race was companies with special access, on. Soon after, Abu Dhabi recruited John closer relationships, better Hopkins and Cleveland Clinic. information, powerful incentives, and other advantages that are In response, Sheikh Mohammed Al difficult to tap from a distance. Makhtoum, then crown prince, set out to The more complex, knowledge- improve the quality of Dubai’s health based, and dynamic the world care services. As everything else in economy becomes, the more this Dubai was “for business”, health care is true. Competitive advantage development was to be no exception. lies increasingly in local things-- The approach was innovative and knowledge, relationships, and unique: clustering health care within a motivation--that distant rivals freezone. This strategy would improve cannot replicate 3 health care quality, increase FDI, and place Dubai as a hub for medical In addition, opportunities to tourism. Dubai, not to be outdone by its invest in health care infrastructure were neighbors, successfully attracted coming at a very opportune time. The Harvard Medical School and Mayo investor profile was changing in Dubai. Clinic as its first strategic partners, A majority of investments had been in placing an Academic Medical Center the real-estate space; however, due to a (AMC) at the city’s core. saturated market, investors were now exploring other opportunities in more 1 By law, all companies need to be at 3 Institute for Strategy and least 51% owned by a United Arab Competitveness, Emirates national http://www.isc.hbs.edu/econ- 2 Interview with Shaher Bashir, Oct. 30, clusters.htm, accessed November 15, 2006 (Dubai, United Arab Emirates) 2006 sophisticated sectors such as IT and this ambitious project with a budget in Health Care.4 the billions of dollars was underway, challenges began emerging. The DHCC was an innovative approach to smorgasbord of projects, especially at attract world-class operators in Clinical DHCC’s infancy created an identity Care, Education, Research, Wellness, crisis. What the city’s mission: a real- and Biotech/pharmaceuticals. Twenty estate broker like the other free-zones in million square feet of desert converted Dubai? a quality police for the city’s into a clinical, residential, and operators? a medical tourism community commercial health care community. promoting spas, hotels, and wellness Plots of land were sold to investors both centers? in the Middle East and internationally for office buildings, hotels, private Challenges outpatient clinics, wellness centers, Complementary and Alternative (CAM) Dubai Health Care City offered an services, spas, hotels, education and innovative approach towards health care research centers, and commercial outlets delivery in a localized community, (banks, restaurants, pharmacies, etc.). At capitalizing on clustering various its finish, Dubai Health Care City is opportunities along the health care value estimated to include over 17 independent chain. This model is now being hospitals and over 350 independent replicated in emerging economies like clinical operators. Dr. Martin Berlin, India as well as developed countries like one of the architects of DHCC stated Australia. that the city was to provide quality health care in an integrated approach Yet, Dubai is a fairly new player in the from diagnosis to rehabilitation, market with the majority of growth over exploiting the complete value stream.5 the last decade. And while it does function as a company8 and is flush with While DHCC sold most projects to cash, it can often be compared to a start- investors to develop, a portion remained up with associated challenges. in the hands of the Dubai Health Care City as a source of sustainable revenues, Too many parents these included: a 5-star hotel, spa, clinical residences, Al Razi Outpatient Another challenge for DHCC is the office building6, and the Dubai owner(s) of the project, understanding University Hospital7. Yet, soon after this context is critical in understanding the culture that was created. The government of Dubai is in constant flux. 4 Interview with Mohammed Suleiman, Dubai is a semi-autonomous government Nov. 3, 2006 (Dubai, United Arab who controls its own finances and Emirates) economic and social policies, yet under 5 Interview with Dr. Martin Berlin, Nov. 2, 2006 (Dubai, United Arab Emirates) 6 Providing 150 clinical operators 8 “Dubai, Inc.” outpatient office space for lease http://www.forbes.com/logistics/2006/03 7 $3 billion state-of-the-art hospital to /02/dubai-DPWorld- serve as the Harvard Medical School Emmar_cx_daa_0302dubai.html March Dubai Center affiliate teaching hospital 3, 2006 the discretion of the federal government making and sustainable revenues. The based in neighboring Abu Dhabi. Dubai Health Care City had undergone in its first two years three transitions Sheikh Mohammed was not yet ruler with different missions: improving when he envisioned the creation of a health care quality, attracting foreign health care innovation in Dubai and direct investment, and finally sustainable mandated Dr. Martin Berlin, then chief revenue streams into the future. During strategist of The Executive Office, to this time as well, managers were coming develop this vision. This intent was to and going and the leadership of this improve the health care quality of Dubai. fledging organization was in constant transition. However, once Dubai Health Care City’s strategy was developed, Sheikh In addition to this challenge, DHCC was Mohammed put the implementation of now part of Tatweer which had the DHCC under the newly created aggressive revenue targets across all the Dubai Development and Investment daughter companies. In fact, interviews Authority (DDIA) under the directorship indicated that Tatweer was planning go of Mr. Saeed Al-Muntafiq. The mandate public with an IPO targeted in five years. of DDIA was to be a vehicle for FDI Tatweer was announcing new mega- into Dubai, therefore, the goal for DHCC projects frequently. Bawadi was under the leadership of DDIA was to announced in summer 2006 which attract investors from surrounding would lead to 30 hotels (30,000 hotel countries into the health care city. rooms) in a 2 km strip costing $27 billion. Dubai Health Care City suffered The first goal in Saeed’s strategy was to due to these new macro-projects. First, partner with brand names in the USA in human capital resources were taken order to increase the attractiveness of away from the organization especially investors leading to a sold out Phase I (4 the sales team who was now transferred million ft2) in less than one year.