Growth and Expansion: The Key Elements

With relentless growth happening in the healthcare industry, over the last few years, the question of how to grow and expand is becoming more and more pertinent. There are hospitals that are looking for ‘greener pastures’ outside India. Then there are ones that are looking at creating a national brand for themselves. Some players are looking at serving the niches which may be the key to their assured profitability.

Amidst all of this, there are two trends that seem to have emerged. The first one is what I call the easy way to expansion. It will be useful to add that the easy way is not the sure shot way. This easy way refers to the nimble and spontaneous decisions being made in order to expand the scope of a hospital. The main people who matter will get together in room and talk briefly about an idea is really great and how it will be tremendous success. They may site a couple of examples at the most in support of their idea. May it be a small nursing home or a big trust hospital, if the right people at the top think that growth or expansion in a certain direction along a certain path is good for the hospital, they go for it. No research is done, no facts are dug and hardly any questions are asked. If the growth initiative backfires, there is always some person or some circumstance that can take the blame for it.

The second way to expand and grow is by research and in depth study of the likely direction to go and the resources required for the same. This is a more systematic and safe approach. I read a quote somewhere which said, ‘If I had 6 hours to cut a tree, I would sharpen my axe for 4 hours and use the remaining 2 to cut it.’ Interestingly, the hospital promoters are more inclined to cut a tree as soon as they get the axe. A phenomenon that happens because people have little or no knowledge about what to look at while planning for growth or expansion. What I am about to discuss here may also be relevant to the hospitals that have not started yet and that are looking at setting up a facility in near future.

The key [and very basic] elements for the hospitals to look at before entering a new market or launching new services or before going in for any expansion are as follows:

Economy:

The economy of the country is the first key element. If the economy is growing, it will mean more money in the system. It will also mean more purchasing power with the people. A small hospital in a small town may not be directly affected by the growing economy. But the effect will certainly be there in some form or another. The opening up of Indian economy, for example, has brought in many health insurance players. The TPAs are a major force in the healthcare in the metro cities at least. It is the trends like these that need to be seen and taken into account before planning to get into an uncharted territory. Another use of the opening up of the economy has been the import of technology to India. It is not only easier to acquire latest technology, it is also easy to acquire the funding for this technology.

The hospitals also need to look into the national data related to the work that it does, or is planning to do. For example, the increased life expectancy compared to 1960s, the changing disease profile, the patient to bed ratio in India, the patient to doctor ratio in India, etc. can be some relevant statistics. I would reckon that you go in for any and all kind of data that is even remotely related to your work. Even if you think it will not have a bearing on your business, it still is advisable to be well versed with the larger picture.

Target Segment[s]:

Understanding the key factors that drive the market where you will operate is another area of great importance. The great generals have a pre-knowledge of the battlefield before they actually fight a war there. They know the climate, the length of the grass, the landscape, the thickness of forest, altitude, availability of water, etc. even before their troops reach the place.

What are the important indicators that you can look into before pitching at a target market? You can certainly start with finding out the size and the buying strength of the target market. Size will include geography, demography and buying power in the market. I personally have gone to the extent of even calculating the number of cars and two wheelers that are being bought and sold in the target market in order to study the feasibility for a new hospital. The average family size is another key indicator. The number of people in various age groups should also be looked at.

Another important factor that many people ignore in targeting a market is the social traditions and culture of the place. The fate of Kentucky Fried Chicken is an example. What they faced in Bangalore a few years ago is an example of how the local market sentiments can hurt a business. For healthcare services, it is imperative to understand the culture and social values of the target market. The festival season, the marriage season, the strength of religious sentiments, the family values in the target market, the belief in superstitions, eating habits, etc. all have a bearing on a hospital’s business.

The level of education and awareness levels may also affect your chances in one way or another. A maternity home in a well educated neighborhood will do business differently than a similar set up located in a less educated small town. The trends in the target market may also act as a key driver to make a decision to enter that market. The trend of having painless deliveries may be a key driver for one of the maternity homes discussed above. The other maternity home may find itself doing more MTPs. The reason could be a trend of not using contraceptives due to lack of knowledge about them.

Customers:

What kind of a business will succeed if does not have detailed knowledge of its customers? Your new target segment may consist of different kind of customers than your existing ones. The buying behaviour may be different, the perception about getting surgeries done may vary or the sensitivity to the price may not be the same. The beer companies in Germany know that an average German drinks 500 litres of beer in a year. The soap companies in France know that an average French male uses only two cakes of soap in a year. Cola giants know that an average American puts 1.5 ice cubes in a glass of cola if it is not chilled enough for him.
While studying your consumers, it always pays to study how they buy a service.

• What is the purchasing process? On an average how many people will he consult before choosing a particular hospital? Who will those people be?

• Does the old man in the family have a say about the choice being made?

• Who are the various opinion leaders amongst the customers?
• What kind of savings do they have in their banks?
• What percent people will have health insurance?
• What are the physical and psychological barriers to purchase for our target customers?

These would be the first set of questions that every hospital must ask before taking up an expansion project.
They should also determine the sets of expectations which the customers will have from the hospital as a brand and as a service provider.

• Will the hospital be able to meet and exceed the expectations?

• Will the hospital be able to involve the customers in the service delivery process so that the satisfaction levels of customers remain high?

• What are the present unmet needs of the customers?
• What is the tangible proof for that need?
• How strongly is this need being felt by them?
• What are the ways in which we will be able to satisfy these needs?
• How much will they be willing to pay for this need being met?
• Will that price be viable for us? • What is the way to measure whether or not the needs are being satisfied by us in a proper way?

The answers to these questions may lead to another set of questions. In the end you will know what are you headed towards.

Competitors:

The competition in the healthcare is heating up. It is unlikely to become any cooler in the near future. The hospitals looking to set up new facilities or introduce new services need to look into the expected rivals and the intensity or rivalry beforehand.

• One of the obvious places to look at is the financial muscle of each of the competitors. It is a known corporate fact that the competitor with deeper pockets is more likely to win the war for more market share. Apart from the financial muscle there are several areas that must be measured and taken into account. The following table attempts at demonstrating how to analyze the various competitors on various parameters. The competitors are measured against your self on a scale of -10 to +10. The negative marks indicate that a particular attribute is a weakness for the player.

• Another useful study is to predict how your competitors will react to a particular strategy on your part. This study can be very useful. In fact, on occasions, you may even get your competitor to react according to your sweet will by taking certain actions or making certain public declarations. It is like making a TV react by pushing certain buttons on the remote control.

• A smart general will not get into a war till he has already won it. He will only attack once the victory is already ensured. Smart organizations do the same. It may be foolhardy to launch an offensive against all competitors. You must be able to select which ones to confront and which ones to avoid. Sometimes avoiding a battle is a victory in itself.

• The growth and expansion should be planned by taking into account the competitive standing of the organization. If you are a market leader, your expansion plans will have to be different than if you are a number four player. It is important to understand that there are leaders, challengers, followers and niche players in the market. Your growth and expansion plans must be consistent to your role in the market place.

• It is also very important to safeguard yourself against potential competition. If you are looking at medical tourism as your growth strategy, for example, you should know that the competition may catch up soon. How can you create an advantage for yourself right now so that the competition is unable to catch up with you in future? May be you can create such a value proposition for the target customers that the competition finds it impossible to replicate. May be you can get into a segment that has very high entry barriers and the competition finds it hard to get in.

• The ability and scope to differentiate yourself amongst the competition is also a prime factor in competitive analysis. if there is enough scope to differentiate and position yourself in a unique way amongst the crowd, you must consider that as a great strategic advantage.

• You must also develop yourself in the science of gathering market intelligence. What your competition is up to must be known to you at all times. There are myriad resources which will help you get important information. An employee at the right place in the rival camp is one such source. The press notes and statements made by the competition is another source. The outsourced services like catering and housekeeping of the competitors can also divulge some important information. The Chartered Accountants and Lawyers are sometimes known to give away information which can be of use. The financial statements if read by an expert can reveal a lot. The web site and other promotional material used by the competition can be useful as well. Some people talk about morals and ethics. Let me assure you, no one will serve the keenly contested market share on a platter to you. It is the survival of the fittest in the market place. Having critical information about the competitors is an important tool to plan future growth and expansion.

Self Analysis:

Lastly, it is very important to study where you are at present before going ahead. It is climbing a mountain. You must know where you exactly are and where you exactly want to be. You must be clear about the probable difficulties ahead and how equipped you are to tackle those difficulties. You may want to ask yourself a few questions before getting started.

• Do you have the resources in terms of people and money to not only create a sustainable lead in the new venture, but also to maintain it overtime?

• How much will actually be required in terms of these resources on your part?
• What are the various places to acquire these resources?
• Are these sources also available to the competition?
• Is the proposed growth plan in accordance to the values and principles that you and your organization abide by? In other words, is the future consistent with the vision of your organization?

• Will the brand equity be enhanced or diluted by the proposed growth plan?
• In case the plan backfires, is there a back up plan? What is it?
• What are your inherent strengths and weaknesses as an organization? Look into the human resources, finances, technology, services, costs, location, growth rate, brand equity, customer satisfaction and loyalty, etc.

• Will the new plan give a sustainable competitive edge to you? How?

The journey to growth and expansion is fraught with many blind curves and surprises. One wrong decision can be the difference between achievement and loss. So study the key elements deeply and ask a thousand questions before you embark on this journey.

Bon Voyage.

Vivek Shukla
mail@vivekshukla.com
Healthcare Marketing Consultant

This article has been published in Express  Healthcare - www.expresshealthcare.in