Seniors Housing Investors and Operators Find Themselves in Red Shark Infested Waters
How Independent and Assisted Living as well as Memory Care and Active Adult operators can create new market space and make the competition irrelevant; entering a Blue Ocean Free of Competition
My husband Dave is a French fry fanatic and no matter how hard he may try to resist; the wafting smell of hot fries always lures him in. Perhaps you feel the same…
While most of us eat French fries when dining out, many people around the world make them at home. Small appliance maker Groupe SEB, a French multinational founded in 1857 produces French fry makers, and not too long ago found themselves facing intense competition and margin pressure. Sound familiar?
In fact, the small appliance industry was shrinking 10 percent a year in value.
Group SEB made a conscious decision to break away from the competition, increase market share and grow margins. The problem was that the executive team didn’t know how to achieve this goal when price was the only thing that seemed to drive sales. Taking a leap of faith, the team started by IDENTIFYING and CHALLENGING the industry’s most basic assumptions as it related to the French fry appliance. In doing so, they had a revelation.
The team discovered there were two facts that everyone accepted without question that defined the industry.
- Making French fries required frying
- Frying required a lot of oil
In digging in, there were a host of problems.
Making fries required 2.5 liters of cooking oil and that was expensive. Once hot, the oil made the fryer dangerous and once cooked, users had to figure out how to dispose of the oil, making clean up difficult. Lastly, all that oil makes fries both unhealthy and fattening.
Challenging the accepted norms led the team to REDEFINE the PROBLEM of how to make the best in class fryer that could make mouthwatering healthy, fresh fries without frying.
The result was ActiFry, a whole new type of French fry maker that requires no frying and uses only one tablespoon of oil to make two pounds of fries with about 40% fewer calories and 80% less fat than the same size serving of traditional fries. The appliance is easy to clean and has no safety or oil disposal issues. The fries are crunchy on the outside and soft on the inside providing for a healthy, lower-calorie, yet delicious fry that inspired Oprah Winfrey to tweet how much she loved her ActiFry, “This machine ActiFry has changed my life…and they’re not paying me to say it!”
Well, we all know what happens when Oprah endorses a product. The rest is history. I’m even thinking I need to order one, so Dave doesn’t have to resist those fries anymore!
Today, a good ten years later, ActiFry remains the market global leader. In fact, with the launch of ActiFry the industry also grew by almost 40 percent in value, pulling into the market brand-new customers who had never bought an electric fry maker before.
A BLUE OCEAN SHIFT FROM COMPETING TO CREATING A NEW MARKETPLACE
If Groupe SEB, with over 150 years behind it was able to shift FROM COMPETING in a crowded existing marketplace to CREATING A NEW MARKETPLACE, with new buyers; imagine what you can do. It’s a French fry appliance! This is the perfect example of a Blue Ocean Shift: A systematic process to move your organization from cutthroat markets with bloody competition; think of it as red oceans full of sharks, to new markets devoid of competition or wide-open blue oceans.
SENIORS HOUSING: FROM MARKET COMPETING TO MARKET CREATING
Seniors housing is ripe for a Blue Ocean Shift.
- Supply exceeds demand
- Tightening profit margins
- Rising cost
- Stagnant or declining sales
- Market share battles
Demand is down (compared to supply), costs and competition are up and many organizations are struggling financially due to lost revenue tied to vacant units, discounting and care provided yet not billed for due to poor process. Assisted living, independent living, memory care, active adult and even CCRCs need more creative strategies to unlock new value-cost frontiers along with profitable new growth horizons. We need a Blue Ocean Shift. Blue Ocean Shift: A systematic process to move your organization from cutthroat markets with bloody competition, what we think of as red oceans full of sharks, to wide-open blue oceans, or new markets devoid of competition, in a way that brings your people along.
INSTEAD OF FOLLOWING THE LEADER, BE THE LEADER
Executives often accept and act on two fundamental assumptions.
- Market boundaries and industry conditions are given, you cannot change them and must build your strategy upon them.
- To succeed within these environmental constraints an organization must make a strategic choice between differentiation and low cost; it can deliver greater value to customers at a greater cost and a higher price, or it can deliver reasonable value at a lower cost, but it can’t do both. Hence, the essence of strategy is seen as making a value-cost trade off.
The question within Blue Ocean Shift is this: Can’t organizations shape the market boundaries and industry conditions they face? Can’t they create strategies that BREAK the value-cost tradeoff in pursuit of differentiation and low cost?
In our example, Groupe SEB redefined the boundaries of what it meant to cook French fries. The company didn’t make a value-cost trade off, it broke it and made a Blue Ocean Shift beyond what other small appliance companies had ever thought to do while growing the value of the industry.
LET’S DIVE IN TO HOW THIS APPLIES TO INDEPENDENT, ASSISTED LIVING, MEMORY CARE, ACTIVE ADULT AND CCRC’s
To effectively participate and get the most out of this book club study I challenge you open your mind to WHAT CAN BE instead of limiting it to WHAT IS right now.
Challenging the accepted norms led the Groupe SEB leadership team to REDEFINE the PROBLEM of how to make the best in class fryer to how to make mouthwatering healthy, fresh fries without frying.
In next week’s blog, still contemplating Chapter one, we will IDENTIFY THE SENIORS HOUSING INDUSTRY’S FUNDAMENTAL ASSUMPTIONS (speaking broadly across all levels of care), problems, will challenge the norm and redefine problems, while considering new offerings and in turn new buyers we’ve never thought to court before.
To get the most out of this book club series, participate in our thought leadership exercise by offering your thoughts on the topic through a quick survey, taking less than two minutes. Results will be shared in my next blog.
If you would like to embark on a six week study with a Bild & Co Executive facilitator, to ensure you follow through and create your own blue ocean, email firstname.lastname@example.org with the subject line FACILITATOR and I’ll reach out to you within 24 hours to strategize an action plan.
To Your Success,