The Risk of Focusing on the Business of Healthcare and Real Estate Stifles Growth and Earnings
How Pivoting from Care to Independence can Draw Attention from Anticipated Boomers to Supercharge Revenue Growth
How many times have you driven to one of your communities only to realize you are low on fuel and energy; ultimately pulling over at a gas station only to walk in and find shelf after shelf full of junk food: chips, doughnuts, candy bars and sodas?
Many gas stations have even eliminated the water feature on their fountain machines, forcing you to buy it bottled or to opt for a Coke or Pepsi instead. Maybe, if you’re lucky there’s a half rotten banana near the cash register but otherwise, you are out of luck. It’s junk food or nothing at all in which case you probably leave in frustration with something in your hand you swore you would not eat!
We’ve all been there and while I love nothing more than a bag of Doritos, it’s not my go to pick and I would much prefer something healthy.
WAWA CREATES RAVING FANS WHILE SHIFTING FROM A PLACE TO GET FUEL TO A PLACE TO EAT WHILE TOPPING OFF
The US-based retail chain Wawa serves over 600 million customers a year in more than 700 stores in six states, with annual sales approaching $10 billion. Customers are so gaga about Wawa that some have tattooed its logo on their arms, can you imagine?
If a gas station can create this type of success, imagine what you can do as a seniors housing operator or investor? There is so much potential to transform our industry and its far-reaching impact. To do so we must continue our quest to think differently.
Wawa’s blue ocean of competitive free space had historically been created by the way it perfected the intersection of its three businesses- convenience store, fuel retailer and food service- under one roof, while delivering incredible customer service. Their in-store sales have historically been more than three times those of the average 7-Eleven.
Despite this success, in 2009 Howard Stoeckel, then its CEO, saw Wawa drifting into the red ocean. The economy was tough after the global financial collapse and competitors were catching up. The executive team went back to work, to define a new blue ocean space and to protect its future viability.
Using the blue ocean tools, we’ve been highlighting in this book club series, Wawa identified that food service was the weakest link in the company’s overall offering and the one with the greatest profitable growth potential. Howard reflected that “if you sell gas, people traditionally have assumed you can’t be a high-quality food restaurant.” The executive team set out to make a blue ocean shift and set its sights on completely changing this perception. It aimed to create a leap in value in the quality of freshness and healthfulness of the food Wawa sold at the best possible price that would recast Wawa from a convenience store and gas station that also sells food, to a leading quick service restaurant that also sells gas and convenience items.
CHANGING CONSUMERS PERCEPTION ABOUT IT’S PRODUCT PAYS OFF BIG FOR WAWA
The RESULT of Wawa’s blue ocean strategy was a total rethinking of what food to offer, how fresh and healthy it had to be, how to display it to be inviting and appetizing; and how to make the selection process easy and food fulfillment fast. All at the best possible price for buyers, this clearly was no easy task!
Now Wawa offers freshly baked breads, fresh salads like kale and quinoa; healthy wraps and soups; made to order hoagies with fresher and more innovative ingredients; hot lunch, dinner, and breakfast sandwiches; and what is described by some as coffee nirvana. With this RETHINKING, food sales skyrocketed, as did the quality of the overall Wawa experience. The power of its blue ocean shift is reflected in the numbers. Today, WAWA’S PER-STORE FOOD SALES ARE AHEAD OF MCDONALDS PER-STORE SALES. That’s shocking to me and inspiring!
CREATING A NEW BUSINESS MODEL THAT DRIVES PROFIT MARGIN WHILE OFFERING INCREASED CUSTOMER VALUE
The team built a business model for the new food and beverage offering that enabled Wawa to earn an aggressive profit margin and hit its aggressive cost targets too. To achieve this, they eliminated many things that quick service restaurants offer such as in-store tables and drive throughs. The key to its low costs and efficiency are in the dramatic differences in its behind the scene operations.
Wawa partnered with a grocery logistics leader and set up its entire food supply chain by partnering with bakeries for its freshly baked offerings and with Taylor Farms and Safeway Group for all the prepared fresh foods. In order to get fresh food delivered to every store, Wawa partners with Penske Corporation, which manages a cross-dock distribution facility where the perishable food is delivered daily.
AND, WAWA OPERATES NONE OF THESE ACTIVITIES OUTSIDE OF A SMALL GROUP OF EMPLOYEES WHO WORK WITH ITS PARTNERS ON COMMUNICATIONS AND QUALITY CONTROL TO ENSURE RELIABLE, HIGH QUALITY DELIVERIES DAILY.
By applying the blue ocean approach, Wawa was able to identify what it would take to create a leap in the quality, value, convenience, and presentation of food for customers that would raise the convenience and quality experience at the same time. Realizing they didn’t have the expertise in food preparation to achieve its goals, Wawa positioned itself to move fast and at low cost by partnering with the best, to ensure it was done right rather than inventing the wheel themselves. Interesting!
Currently Wawa’s fresh food and beverage account for more than 40% of Wawa’s merchandise sales. They have grown from what had been a traditional convenience store to a restaurant to go with fuel.
WHAT CAN YOU LEARN FROM THIS CASE STUDY TO EVOLVE YOUR SENIORS HOUSING OPERATION?
SENIORS HOUSING IS AN INTERSECTION OF HOUSING, HEALTHCARE, FOOD/DINING, TRANSPORTATION, HOUSEKEEPING, MAINTENANCE AND ACTIVITIES
As I continue to work through this book club study and this chapter, it stands out to me that we are trying to be experts in many things. Trust me, I’ve been there and have learned the hard way that you do best when you hyper focus on your zone of genius which is typically one or two things. What is it that you do best as a company? Imagine if you were to outsource everything else and focus solely on that? Interesting thought, right?
Take our brief survey and we’ll email you the result to share best practices across the industry. This insight may give you the spark you need to venture into blue ocean waters.
WHAT’S THE CURRENT PERCEPTION OF SENIORS HOUSING BY PROSPECTIVE BUYERS?
Unfortunately, it’s not good. When I was on recent trip to Israel, there were several baby boomers who were out with us riding thirty miles a day. I asked if they would ever consider independent living, even active aging and the response was a resounding “No!” They saw it as something perhaps for their mom or dad and the experience terrified them. It was not seen as a place to thrive but a place to die…still.
The seniors housing space is still perceived by many as a nursing home. It’s time we change the perception and that change begins with you, how you position your community and how you market. As you envision the future of your portfolio, as Wawa did for its convenience stores, think with the end in mind – how do you want people to perceive your communities? Build the brand backwards and deliver on it. Is it a place for seniors to come to live or a place for seniors to come to die? If it’s life, exactly how are you creating life experiences they couldn’t have on their own?
HOW CAN WE CHANGE THE PERCEPTION OF SENIORS HOUSING?
And how can we create a leap in value to recast seniors housing from a nursing home to a thriving environment where people have freedom to live their lives without the constraints of managing a home and where healthcare can be received should they need it?
As I pondered the many buyers on my Backroads cycling trip, 80% who were boomers, I realized that none of them would willingly move to an independent living or active adult community until they had to. They are too busy traveling, drinking wine, savoring amazing food, seeking intellectual stimulation, biking, hiking and more. These people are like you and I, but in a slowly declining body. They don’t want to play bingo, do chair yoga, a Bible study or take a trip to Walmart, do you?
We need to shift and create communities for people, not old people. They want to thrive, be active and be young as long as possible – who wouldn’t? Just because you are old doesn’t mean you aren’t a vibrant person who aspires to do the same things you do now, outside of physical limitations of course.
This is my CHALLENGE to you, how do you deliver something people want, something people get excited about and see as transforming to their lives?
FIVE WAYS SENIORS HOUSING OPERATORS CAN SHIFT, STREAMLINE AND INNOVATE OPERATIONS
As you innovate, you can also lower cost without sacrificing buyer value. Here are a series of questions you can ask to uncover possibilities for your own blue ocean shift:
- Can we eliminate high-cost, low value-added activities and facilitates or replace them with low cost-effective ones? I can’t help but immediately think of activities in our industry, even transportation. We all know that activities as a rule are incredibly bland, repetitive, poorly attended and uninspiring. Transportation cost can be replaced or eliminated entirely by partnering with local drivers from Uber and Lyft to private transportation services depending on current usage. Even community gyms…they sit empty, collecting dust, while we highlight them on tours pretending, they bring a grand value that ultimately is rarely realized once a resident moves in. How else might you use this space, in a way that brings greater value to residents at a lower cost? Could you create a medical center where physicians do on-site rotations, garnering a monthly rental fee to the community while offering convenience to residents, a win-win?
- Can we shift the location of our offering to lower cost real estate? One example is looking at local colleges as they seek ways to boost their revenue. With enrollment in decline, is there a way to leverage their offerings to your own residents and create a partnership that is a win-win? Imagine the opportunity for residents to attend classes, dine with students, participate in campus organizations and more!
- Can we truncate the number of parts or steps in the resident delivery process? What if rather than forcing residents to eat the majority of meals in the dining room you partner with a food delivery service to have groceries delivered to residents so they can maintain independence and dine in their own apartments? This reduces the need for large dining halls, kitchen and wait staff while allowing residents to maintain a skill they have relied on their entire lives, cooking!
- Are there off-the-shelf technologies we can use or activities we can digitize to reduce our cost? Many communities fail to bill for care services provided. Plugging in a white labeled app that tracks care down to the minute can be transforming to your operation and bottom line. caringondemand.com is a perfect example of off the shelf technology that operators can use to track care delivered by the minute, plug in caregivers for a fraction of the cost of agencies when experiencing staff shortages and more.
- Can we replace raw materials with unconventional, less expensive ones?
Diving into these same questions, as shared in the last blog, citizenM Hotels discovered an innovative way to lower its building cost dramatically while simultaneously raising the quality of its rooms. With construction being one of the largest cost factors, moving to only one type of guest room allowed them to move to modular manufacturing where rooms could be built at far lower cost at greater speed, higher quality assurance and consistency and at the same time optimized sound insulation and wiring using value engineering. This innovation helped citizenM cut its room construction cost by as much as 35% compared to the average four-star hotel and its overall construction time by around 35-50% compared to other luxury hotels. Can you imagine the impact of this on seniors housing new construction?
LOTS OF THINKING TO DO!
As I wrap this study of Blue Ocean Shift, I am inspired and know that ideas will begin to bubble to the surface that bring a change in the perception that future buyers have of seniors housing. I believe that the biggest shift we can make is in our thinking of the industry as healthcare and real estate to something that is more symbolic of freedom and independence with the security in knowing care is there when and where it’s needed; sort of like Wawa making fuel secondary to food. Every great innovation begins with a single thought. While the process can be frustrating, even overwhelming, the impact can be transforming to your organization and the offerings provided to your future residents.
If you want to go on a 12 month journey of exploration, establishing a team of employees who work ON, rather than IN the business; pushing the limits of your offering, brand and customer experience- all impacting revenue and net operating income as well as creating new, blue ocean space, text me at 813.390.3349 to set up a few minutes to talk about the Bild & Co Seniors Housing Evolution. Using an executive retreat format with executive coaching, we can facilitate the change you seek.
As we wrap our Executive Book Club study of Blue Ocean Shift, stay tuned for what’s coming up next!
Enjoy our book club study? Please, share it with your company’s executive team and study together or your industry peers by clicking below. Whatever you do, smart operators TAKE ACTION and they do it relentlessly. You can too!