There has been much wringing of hands and gnashing of teeth at the impending “death of PHI”…however, much as Mark Twain apparently retorted on news of his own demise whilst simply away from the US, “reports of my death are greatly exaggerated”…or are they?
There are more than a few similarities here. Not that PHI businesses are great writers and adventurers, but that a number of them do appear to be absent. A number of people therefore feel as though perhaps those PHI businesses have already died, or are in “a death spiral”.
Even before the virus changed the world, the reports that life was getting harder for PHI businesses was undoubtedly true. The market environment for a number of older businesses is getting tougher than it has ever been. For many years PHI has been assisted by a generous succession of governments who do not want to over-burden the public system with a great number of elective surgeries. Governments then end up needing vast administrations to control public health. The cost of PHI premiums relative to other costs of living were relatively under control, and well subsidised for consumers who had grown up simply accepting PHI as “what you did”. Wages growth was also helping maintain a healthy insured population.
Move forward to today and the costs of PHI premiums have been spiralling at a rate that the government can no longer afford to subsidise so readily. Alongside that wage growth has stalled, whilst other more essential costs of living have also increased enormously in recent years. It would appear to be the perfect storm, even before one starts to look into the future with increases in “lifestyle” diseases, alongside expensive treatments for more and more conditions. Somehow we are all going to have to work out how they can be afforded - whether in a public or a private system.
A number of PHI businesses have simply continued to sail directly into this storm in the most unseaworthy vessels, often seemingly unaware of the signs warning them of the need to invest in a major refit.
The market has been populated for years by a number of smaller mutual health funds, promoting their mutual status (and local or industry links) as a great reason for why people should entrust their health insurance to them. One of the greatest challenges for these funds has been to develop internal capabilities in sales, marketing and IT. Their inability to do so, leaves them seriously exposed to the changes in today’s consumer desires and behaviours. This is especially true when a number of the industries that they once relied upon for members have been shrinking for the last few decades.
In the last few years even this landscape has changed with the entrance of larger for-profit players. In a totally unreasonable way, these “for-profit” funds have a nasty habit of re-investing a proportion of their profits into delivering better sales and marketing programmes to drive acquisition and retention. Sadly a number of the incumbents have seemingly not had a plan for spending money on anything other than simply managing and paying claims. Similarly, the growth of comparison sites and online brokers has begun to dominate how consumers interact with health funds, utilising smart digital marketing technologies and highly focussed sales teams to acquire customers’ loyalty from the smaller (and even some larger) health funds.
One can see that huge competitive advantage could be gained by these funds making similar improvements. Taking as an example, the IT systems that a number of PHI businesses run today, they are mostly aged and really should be “self-isolating” now. They were designed before the internet age to do what computers did back then - compute a bit of data quicker than a team of people with calculators could. They were never designed with modern marketing techniques in mind such as product development even, let alone web integration, customer communications and value delivery.
This is just the beginning of the problem, which of course then makes it ridiculously difficult to move these businesses into the modern age, let alone the digital one. There are fantastic CRM systems around that could help move some of these businesses forward, but try connecting them to the current operating systems and just see whether you are really going to get value for money out of your significant investment in a new CRM system, or whether it is worth the hours of work-arounds your teams have to endure to get data in and out of the CRM system.
All of this is still going on behind the scenes from a customer perspective. And the customer’s perspective is changing rapidly. They are questioning the value of PHI in the first place, and on top of that being forced to work through difficult systems to get things done. Once they realise that there is so little being done to introduce efficient systems behind the scenes, they will baulk even further at premium hikes…no matter how often PHI Funds point out the rapid increases in claims costs for a host of other genuine reasons. The cohort of people PHI desperately need to attract have never experienced a world without Medicare. Older generations recall that world of long waiting lists, or an inability to receive much treatment unless they were a government health care cardholder. So the older people are desperately clinging to PHI policies out of experience and a knowledge that they will need it soon, whereas the younger, healthier group are often unaware of the consequences of not having PHI, both for them personally, and the finely balanced Australian healthcare system as a whole.
10-15 years ago, consumers who were happy paying their premiums were satisfied if the claims were settled in a relatively straightforward manner. In today’s world there are general insurers who are paying out claims instantly from an app. There have been years of advertising from PHI’s that you are going to get a lot back, and that has then been followed by price increases alongside wage stagnation. Consumers are then driven to seek out this better value that everyone assures them should be available. This desire from customers to be able to seamlessly and efficiently interact with businesses online is now growing by the day in a (nearly) post-pandemic world. There are no longer any excuses for businesses to delay implementing real digital platforms for their customers.
So, what can be done?? It seems the standard answer from a lot of PHI funds is to simply keep pointing to rising costs and ask for more government assistance, as though there was nothing anyone could do about it.
There are, however, simple strategies that could be implemented to connect more with what consumers are actually experiencing. Clearly the government is not rushing to address the ever-increasing claims bubble that is lifestyle related (diabetes, joint replacements etc etc), so what can PHI’s do to simply reduce the future claims impact? Most funds already have the data they need to deliver great results in these areas, and there are companies clamouring to work with them. To gain a competitive advantage from this data, there needs to be a mind shift that APRA has been pushing for a couple of years now…that PHI funds need to get in touch with consumers and actually start thinking about how to deliver value. They must stop expecting that a government will wave a magic wand again and get the participation rate increased through further subsidies.
Some funds are even starting to change operating systems, with varying degrees of success. There are a number of significant international technology players now circling Australia, as they have also seen the market opportunity presented by ageing and under-supported systems trying to deliver true customer value in the modern world. There has probably never been a better time to get someone in to start reviewing the digital infrastructure of your PHI fund and start to recommend the pathway to sustainable success. Everyone knows that the data for delivering great value is in these funds, they just need some help to unlock it and deliver it in a way that connects with modern consumers.
Last time we identified the 3 phases of this viral economic crisis:
Whilst unfortunately a number of businesses have already gone under, it feels as though most people are through the first phase of pure panic and are trying to work out how far into phase 2 we are. It seems likely that Australia is heading out of the virus black hole at the moment, but clearly there are large parts of Europe and North America in particular with a significant amount of work to do yet. It is also unclear as to whether the virus is really on a proper retreat yet, or merely waiting for everything to open back up again, before striking hard again.
Some things are becoming abundantly clear. The economic impacts of this pandemic are likely to bite extremely hard, and continue for years rather than months, and to think that all businesses will be able to simply “return to normal” any time soon is pretty unlikely.
I have recently read others describing this next 3-4 months in Australia as a “False Economy”, given the number of businesses being propped up by various government incentives. There is no doubt that this makes the end of September another massively important date in this crisis period. There are large numbers of businesses surviving purely on the generosity of government subsidies, rather than under their own steam.
In some cases these business were probably struggling to thrive even before the virus hit, but are now being made to feel the inadequacies of their positioning or strategic decisions over the last few years in a much shorter time frame than would normally be the case. Others have had perfectly good businesses stripped away from in front of them, now desperately flailing around trying to work out how to get going again. It has however given every one of these businesses an opportunity to review their activities, without necessarily having to resort to immediately slashing wages in order to survive.
At the very least it is enabling businesses to avoid the cash flow nightmares of multiple redundancies at a time when they can least afford it. More helpfully than that, this is a fantastic opportunity which needs to be well planned and taken advantage of wherever possible. If you are in this cohort of being able to avoid redundancies right now, then this means you have got “extra” people available, and at the very least are getting a good subsidy of your wage bill to free up cash flow for continuing operations. What the government would dearly love is for businesses to use, as far as is practicable, this extra time and money to set your business up to survive past September in the first instance, but ideally well into many more Septembers.
There is no text book answer on how to trade a business of any kind through a global pandemic. Everyone is learning, and the real survivors out of this will be those that invest in their business by trying new ideas, failing, learning and getting going again quicker than their competitors. The key to this is going to be building resilience into your business. Resilience is not just holding more cash than the next guy; it is also knowing what to do with it, and when; and also making sure you have the right people on your team. There are numerous examples of businesses “pivoting” rapidly at the moment and enjoying astonishing success. It doesn’t really need to be so dramatic, although if you can, maybe you should try! Simply reviewing how you do business, challenging the assumptions you have worked on for years may well give you a good enough opportunity to delight your customers and return more quickly to profitability.
It is also crucial to realise that everyone is learning at the moment, and most customers are likely to be going through exactly the same process…so maybe team up with some of them to try some new ideas, at least perhaps warn them you are trying new ways to make life better for everyone in your value chain, and beg some patience whilst everyone tries to find this elusive “new normal”. Customers are almost certainly keen to find new ways to do business with you - equally in B2B or B2C, so it is probably time to finally implement a proper investment in digital improvements, new products, or develop new channels to market to fit with these shifts in customer desires.
So to sit back and wait for September to roll around and horde as much cash as possible in the vain hope that all will magically be well, is the worst kind of False Economy one could contemplate…at least the False Economy created by all of this government support has a clear and valuable goal of trying to get as many of our businesses as possible through this economic crisis and trading profitably into the future with all of the resulting job opportunities and tax revenues that delivers. Make sure your business is not making its own False Economy, but is investing in how to adapt and thrive in an extremely challenging environment.
Cutting costs to maintain business sustainability and spending money are far from mutually exclusive.
If your cash is vanishing faster out the door in expenses than your sales efforts can pour it back in, then the focus on controlling costs needs to become an obsession. However care needs to be taken with identifying when and which costs to cut. There will be occasions where spending some money may actually make even more sense, if you can possibly afford it. Cutting some costs now may also force you on to a terminal course for your business, unable to make your way back out the other side quickly enough to be competitive and profitable in the long term.
Clearly all businesses need to batten down the hatches quickly whilst this particular virus-based storm front rages towards and over everyone. It is still unclear as to whether there will be a calm after this storm, or whether we are just reaching deep into the Roaring Forties with a cyclone turning into a gale, into a downpour and possibly back up to a gale again.
This is where cool heads need to prevail. Spending time right now on setting your business up for the prevailing conditions, and for the next few months is going to be crucial for weathering this storm. This may also mean you are going to be better off spending some money wisely to make sure you can firstly get through the storm, but more importantly can set off more quickly out the other side.
You can be the best widget maker ever, but that doesn’t necessarily mean you are the best at trying to work out how many widgets are going to be needed, nor what shape they may take in the coming months, nor how people want to buy them, or if indeed they are ever going to want to buy them again! Ideally then the best widget makers should be lining up to consult with the best strategic and business thinkers they can find and afford, to try and help them continue their businesses successfully into the future. They should also be preparing to review every element of their business to see how it is likely to need to change over the coming months.
So with the shameless business plug covered…what should we all be thinking about now?
There seem to be 3 distinct phases to this particular journey into previously uncharted waters. With the standard sailing analogies included.
Those who get through these phases the quickest will be the winners long into the future. The best way to navigate quickly and safely through this time is by having a plan that allows you to see where you want to be at the end of this storm, so the sooner you start working on that plan the better. It is not too late to start working hard on this now, but once others are back up and running, it may be very hard to catch them.
Whilst this is all easy to say, the details of getting through them are complex and uncertain, will require hours of planning and an ability to be supremely flexible. It may also need a little bit of investment in dollars as well as time to make sure your business remains On-Course during and long after these storms.
Being On-Course is probably even more critical now that than it has ever been.
20 years ago it was undoubtedly the case that some elements of running a business were a lot easier. The world was apparently “simpler”. Some of this is down to the very technological changes that have “enabled” businesses to become more efficient, and some of these have also led to changes in the ways consumers are now able to interact with businesses.
Spring forward to today and we constantly hear of the importance of CX, UX, EX, engagement, authenticity, etc etc, as though they were new ideas - they aren’t. You always had to engage with your customers and offer an experience at the very least commensurate with the value they perceived. The best businesses always did this more authentically and that was often achieved through excellent employee engagement. Indeed those businesses who had a clearly articulated strategy, vision and values that was well communicated, believed and followed throughout their organisation always seemed to be able to serve customers better, and grow sales better - for me working at Waitrose and then Bunnings many moons ago taught me the value of everyone in the entire company understanding where “due north” is, and I continue to bang on about it all of the time…. These businesses were relentless in making sure that everything that happened internally and externally was completely aligned with the overall strategy: from branding, to communications, to store layouts, individual KPI's and so on.
In the old world (not that it was THAT long ago!) it was almost impossible for customers to understand the corporate culture of most of the businesses they interacted with; or to judge their level of corporate responsibility (if by chance they felt the need to do that kind of thing); or to uncover how ethically they may or may not have sourced their products and raw materials. The disconnects between the public facing side of the business and “behind the scenes” was significant and a number of businesses got away with it through good or great execution of at least a couple of P’s...normally product, price or promotion.
Of course these businesses would often not be quite as profitable as others, maybe didn’t grow quite as quickly with teams not working perfectly in unison, but they could muddle through.
The big differences appearing ever more rapidly and urgently today are to do with how customers are able to experience your business. The customer journey can now start almost anywhere. Today your employees from back to front of house are potentially on display through one social media platform or another. Employees are now using Glassdoor and other employer review sites almost as religiously as the plethora of product review sites available to customers to find out about all of the dirty little secrets that would previously have remained exactly that. Your brand and its communications are no longer just in one or two media which you have complete control over, they can be everywhere at any time, often with a scary lack of control!
That is at the extremes of the spectrum of success & failure. The wonders of this overly connected world mean that it is ridiculously easy for consumers to sniff out whether your business really lives its vision and values....so beware of misaligned teams, objectives, communications in any business big or small, not only is it going to lead to the inefficiencies it always used to, it could also lead to diminishing sales and customer appeal that has the potential to make those inefficiencies terminal.
Who are we?
What do we do?
We have taken this milestone as an opportunity to kick off our website blog and post to LinkedIn as well. To avoid boring everyone to tears I have split up the first “birthday message” into 2 parts - What have we done? (The more self-indulgent part of it!) and What have we learnt?
This one is:
What have we done?
Unsurprisingly we have continued to do a lot of work in and around building materials, working in both commercial and residential markets, with materials suppliers, retailers and contractors. As a step out from there we have also spent a long time working in private health insurance, and allied with that some optical clinics as well. More recently we have started spending some time closer to the start-up world working with a communications business who is focussed on comms experimentation and helping start-ups to attract attention and grow. Next, we are about to launch into running seminars alongside some other great small business people, aiming to help small businesses grow into bigger businesses at a pace that makes sense for them…you will see more about that in the next week or so!
The projects have been many and varied within Strategy, Marketing and Sales, including a number of diversions into helping with IT / Digital projects in order to achieve some of the sales and marketing goals we have developed with clients. Our projects have varied greatly: complete business reviews (going deep into where the value is within a business and making sure it is maximised sustainably for the owners); to segment and new product development work with really targeted, defined goals; to retail store updates; category planning for retail stores; sales force effectiveness reviews; business and branding strategies; marketing comms plans, assistance with advertising and PR Campaigns; website reviews and re-designs; helping to recruit sales and marketing teams; merchandising work in-store for suppliers to Bunnings (from normal shelf replenishment to major revamps of layouts etc). The clients have been “one-man bands” up to multinationals, all with their own unique challenges to overcome.
Along the way we also bought Auscan Imports. Funnily enough we practice what we preach. We have always had our own strategy for long term profitable growth, and it included at some point having our own distribution business to run alongside the consulting & merchandising one. It also means we actually do a lot of the things that we suggest to clients in the real world, based on real experience - rather than just being theoretical consultants with lots of great ideas, but absolutely no idea of how to implement them in a small business, with all of the constraints that implies.
To all of the great clients we have dealt with so far, we thank you for helping us achieve the milestone of 5 years and still going strong, and for making sure that we never stop learning!