Home' Australian Ageing Agenda : AAA May-Jun 2013 Contents An 'immature' industry
consists of a large number
of small producers or
suppliers. Eventually a
'mature' industry evolves
and it becomes a small number of large
producers or suppliers. Aged care is an
immature industry and since 1997, the
Australian Government has been trying to
make it a mature one.
The 1997 Aged Care Act was designed
(as in farming and chemist shops) to
encourage providers to 'get big or get
out'. It has had only mixed success with
amalgamations and consolidations but
the process will continue. The aged care
industry will continue to undergo reforms.
In this context, a challenge for boards
is to recognise the extent to which they
are now running significant businesses,
with significant director responsibilities.
Directors help to develop the aged care
organisation's overall strategy - as distinct
from getting bogged down, say, in the
management details of furnishings.
THREE BIG QUESTIONS
Here are three big strategic questions to
stimulate discussion at board meetings.
1. Are we becoming complacent?
The time of greatest danger comes at
the time of greatest success. There is
no single 'finishing line'. A successful
company one day can become a failure
shortly thereafter. There is a risk that a
company or organisation can become self-
satisfied and complacent.
In corporate governance terms, the
seeds of decline can often be spotted at
least three years out. But the board has
to be alert to the faint warnings of danger,
and not necessarily be overwhelmed by
what seems to be continual good news
from the CEO.
For example, there were clear
warnings signs about the impending 2008
'global financial crisis' but they were
ignored. Many finance sector people were
so busy making money that few asked
what could go wrong. Life in the credit
bubble seemed to be going along so well
that few could envisage a crash.
An aged care business model that
works well in one era may not work so
well in a later one. There is no single
formula for success
2. Are we doing enough thinking for
Customers don't always know what is best
for them. Innovative car maker Henry
Ford said: "If I had asked my customers
what they wanted they would have said a
By all means keep close to the
customers but don't rely on them for
business directions -- in effect, they rely on
you. For example, no one was pressing for
the invention of the transistor, computer,
Sony Walkman, or Internet. But once they
came along they were very welcome.
A good introduction to this concept
is the best-selling book Blue Ocean
Strategy by European business scholars,
Professors W Chan Kim and Renee
Mauborgne. 'Blue ocean' is new market
space -- in contrast to 'red ocean', which is
the contested market space (think of all
the blood in the water from the fighting).
The blue ocean intention is not so much
to beat the competition -- as to make it
irrelevant. Blue ocean thinker, Henry Ford,
invented the mass-produced, inexpensive
automobile, rather than contest the red
ocean of expensive, elite automobiles.
Another example is Yellow Tail
Australian wine. Americans don't drink
much wine because they associate it
with sophisticated Europeans learnedly
speculating on vintages etc. Americans
may have money but they don't have
that sort of 'class'. Yellow Tail is the
biggest selling foreign wine in the US.
It comes in only two versions red or
white: even an American can tell
Another example is the Canadian
reinvention of the circus. Traditional
circus companies have run into
problems with animal liberation
activists; and anyway, kids are more
interested in computer games than
clowns. Cirque du Soleil (formed in
1984) has no animals and caters for
adults via elaborate acrobatics and
theatrical settings. It can also charge
much more for its tickets.
Management & governance
Blue skies and green fields may be appealing concepts in
business terms but it's the 'blue ocean' strategy that can deliver
the quantum leap for the clever and innovative aged services
provider, writes Dr Keith Suter.
24 | MAY--JUNE2013 | AAA
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