Let’s take some time to unpack this chart. We’re looking at the number of new participants entering SIL per quarter since June 2017. We’re currently at the red dot.

Only 327 additional participants had SIL entered into their plan in the last quarter. Consider that the average in 2020 was 610, and the average in 2019 was 1349. Does 327 still sound like a lot of participants to you who might be interested in your service?

As of September, there were 1081 active SIL providers in the market. This means that the average SIL provider should expect approximately 1.2 new participants annually. Consider how this might impact your vacancies.

Many organisations have 3 to 5 year strategic planning cycles. If your organisation set their plan in 2019 or before, when the average quarterly growth per quarter was 400% higher, you may find that your plan does not map to reality.

This chart should make it clear that the game has changed. It will no longer be sufficient to simply “have vacancies” and expect to grow. The number of active providers is at an all time high, and the growth rate of SIL is at an all time low. The friction between these two facts means you will need to compete and offer genuine value to prospective SIL customers.

Many of you would have felt this reality in slowing referral rates and vacancies being open for far longer than in prior years. With at least 9000 participants having ILO in their plans and the NDIS pricing controls in full swing, we expect this trend to continue. The two spikes likely represent government transfers and it seems like that matter is settled. Given the stability, we expect that larger providers will be upping their game to compete for referral growth.

Still, the market represents a great opportunity for excellent providers. The NDIS 18-24 year old report demonstrated that there is significant entry and exit volume in SIL (as high as 30% in some groups). If your product offers real value to SIL customers, and they preferentially choose your service, then you can continue to enjoy real growth. On the other hand, if your product is substandard, then the chances of incidental growth are much lower than in prior years, and it is our view that it will approach zero as ILO deploys.

The other good news is that we don’t believe that larger providers will simply swallow the remaining volume. This chart is a model of market share based on provider size:

 

What you can see is that market share is spread relatively evenly across providers by size. And this is good news because it means we are in a very competitive market where the quality of the offer can overcome the inertia of larger providers (for economics nerds, we think that the Herfindahl–Hirschman index is less than .01). To their credit, the NDIA has created a market where many thought it wasn’t possible.

In our view, this is excellent news for customers. Many organisations have failed to innovate and simply compete on vacancy volume. Now that supply is catching up to demand, customers will be able to field multiple offers and choose a service that best meets their needs. We hope that this competition will drive innovation in the sector and lift the standard of care for everyone receiving SIL.

We don’t want this article to serve as a deterrent for people considering SIL expansion. On the contrary, we believe this trend will translate into far better consumer participation in their SIL placement decision. If you think that your organisation does it better, then now is the time to make it known.

Now is the time to seriously think about your competitive advantage and value proposition. We are rapidly approaching the time of zero-sum and customers are learning about their bargaining power.

Developing compelling SIL products and finding the path to market is our jam. If you would like to have a conversation with us, feel free to drop us a line.