Understanding the impact of the 8% NDIS commitment – where will providers feel the pinch?
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October 13, 2022
The truth is that NDIS product strategy is almost always wrong.
Many of our readers think this is a bold claim. However, the following article might convince you otherwise.
In a typical not-for-profit setting, an organisation’s strategic plan usually looks something like this:
At “Disability Not-for-Profit Services”, we will deliver:
Of course, subgoals sit beneath each major goal, and the organisation treats this process as a loosely monitored project plan often subject to last-minute crunches.
This is not how a strategy works.
Sonia Marciano of NYU Stern School of Business captures this problem brilliantly with the concept of product feature variability and weight.
Let’s say your Supported Independent Living business is entering the Sydney market for the first time. You will need certain inclusions, such as a robust incident management process. This process is a high-weight critical system required to perform the service. However, it is also low-variance because it varries little between competitors. Therefore, it can not serve as a point of difference. We call these inclusions table stakes.
On the other hand, having good quality staff is just as important but varies considerably between and within organisations. Therefore, staff quality is a high-weight and high-variance product feature.
Given that we all work within the NDIS, and the Disability Support Worker Cost Model (DSWCM), figuring out what features you ‘overinvest’ in can substantially impact your competitiveness. The chart below visualizes how certain ‘features’ are perceived by customers.
The grey feature may be staff quality, as it is important (high-weight) but also has high variance; therefore, this is the feature that warrants over-investment. The blue feature could be an incident management system, our table stakes. This system is important (high-weight) but does not vary enough to influence purchasing decisions (low-variance). Finally, the yellow feature isn’t particularly important to your customers (low-weight) and varies minimally among competitors (low-variance).
This seems obvious, but product variance will impact the increasingly competitive SIL market. If your competitors establish what is of high importance to customers and strategically invest in those high-variance components, it will be challenging to compete. The other major issue is that organisations commit the cardinal sins of competitive strategy:
Going all in on the essential attributes that matter most to your customers and vary between businesses is at the heart of competitive strategy. Unfortunately, many organisations don’t understand how their customers perceive their product features and can’t begin the critical strategic work of organisational alignment to these features.
The second challenge of framing your strategy is within the context of your organisation, segment, and preferences. Lafley and Martin address this circular issue well through their simplified strategic cascade:
The long and short of this is you can’t design winning products unless you understand the specific market subsegment you intend to serve. Indeed, organisations must realise that perceived weight and variance of product features will vary between submarkets. Therefore a standard offer will likely lose out to something specific to these individual weights.
The other strategic consideration organisations must take is “can I deliver a winning product in this market?”. The actual product design comes after sub-segment selection, which will typically look at growth rates, margin, and cost to enter. Once you’re clear on those three issues, you then need to seriously consider if you can put the right capabilities and systems in place to reliably deliver the high-variance inclusions you have designed. If you can’t, it’s time to move back up the cascade and re-evaluate the “Where will we play” to determine new markets in line with your guiding aspirations. The exact process is then followed to determine if you can deliver a winning product in that market.
Finally, strategy is about trade-offs, and that’s why it’s so crucial to understanding what is most important to your segment. The DSWCM means you can’t be in first place for every conceivable product feature. You will make losses, especially if your nearest competitor has traded off other features, forcing you to overinvest in their speciality. At the same time, you carry the rest of your over-investment.
To do strategy well, you need to understand your customer as completely as possible. This means going on the journey of segmentation, capability review, and quantifying customer perceived weight and variance. If you get these three things right, you’re well on your way to sustained competitive advantage.
On the other hand, if you stick to the script and pursue “we’re going to be the best at every feature”, there is simply no way you’ll manage within the DSWCM.
One of the major reasons the NDIS space has failed to innovate is that very few organisations have made deliberate trade-offs. HireUp is one case where the customer has tacitly traded off staff supervision for access to more affordable and controllable staff. In a robust marketplace, customers can make their own trade-off decisions between competing organisations with different offers.
Based on Christine Bigby’s work, we expect that there will be a cohort of customers who make the exact opposite trade-off and choose organisations that have present and technical front-line leaders. And that is precisely the point, HireUp can’t offer cheaper support and win the supervision sensitive segment.
However, middle-of-the-road offers will struggle to win on any high-value domain, and their position in the market will likely be the rubbish bin.
If you are interested in discussing your strategy and how to position your business differently in the NDIS market, book a call or reach out to our team.
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