Dr. Allen Nazeri argues clinic founders should build strategic partnerships instead of going solo. Partnerships expand your patient base, build credibility, share resources, and reduce bargaining power from customers and suppliers. He uses Porter's Five Forces to show how alliances raise barriers to entry and create competitive advantage.
Chapters
Value engineering strategies to 10x the value of your clinic and dominate the market. Part 9 Chapter 8 Don't do it Alone.
From my own experience as a young entrepreneur, founding my first multi million dollar group practice at the age of 24 and observing other young founders doing it alone feels very brave and natural. After all, young founders are incredibly ambitious, super creative and like to build their empire alone and on their terms. Over the years, I have realized nothing could be more robust and greater driving force in expanding a business than intentional strategic partnerships. In other words, not to do it alone. This form of collaboration does not necessarily involve giving up or exchanging equity among partners. However, each partner leverages each other's resources to grow no matter what stage of business. Building alliances can leap a business forward by generating revenue, capturing market share, and creating momentum unlike any other force. In my MBA training programs, I often talk about Porter's Five's forces. Introduced by Professor Michael Porter in 1980, it is a framework for companies to use to determine various competitive effects on their revenue and profitability. As explained by Porter, these forces are in addition to competitive forces placed on a business from arrival. The other four pressuring forces are from customers, suppliers, new entrants, and the ease of switching providers for customers, also known as the threat of substitute. When we look at healthcare practices from Porter's five forces perspective, we can quickly appreciate how a strategic partner can help us grow and sustain sustain our business. First, let's look at some of the benefits of strategic partnerships and later I will discuss how strategic partnerships can counterbalance the effects of forces placed on a business.
Benefits of strategic partnerships 1. Expansion of patient Base A strategic partnership can help companies grow their customer base. Their partnership allows companies to access a captive audience already engaged in the business with the partner. 2. Expansion of geographic Footprint Because a potential partner is most likely in a different geographic market, it immediately adds more value to the existing customer base as there will be more location options.
3. Building top mind, awareness and credibility when finding a strategic partner, especially one with a reputable brand, it can make the business look more credible, trustworthy, and customers become more certain about doing business with the entity.
4. Shared resources.
Strategic partnerships allow resources to be shared and leveraged. For example, the sharing of more highly skilled workers among companies strengthens the alliance. Suppliers and vendors leveraging and achieving the economy of scale are among other benefits. It is all about reducing costs and enhancing operational efficiency as well as the customer's experience.
5. Honeymooning before committing.
Strategic partnerships often lead to eventual mergers between two companies. Therefore, it can act as a pretrial phase between two companies, keeping their identity independent until deciding on financial commitment and accounting integration. I often recommend this form of pre integration model that can, through multiple phases of integration, evolve into a permanent M and A. It is safer for both parties and it mitigates the risk of a typical post integration problem that exists with traditional mergers and acquisitions. These arrangements often do not affect the partner's governance, keeping them independent and less aggressive, creating a slower but stronger bond. Unlike other businesses in healthcare, cultural integration plays a volatile role in successful merger as a high level of relationship exists between healthcare teams and patients. Strategic Partnerships offer Dipping Toes in the water without getting soaked now that we looked at some of the benefits of strategic partnerships, let's look at how it can positively affect Porter's five Forces as previously discussed.
Force Number one Customers the power of customer negotiation is one of the forces that can affect revenue and ultimately a company's profits. The customers could be direct in health care such as fee for service patients, or indirectly through a contracted referral from an insurance company. Regardless of the source, strategic alliances reduce customers bargaining power more than a smaller or an individual company.
Force number two Suppliers. The suppliers continue to look for ways to raise prices and monopolize their products and services. All of these activities affect the company's bottom line. One of the mutual benefits considered in strategic alliance is leveraging suppliers negotiating power by creating economies of scale between partners.
Force 3 threat of substitute the fact that our patients have so many choices in finding a healthcare provider is a threat to any practice's profitability. If a patient is not happy with one clinic, they can simply go to another. Companies like cell service carriers, cable TV or utility companies are among those who understand this threat and have strategized ways to make it difficult for customers to to switch through brand loyalty and long term penalty contracts. Strategic partnerships offer expanded opportunities to patients if they decide to switch providers and help them remain within an organization. It also allows the clinics to provide various patient loyalty or membership programs to discourage switching to a competitor.
Force 4 new entrants every year new competing businesses enter the marketplace and take a bite at the market share which is a competitive force on the company. New companies are looking for opportunity gaps in the market where they can penetrate and take some business away. However, they typically pass on markets where there is a considerable influence by group. Through a strategic alliance, the strategic partnership increases the barrier of entry for new entrants.
Force Number five the Rivals As a business owner, we must identify ways to have a competitive advantage over our rivals. We can have an edge against competitors through creating more value for our patients, differentiating with expanding our services, and exploiting our available resources to continue to complete and grow. Selective strategic partnerships allow us to accomplish all of this and more. From this chapter, I hope you can see the importance of not doing it alone, identifying a strategic partner early on and leveraging the alliance to grow your business's value. In the next chapter, you will learn about the different types of strategic partners and how to strike a mutually beneficial deal.
Frequently Asked Questions.
If the strategic partnership is so important, why do you think most doctors try to do it alone?
Most doctors like to do things their way, which is very admirable. However, what they don't realize is prolonged and often expensive process. For example, a typical successful healthcare entrepreneur thinks expansion is an operational activity where they need to spend most of their time working on a company's inner part to grow. Organically experienced business people focus on leveraging partnerships to grow their business exponentially.
We are multi location physiotherapy group with massive competition where customers demands are high. If not met, they will request the records to transfer to another group. What can we do to retain more of our patients?
There are two things that I recommend focusing on to minimize the revolving door that is leading to patient loss. The first thing I would do is to focus on differentiating your services. This differentiation can be in customer service, billing, hours of operation, verbal branding, methods of payment, ease of doing business or related to the delivery of care such as working with a well known therapist and acquiring the latest technology and equipment. The more differentiated, the more competitive advantage your group will have over the competition. The second thing is to find a way to minimize the threat of substitutes so more patients commit to visiting your group. An example will be offering a loyalty membership program working with insurance providers other than those your competitors are working with or partnering with a fitness center as an added benefit from for being patient.
What are the legal implications of partnerships if one partner is sued by a customer?
Using a disclaimer to identify and explain the relationship between parties, making it known that each company is individually owned and operated is essential to mitigate any liabilities. I strongly recommend consulting with an attorney on the specific language used.
This is the end of Part 9, Chapter 8. Please proceed to Part 10.
