Dentistry continues to become more competitive. Some of the causes are this increased competition include the oversupply of dentists, increasing dental substitutes, and the changing bargaining power of buyers. A sound strategy will be the key to success. Thinking carefully about what my practices should look like is the key to sustainable profitability.
Porter’s five forces can be used by my dental practices to analyse different external threats in the environment. The first force is the extent to which my practices are threatened by the entry of new dental practices or barriers to entry. It is possible to enter dentistry although a barrier may be capital costs to set up a new practice and the need for a dental license to own patient charts. Similarly, the second potential threat is from a substitute service, for example, this could be by other professionals or the threat of substitute services provided by alternative providers such as spas offering teeth whitening. Likewise, a third threat is the possibility of rivalry between dental practices, particularly when their services overlap. The fourth force relates to the bargaining power of buyers, which is the public, private insurers, or the government. If they are of sufficient size, buyers are likely to represent a significant influence on a dental practice. The final threat is the bargaining power of suppliers. These may be the supplier of equipment or materials, a potential strategic threat to dental practices, particularly since suppliers are few in number.
These threats can have an impact on my offices. To deal with these threats, my clinics focus on a differentiation strategy, and to a lesser degree on a cost leadership strategy. Differentiation is driven by what customers value. By pursuing a differentiation strategy, we can try to increase the demand for our services by offering attractive looking offices, effective staff communication, and marketing, allowing us to compete on high quality. I have done this through establishing a brand, dentalhouse, which also acts as a barrier to entry to new practices in a particular community. Alternatively, we also pursue a cost leadership strategy to a lesser degree which allows us to focus on efficiency and low costs. A cost leadership strategy may help us deal with the perceived threat of a buyer and demands for cost savings. Since in Ontario dental fees are set by a fee guide, it is critical that our differentiation strategy is carried out on a daily basis. The key for us is to understand the services we provide, the customers, and the link between the two.
I have positioned my practices to offer a full range of services and make them available to many patient segments. We have also analyzed our competitors. Our choice of strategy depends on many factors including rivals, trends, practice competencies, and my personal experience. The decision about which segments to focus on is dependent on profitability. The decision also depends on the characteristics and skills in the practice. Each positioning strategy requires a different set of practice attributes. One of my offices practices a differentiation strategy by focusing on providing cosmetic dentistry to wealthy patients. This practice is located in a high-end mall, has a nice waiting area and operatories, and high-tech equipment. However, most of my practices provide a family practice atmosphere, requiring convenient parking, clean and friendly ambience, convenient hours, and ease of booking appointments. We are able to offer a variety of services to many segments because my clinics are group practices in which different dentists specialise in different areas, allowing us to have a sustainable competitive advantage. A successful strategy requires decisions about which segments to compete in.
Our dentists perform various services. Some of the ways to classify dental services include:
- Procedure codes
- Quality of service/material
- Time of day the service is provided
- Location
The key for us is to focus on service characteristics that are important to our patients. To market our services, we have segmented our patients to understand their needs. While patients are the end-users of dental services, they are not the only customers. Other potential customers include:
- Physicians and other health-related professionals who refer patients
- Other dentists who refer patients
- Insurance companies
- Government (military, welfare, ODSP, etc.)
Patients can be segmented on the basis of:
- Demographics (age, gender, income)
- Insurance coverage
- Dental IQ
- Patient status: new vs regular vs emergency patients
- Treatment sought
- Proximity to practice
Many of the customers listed above can be thought of as referral sources of patients. It is in our best interest to provide value to them. For strategic purposes, it is essential to know which services the practice provides to which customer segments, along with quantitative information allowing us to recognize which segments are the most important in terms of volume, revenue, profit, etc. This information allows us to decide which segments the practice should serve as well as how it should compete in each segment. My dental practices also compete against other dental practices. It is important for us to be familiar with our competitors and related segments.
For strategic planning to be truly effective, we have realized that team involvement is essential. Our team represent a sustainable competitive advantage for me since personal relationships are very important in dentistry. In terms of the VRIO framework, my team members are valuable, rare (shortage of dental staff), costly to imitate (high training costs), and organized to capture value for my offices. I hold an annual full-day strategy retreat with my practice managers to discuss our current strategy and the future. Through these meetings I have learned that I have to do a better job of sharing my expectations with my team. One of the most common complaints that I hear from team members is that they do not know what I want. This can lead to frustration for the entire team. One of my practice managers stated, “Be mindful of the choice of words you use. Verbal communication only makes up a small part of how we communicate in person. Make this a part of your ongoing routine to touch base with staff and share thoughts and ideas”.
If I do not challenge myself and my staff, strategies and techniques would never change and therefore, never improve. Another practice manager of mine stated, “If you want to lead others, use yourself as an example and give others the opportunity to do as you do. Make sure to give them feedback in an objective manner”. I plan to instill a vision for my team through direct feedback or employee surveys, and integrating their ideas into the practices. Quarterly, I will look at the organization as a whole again examining our production and cost structure improvements, compared to the previous quarter.
Further comments such as, “If you are specific with job descriptions and expectations, it is easier to follow through when these are not met”, and, “Arsalan procrastinates on performance reports which is frustrating to the staff”, and, “Needs to be more assertive” suggest that I need to be more hands on in terms of providing objectives. I also believe that as a leader I have to do a better job in ensuring the goals of the organization are well articulated to my staff. This was evident through comments such as, “Be willing to share with your team your vision moving forward”. I feel that I need to instill a vision for the offices three to five years out. This means that I need to recognize the gaps between the resources required to operate in that future state and actions needed to close the gap. I need to define the key priorities rather than overwhelming my team with too much at once. I plan to do this by giving each practice manager five clear, challenging, measurable team objectives, both short term and long term.
The buying patterns of our patients are based on referrals, marketing, and proximity. Patients new to an area may find a service provider based on advertisements or proximity. Dental practices always compete to some extent against other dental practices that are in close physical proximity. Location also affects the size and demographic characteristics of the practice’s customer base. Profits decrease as the closeness of competitors increases. Strategic closeness depends on the similarity of service categories. We compete most against practices that are closest in terms of both geographic closeness and strategic closeness. My competition that has a similar competitive stance as my practices are most problematic.
We use profit strategies to increase revenue from our existing patients, which have allowed us to boost our revenues. In addition, system strategies have allowed us to improve the efficiency of my offices and strengthen our team. They include things such as setting a vision statement, meetings, and team training, allowing me to improve my leadership skills at the same time. We did this by conducting a systematic review of how we train our staff and step-by-step business systems. By learning the proper steps and following them consistently, our staff members work more efficiently. We have found that the best way to ensure these systems are clearly defined is to document them. We also use scripts, improving our team’s effectiveness. We rely on job descriptions and use those descriptions for performance reviews.
We defend against competitors by being more efficient than other practices in service and cost control, with reliance on technology as a means of enhancing our competitive advantage. In addition, we also look to regularly identify new markets or services. This may be by diversifying into new markets, or by offering new services to our existing patients. In terms of growing our patient base, we have focused on expanding our services to improve value by spending and allocating resources for state-of-the-art technology, which has not only increased our word of mouth referrals, but it has also made us more efficient. We also spent resources on updating our patient management software which allows us to create better patient flow and contributes to the superior customer service that our patients expect.
We have metrics that allow us to measure how sustainable our practices are. These include:
- Number of dental visits: Important for assessing cost/visit and revenue/visit
- Number of new patients: Gives us a sense of if our marketing dollars are effective
- Number of emergency patients
- Dental policies for no-shows, emergencies, scheduling, and payments
- Profit and loss statement: The following data are tracked: gross charges: benchmark: >$600K per dentist/year; revenue per visit; cost per visit; benchmark: average cost per visit is $135/visit; gross charges vs. net revenue
- Aging Report: Shows us how much money is past due
- Production Report: Shows the number of times that each procedure was provided by a fee code
- Provider Productivity: We have daily productivity goals. Productivity benchmarks: dentist: 1,600 patients/year; 8 patients/day per dentist; 1.5 assistants/dentist; dental hygienist: 2,200 encounters/year; 8-10 patients/day per hygienist
- Total Operating Revenue is the key figure used to calculate revenue per visit
- Inventory cost should not exceed 6% of our gross production
Every office has activities that are performed to design, produce, market, deliver, and support its services. All of these activities can be represented using a value chain. We consider market participants, dental labs, dental practices, and patients as part of the value chain. Dental suppliers generate value by manufacturing consumables for dental technicians or dentists. Dental technicians generate value by making dental restorations and dentists generate value by treating patients.
The common point of our value chain and differentiation strategy is to enhance our productivity. We combine these concepts and use them daily into the operations of clinics to efficiently take advantage of current resources. To alleviate patients’ fears of dentists, we have attempted to standardize our procedures throughout our clinics in order to create satisfied customers through a series of procedures that create values. Under my authority, there are dentists that work as my associates. Under each dentist, there are assistants, administrative staff, and dental hygienists. Each dentist is supported by a assistant who takes care of the tools and a second assistant that helps with sterilization. Other administrative staff take care of administrative affairs like confirming appointments. When combined, a combination of value-added activities are created for our customers. How effective this value chain functions depends on the assistance of all supporting staff to the dentists. Our assistants need to make sure what kind of treatment the patient needs in advance to avoid a lag, and the dentist needs to develop customized treatment plans. In such an age of customer-focus and of fast industry change, our clinics need to consider how to provide new values and new services to our patients.
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