Few would argue that work comp services is largely a commodity industry…“price” is the ultimate decision criterion in many most buying decisions. There are exceptions, but many are really service guarantees backed by financial penalties…another way for purchasers to demonstrate fiscal prudence.

aka, “strategy” often devolves to attempts to escape the commodity trap.

The first step is to understand what’s lost in the typical sales process is the “value” inherent in the service. 

Way back in 2009 I wrote this:

For several years bill review has been [and still is] a commodity.

Despite vendors’ best efforts to differentiate, most buyers place great emphasis on price. As a result, bill review vendors have worked hard to squeeze out cost…bill review vendors have lost sight of their reason for existence – to ensure their customers pay only what they legally are required to. Instead they compete on the basis of how cheaply they can write checks out of their customers’ checkbooks.

This is not entirely the bill review vendors’ fault. Their customers bear much of the responsibility for the situation, playing vendors off against each other in an effort to reduce the payer’s admin expense. And the payers have succeeded. That success has come at a cost which some payers are only recently beginning to grasp [and now, 14 years later, many payers still don’t].

This is NOT unique to bill review...lazy buyers and brokers/consultants usually commoditize claims, networks, clinical services, occupational medicine, Medicare Set Asides and other services.

Why?  Because it is easy, requires little effort, and, frankly, vendors fail to focus on value.  Rare indeed is the service company that really, really trains its sales folks, or invests in market research, or has any concept of branding. So, yeah, it’s on the vendors too.

Value starts with understanding how your customers define success…and by “customers” I mean the individuals who will make and influence the buying decision.

What does this mean for you?

Organizations don’t buy – people do. But if you do not KNOW what the buyer values, you can’t get out of the commodity trap.

More…

this from an excellent Harvard Business Review piece...

price does equal value in the eyes of a customer when all other strategic factors in the purchase decision are equal, which often occurs with commodities.

Many other products and services are customized rather than commoditized, and, in these cases, price doesn’t equal value. Steve, for example, is CEO of a kitchen design and installation company specializing in large and expensive homes. When his inquiries dropped, he leapt to the assumption that he was “too expensive.” So, he embarked on a round of price cutting. But was cost really the issue? To find out, we assisted by interviewing some of his clients who chose a competitor. A typical example was Jenna.

She’d sought three quotes for the kitchen of her large home. “They came in at different prices, naturally,” she said. “I could have bought a new car at the prices supplied.” She explained that the kitchen contractor she chose wasn’t the cheapest. More important to Jenna were four other factors: innovative design (she spent a lot of time with each contractor trying to find the best design solution), work quality (recommendations from previous customers about kitchen finishes), customer service (easy to deal with and good listening skills), and quality of inclusions (the brands of dishwasher, sink and taps recommended).

The final factor, she said, was “trust.” It was “very important because she wasn’t going to be there every day checking on the installation of plumbing and electrical fittings.”

Your position on the scale of commoditized vs. customized depends on how much unique value you contribute to your products

If you – the service provider – don’t fully understand what your customers value AND are able to clearly and crisply articulate how your company can deliver that value, you’re forever going to compete on price.

And in the highly mature, scale-centric, declining industry that is work comp services guarantees ever-lower prices and ever-lower profits.

Quick takeaways from National Work Comp…

Don’t know what total attendance was, but seemed somewhat less than in pre-COVID years. Exhibit hall corridors were pretty empty despite sessions located around the exhibits.

Newest thing du jour – AI...sessions on AI, vendors promoting various applications, attendees mentioning AI in conversations about claims, data interpretation, claim intake, you name it.

Nurse triage – just…stop. Far too many are touting nurse triage – almost all without a clue as to what exactly this is, why they want to do it, what a “nurse” is, and how this will improve things. More on this in a future post, but for now:

• define nurse – do you need an RN? APRN? LPN? nursing assistant?
• what expertise/training/experience does this “nurse” need? orthopedics? emergency medicine? trauma? behavioral health?
• okay, so a new RN is on the phone with a person…exactly what value does this add? Be specific.
• more to come.

Events – by all reports myMatrixx’ get together was really well attended...I didn’t get to any others as they were past my east-coast bedtime. I do miss the myMatrixx transportation services from years past :( (mM is a consulting client)

There was a beach party outside my window that prevented a lot of us form getting to sleep before 11. Mandalay Bay staff was far less than helpful, told me this was on me as I should have checked the event calendar before booking my room (WTF!) and offered to send housekeeping up with a couple earplugs…I will NEVER stay there again.

Optum’s dog party was a big hit – great idea, really smart marketing, and good buzz generator.

Provocative session addressed anxiety, suicide and depression – more on that later. Sobering and much needed. Really respect the speakers for sharing their views and personal experiences. Yvonne Guibert – you are an inspiration.  

Booth staff – STOP pitching your stuff. JUST STOP. Until you have a decent sense for what the person in front of you needs, wants, is challenged by, don’t say anything other than a one-sentence line about the service/product your company delivers. 

have an excellent weekend.

The annual gathering of the work comp tribes begins today – I’m reprising a post from a couple years ago on lessons I’ve learned…

1.  Realize you can’t be everywhere and do everything. Prioritize.

2.  Leave time for last-minute meetings and the inevitable chance encounters with old friends and colleagues.

3.  Unless you have a photographic memory, use your smartphone to take voice notes from each meeting – right after you’re done – or write down key points immediately.  Otherwise they’ll all run together and you’ll never remember what you committed to.

4.  Introduce yourself to a dozen people you’ve never met.  This business is all about relationships and networking, and no better place to do that than this conference.

5.  Wear comfortable shoes, get your exercise in, and be professional and polished.  It’s a long three days, and you’re always ‘on’.

Finally, in these day of YouTube, phone cameras, Twitter, Instachat and SnapGram, what you do is public knowledge.  That slick dance move or intense conversation with a private equity exec just might re-appear – to your dismay.

And beware the white man’s overbite!!!

M&A activity in the world of workers’ comp services has been somewhat quiet of late, although there’s been some under-the-radar activity that – taken together – shows consolidation continues.

That’s no surprise…workers’ comp is a classic mature industry with all the attributes thereof. Scale is key, margins are tight, cost-cutting is constant, and funds for innovation scarce.

Here’s a quick roundup of recent activity from various sources…

Sedgwick is rumored to be doing a re-capitalization, another word for current investors cashing out a chunk of their equity. In my view TPAs are one of the very   few workers’ comp service sectors that have growth opportunity, so terms may be favorable. However, interest rates are still a drag (recaps almost always involve taking on a lot of debt) and of late private equity (PE) investors seem really hesitant to close on deals.

Of note, WC is just one of the insurance lines handled by the giant TPA – those other lines are in rough shape (more on that in a future post). I don’t know whether P&C carriers will be more or less interested in outsourcing work to TPAs for non-WC lines, but those calculations will undoubtedly weigh on potential investors’ enthusiasm for a Sedgwick transaction.

Ametros inhabits another sector that could be quite promising – handling funds from claims settlements. One of the extremely few companies that really gets marketing (which is NOT sales support or writing proposals), Ametros is rumored to be in the final stages of a sale/recap. While I like the company and the sector, reality is major growth is really dependent on what CMS does – or doesn’t do – re Medicare Set-Asides. CMS’ continued lack of a coherent, consistent, and clear policy on if/when MSAs are required for what lines of insurance is nonsensical, frustrating, and a disservice to we taxpayers.

Enlyte/Mitchell/Genex just completed the acquisition of Therapy Direct, a rather small PT management firm. Expect TD to be fully absorbed into Enlyte subsidiary Apricus with most functions assumed by Apricus’ current staff. Unfortunately, that’s just the way these things work; Enlyte gets a few more millions of revenue and reduces costs by cutting expenses. Classic mature industry growth…buying revenue to grow top-line. 

Lastly, any potential transactions for One Call are likely on hold pending resolution or conclusion of various legal issues involving current investors; word is some are suing others.

There are a couple others in various stages…will wait and see if things progress or not.

What does this mean for you?

In a highly mature industry, it’s

Scale. Efficiency. Differentiation. Service.