The tween-teenage years of human life are notorious for their challenges and complexity; (for both those journeying through those years, and the parents!).
In our many years of experience in consulting with care providers, we have regularly observed that the tween-teen years of revenue (~$10-20M) prove to also be a very difficult stage of ‘life’ for organisations to successfully navigate and grow ‘through’.
What’s concerning is that while there are a number of large service providers with revenues north of $100M, it’s the $10-$20M organisations that form the backbone of the disability, mental health, aged care, and allied health sectors in Australia. According to ACNC data, there are over five hundred not-for-profit service provider organisations of this scale in Australia. These essential service providers are genuinely critical to the well-being of our community. With the roll-out of the NDIS and booming need for aged care services, our nation cannot afford to have care providers fail to mature beyond this ‘puberty’ stage.
So why is this particular stage of an organisation’s growth typically so challenging?
We see a clear relationship between the scale of a provider, the breadth of their services and the resulting extent of operational, managerial, and administrative complexity and costs.
The ~$10-20M revenue years, which our team like to call the 'Cliffs of Complexity' typically prove to be a stage in a provider’s lifecycle when operational, administrative, and managerial complexity is great relative to the organisation’s capacity and capability to meet those demands. In many cases, there is a comparatively low level of technology maturity and extensive reliance on manual processes to drive the business.
Even worse, the plethora of spreadsheet-based data sources and manual processes is often an expensive workaround (labour costs) and creates potential for significant issues and risk, including:
· Difficulty in providing clients with an accurate and timely package balance
· Revenue leakage - a hidden issue, we regularly see leakage costing providers several tens of thousands each month
· Difficulty in reporting against client outcomes to meet funder’s requirements
· Overhead costs increase disproportionally to revenue growth as providers incur a greater manual administrative workload and compliance burden.
· A conundrum of a growing organisation that appears not to be financially sustainable
So, why do these issues often strike at this stage of life?
Providers facing the Cliffs of Complexity often don’t seem to have the operational and technology sophistication of their much larger competitors: i.e. they lack the integrated systems, process maturity, a designed technology architecture, and a common data model. (That said, we’ve seen much larger / “older” organisations which have not yet successfully out-grown some of the typical teenage year issues and remain much longer on the cliff-face!) This means they often are not operating efficiently and lack an ability to ask and answer simple business questions like “where have we provided services but not billed?” (aka the ‘revenue leakage’ question):
To answer this critically important question with confidence, you’ll likely need to pull together data from your rostering and scheduling system, time and attendance system, HR awards interpreter, billing, case management system, and the funder’s statement portal. All that data exists in different places in different structures, so answering the simple revenue leakage question … well, for most providers isn’t so simple at all. And no, it can’t be easily done in a spreadsheet by your back-office staff.
Recently we worked with the executive team of a small disability provider organisation (<$20M revenue) to understand their technology needs. They identified 26 business capability areas requiring enabling systems for their organisation to operate effectively and efficiently. 26! This was not a wish-list, it is simply what they need. Currently they have just five tools and most of those are recognised to be inadequate. From what we’ve seen this circumstance is not uncommon across the sector.
This is just one common reason we see providers attempting to scale the Cliff of Complexity struggling to push beyond ‘puberty’ revenue. There are many other examples we can share from our experiences, if you are interested to chat.
So, what can you do if you are stuck climbing what might currently feel like an unscalable wall of complexity right now?
Most importantly:
1. Consider the design of your end-to-end service value chain.
· Is your traditional approach sustainable?
· What new ways of working can be adopted and what are the resulting operational, process, technology, and data demands?
· Recognising the criticality of designing in collaboration with your team
2. Understand that data is an asset, critical to client outcomes and productivity.
· Design your data-model, so data can be blended from multiple systems to ask and answer critical business questions and meet reporting needs.
3. Ask, where are your pain-points, issues, and opportunities?
· Working along every step of the service value chain.
· Consider your internal capabilities and adequacy of current core systems.
4. Agree on your priorities – to grow your operational and technology maturity:
· Identify processes, measure their performance, assign owners.
· Agree who owns and governs each dataset in your organisation.
· Consider, what are the critical business questions you need to answer with data?
5. Then, design an operational and technology roadmap of initiatives that your executive team has prioritised, sequenced, budgeted, with plans to implement.
· What is the order of magnitude investment and resource commitment required?
· What new or elevated capabilities will you need to develop to ensure success of the program of initiatives?
· How will you bring your people along on the journey?
The longer you put these things off … the longer you will likely spend stuck on the cliff-face. See our related previous post on the importance of developing your organisation's #TransformationCapability. Our next post asks the question "What does good look like for service providers?"
We'd love to hear from you....
In your experience, what’s a specific challenge you have experienced scaling the Cliffs of Complexity?
Key contribution by Steven Balderstone,
Strategy and Operations Lead
for Blue Bike Solutions.
Blue Bike exists to help organisations that provide a positive impact for our community do their good better. We partner extensively with service providers from the disability, mental-health, aged-care, international development and broader social services sectors. As the community sector consulting specialists we understand the importance of taking a holistic and pragmatic approach to transformation. With proven capabilities spanning strategy & operations, people & process, systems & technology, and data & insights you can rest assured we know how to meet you where you are and help you move to where you need to be.