The Case:

‘Fiction Smile’ (Fiction) is a five-year-old dental clinic with two centres in Lucknow. Run by the reputed Dr. Shah, Fiction is known for its quality service accorded by its doctors and staff. While both the centres are self-sustaining, Dr. Shah is keen to build up scale and expand its presence. As he sees more opportunities in Tier-II cities, he hopes to grow to other such cities before concentrating on Tier-I and Tier-III cities. In this regard, Fiction needs to get its strategies and operations in place to help it scale at a faster pace.

The Expert:

Dr. Rana Mehta leads PricewaterhouseCoopers’ (PwC) healthcare practice in India. He advises a diverse range of clients including multilateral agencies, large corporate houses, industry bodies, healthcare providers, government and public sector institutions. He has also worked for the Apollo Hospitals Group and was instrumental in commissioning and operating its hospitals in New Delhi and Colombo. Mehta’s views are very much sought after by both international and domestic media on a variety of matters on healthcare in the subcontinent. He travels and speaks extensively at leading healthcare fora and management schools across the world. Mehta holds a Masters of Hospital Administration (MHA) from Tata Institute of Social Sciences, Mumbai and Bachelor of Medicine, Bachelor of Surgery (MBBS), Medical College, Kolkata.

Expert talk:

Dental care is an unorganised segment with no major players in this space. It’s the mom and pop centres that dominate. Hence, there are good opportunities in Tier-II cities, especially since some Tier-I cities are quite saturated though there are areas that see poor penetration. One of the advantages of focussing on such cities is that getting manpower is relatively easy. So, they need to have the right infrastructure and tap into the paying capacity of people who would pay for such care. There is a definite opportunity for Fiction to grow further in this segment.

“He needs to get a corporate team in place which can replicate the model and infrastructure of its first two legacy centres. They should be able to zero in on a location, open it in 90 days time and turn it profitable in the next six months.”

However, I would recommend Fiction to scale up to at least eight to 10 centres before approaching investors. It is difficult to obtain investment with only two centres since it does not give much proof of budget. Once Dr. Shah reaches a certain amount of scale with eight to 10 centres, there is proof that he has an established model that he can rely on to scale up. Private equity players tend to look for proof of concept about his ability to set up a centre in a given period of time, recruit doctors and make it profitable. This timeframe can be something that is convenient to him (he could have a track record of six months to open each new centre).  He needs to get a corporate team in place who can replicate the model and infrastructure of its first two legacy centres. They should be able to zero in on a location, open it in 90 days time and turn it profitable in the next six months. By then, he also needs to have the necessary systems and protocols in place since investors fund expansion and not the existing centres.

Location

Geographically, the entrepreneur needs to pay attention to the ambience in the area, how good the facilities are, if there is enough traffic and the place acts as a nodal point for people to congregate. He also needs to take into consideration issues like sufficient parking area and its convenience. Once the location analysis is done, it would be good to lease the premises than buy it. He also needs to factor in how quickly the lease is issued and the permissions to redevelop the place.

Hiring

Fiction can either hire doctors locally or from other places. This should depend on each centre but all doctors should be trained centrally so that the standard of service remains the same through all its centres. It also helps to tie-up with educational institutes so that they have a continuous learning curve. With regards to the other staff, while it might be hard to get those with experience, they can undergo on-the-job training.

Differentiation

Differentiation from other local centres is critical since the company can languish due to lack of it. Shah can offer superior services and infrastructure compared to established local centres to bring in patients. A corporate team should ensure standardised quality across all centres as the company scales. Fiction can go for a mix of franchise and self-owned centres. But he has to drive value through each one of them.

Fiction can also be positioned as both a premium and a mass brand depending on the centre’s location and the competition present in that area. This can vary on the sub-segments they focus on – if a centre focuses on the routine dental procedures, it can cater to the mass while cosmetic procedures can be targeted towards the upper crust of society. Like Apollo or Fortis Hospitals, Fiction should aim to build a trusted brand that takes care of its patients.

Pricing

Pricing can’t be standardised since the service and the doctors’ skill sets vary from centre to centre. Some doctors would have more years of experience than others. Both the pricing and the technology should be based on the location and the local dynamics of the place.

Expansion strategy

Planning is crucial to expansion strategy.  Dr. Shah should have a clear goal about the number of centres he wants to open in a year. This will ensure that his backend, vendor deals, arrangements for equipments and other materials don’t lag. On the non-clinical side, he has to set up protocols for customer service, maintaining records, follow-ups and make sure systems like CRM (customer relationship management) are in place.

The rate of expansion typically depends on the available resources and the management bandwidth. Focusing on one centre at a time would be too slow an expansion; he should set up multiple centres, build it up and then move onto the next set. The hub and spoke model where smaller centres refer cases to the bigger ones has not worked well in this space – simply because patients would end up going to the best dental clinic in their city than to be referred. Each centre should be viable on its own.

After building sufficient scale with a sound model and having obtained funding, Dr. Shah can look at Tier-I cities as well. Many major hospitals outsource dental care, so he can look to run centres in such hospitals than set up independent ones.