This industry destroys value

I am the co-leader of a company in the medical alert / medical alarm industry. Our industry and service are immortalized by the tragically effective marketing slogan “Help! I’ve fallen and I can’t get up!” (a registered trademark of Life Alert, and before that, LifeCall). Their commercials are a part of television Americana from the 1980s.

Help! I’ve Fallen!

The service, as the classic commercial demonstrates, is pretty simple:

  1. You pay a monthly fee for the medical alert / medical alarm service. The fee gets you a device that you plug in, and a smaller wireless device that you wear.
  2. The wireless device is a simple push button. When pressed, it sends a distress signal to the plug in unit, which dials a private emergency dispatcher.
  3. The dispatcher accesses a database with instructions on how you want your calls to be handled. They can call anyone you want or send your local 911 responder.

Why is this service valuable?

  • For starters, pressing a button is easy. 9-1-1 is an easy number too, but when you’re in a real emergency, going to a phone and dialing three numbers can be challenging. (Our own customers have reported to us many situations when they “forgot how to dial 9-1-1.”)┬áThe same problem challenges smartphone users. The advent of smartphones makes many things possible. But in a true emergency, you don’t want to unlock your smartphone with your shaking hands and tap the “Emergency Call” icon. It’s not easy enough.
  • Related, the help button does one thing well. It belongs in the class of goods that you only want doing one thing well: fire hydrants, smoke detectors, emergency brakes, and the like. The classic medical alert is not laden with extra features like pill reminders, fall detectors, and GPS. It is a simple button that triggers a call.
  • And finally, the medical alarm is one of the few devices that provides passive support. Active support in senior care is the nursing home, or home healthcare. No support is, well, no support. Passive is on demand support. It doesn’t intrude or make you feel surveilled.

So far so good, right? Niche industry of $1bn that provides a specific service to fill a specific need. So let’s now view it through the lens of Porter’s Five Forces:

  • Threat of New Entrants – Pretty high. It is easy to be a mom and pop in this industry. Many industry players provide, effectively, franchising services for people who want to be in this industry. Just as any mom and pop can open up a diner, they can open up a help button shop. Grow it over time, and it can become a strong regional player. If one strong regional player buys another strong regional player, you have the makings of a national business.
  • Threat of Substitutes – The biggest substitute is doing nothing. People don’t like wearing the button (because it can make them feel old and unpretty), so this is often a delayed purchase. By the time you realize you need a help button, it may actually be time for a nursing home.
  • Buyer Power – Usually the buyer is a first-time buyer, so there isn’t much of a knowledge base. That cuts both ways: a skilled seller can probably make hay. A self-serve model or unskilled salesforce will end up competing on price, which puts the power back into the buyer’s hands. (Most salespeople in this industry are not skilled.)
  • Supplier Power – There aren’t many quality suppliers of dispatching services or medical alarm equipment. The suppliers own the market. (And unfortunately, the vast majority don’t innovate.)
  • Competition – Tons. Cf. “Threat of New Entrants.”

Oof. I come from the restaurant industry, which is notoriously difficult to succeed in. This industry’s similarly weak strength has me wondering whether I should ask my old boss at Panera Bread for my job back. Especially when I realize that players in this industry behave in ways that defeat us all.

Two Men Walk into a PERS Conference…

No, this is not the start of a bad joke. PERS, for the record, is “Personal Emergency Response System,” the formal name of our industry. The two men are folks on my team, and they went to the PERS industry’s only conference, MAMA. Their mission was to catch up with other players in the industry, and to listen and learn at the lectures and discussion sessions. A topic of particular interest was a spate of robo-dialing targeting senior citizens that had been reported throughout the country. It was so aggressive that the Federal Trade Commission was investigating it (and still is). Reports of people being targeted by the robocalling are rampant.

Good industries respond to epidemics like this with alacrity and purpose. They stamp these transgressors out because what they do gives everybody a bad name. This industry does not. In fact, at the PERS conference, our company’s two representatives walked into a meeting about robocalling to find a lawyer explaining how to do it and thread the needle so that the activity cannot be found illegal. Complicit in the presentation is our competitor who puts on this conference.

This is wrong. We serve a vulnerable population of Americans. We have to protect them, not gather in smoky backrooms to find legal loopholes to screw them without getting caught. We have to stop the people who are destroying value. We need to do better by those we serve.

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