Changing business models for disability sector enterprises

This article is the second in the series – Architecting disability sector enterprises. Thefirst article provided the background and motivation for this series. This article explores:

• the background to the changes in the disability sector in Australia (briefly)
• the current business model underpinning many disability sector enterprises
• the new business model which these enterprises will need to understand and adopt if they are to be successful in the emerging environment
• the implications of these changes which can be explored through the “architecture” lens

Background

The introduction of the NDIS in Australia is based on the principle that people with disability have the same right as other Australians to determine their best interests and to have choice and control over their lives. It recognises that everyone’s needs and goals are different. The aim is to provide people with individualised support and the flexibility to manage their supports to help them achieve their goals and enjoy an ordinary life.

Disability sector enterprises are a critical part of the NDIS in terms of delivering high quality, person centred supports and services to help participants achieve their goals. They form a market-style system where government funding will no longer go directly to disability service providers, but instead to the client, who can choose the providers they want. Under this scheme, users should be able to move from provider to provider, receiving the services they want, and how they want them.

To provide some idea of the scale of the NDIS, it is estimated that the market will be worth $22 billion a year once full roll out is complete.

Applying business model thinking

In the following sections, I outline some features of the old and new business models under which disability sector enterprises may operate.  These models are indicative only and do not represent any specific enterprise.  If I were engaging with such an enterprise, I might use these as a starting point for discussion and development of models specific to that particular enterprise.

The sample models convey a number of features of the use of business models in expressing the architecture of an enterprise, including:

• Use of viewpoints which attend to concerns for particular stakeholders
• Exclusion of elements deemed to be of lower significance to the decisions being contemplated
• Highlighting particular elements which are changing between the models being considered

Old business model

Many disability sector enterprises have operated on a business model whereby the government funded the resources which the enterprise managed in order to provide services to people with disabilities.  Features of this model included:

• Government funding of the “supply side” of the disability market
• Managing income through grants or block funding, providing reasonable cash flow certainty
• Funding on an input / resources basis rather than outputs and outcomes

Applying the business model elements from earlier AE articles:

• Customer (funder) = government
• Value proposition = people with disabilities receive services
• Consumer = people with disabilities
• Key capabilities = management of activities associated with provision of services (eg. accommodation services, support services) and management of resources (care workers and assets required to provide services)
• Suppliers = providers of additional resources required for services

This might be represented in the following visual model:

Future business model

Under NDIS, the key changes that will occur include:

• Customer (funder) = person with disability (or their carer where under some form of guardianship)
• Consumer (user) = person with disability 
• Value proposition = service provider offer services reflecting consumer preferences
• Key capabilities = management of sales pipeline, service delivery, resource management and cashflow

• Suppliers = providers of additional resources required for services

This might be represented in the following visual model:

Implications

Comparing the two business models and the capabilities required to operate under the future model, disability sector entities will need to establish a range of new capabilities that were not previously necessary, including: 

• Marketing and business development, ensuring they are offering services which are valued and purchased by people with disabilities
• Service development and pricing, sustaining relevant services in a more dynamic market, and understanding the cost of service provision
• Cashflow management, moving from high value, low volume to low value, high volume cashflows with greater uncertainty about income timing
• Resource utilisation management, dealing with fluctuating demands and needing to sustain target utilisation levels to ensuring ongoing viability 

These capabilities will require enterprises to:

• secure the appropriate range of knowledge and skills associated with these capabilities
• introduce new business processes and practices to effect these capabilities
• acquire or modify existing information systems to support these capabilities

The use of the business models assists enterprises to identify changes to their operating model and requisite capabilities.  The enables enterprises to develop a more confident shared view as to where to direct attention to capability development, including the necessary investment to enable realisation of their strategic goals and aspirations. 

Other series and articles can be found using the following index.

Arrange a Conversation