service better here. One: We know you. Two: You don’t have to travel . . . we bring the qualified physicians here, whether it be from Mayo Clinic, Cleveland Clinic, etc.
The new customers will be those who are vacationing. The 260,000 people we have in our community swells to a million any given day during Memorial Day and Labor Day and then December 15th through March 15th we have all the snowbirds who come down, so different types of payer sources and different types of customers altogether.
We talked about the unusual impact of natural events in his world relating to how he gets and serves new customers. In particular, we discussed 2018’s Hurricane Michael that decimated nearby Panama City, Florida.
Well, that’s what’s great about our company HCA. We work together as teams. We saw the hurricane coming, and all of ACA prepares like we are the third little pig, with the nice brick house. We were prepared for the storm but it turned east and our sister hospital down in Panama City was severely impacted. (Author’s note: 2 years later the city is still rebuilding.) We put together a helicopter landing service here. We just took over a doctor’s office parking lot and made more availability for helicopters to fly patients in from those hospitals that were hit. What a disruption not only from the ER standpoint, surgery standpoint, skilled nursing facilities, assisted living facilities. It was just extremely impactful. Then moving the children so they could come back to school. We even set up networks in order to get these patients in touch with their families and also to be cared for and then housed temporarily until we could find safe haven for them to go back to.
We were receiving 30 flights a day.
I share Mitch’s story to illustrate just how many ways you can define customer: direct, indirect, community, colleague. Sometimes you have to think about the ecosystem you serve in its entirety. Oftentimes, neglect of one segment of your customer base will impact another. Mitch is not just addressing his customer base, but the ecosystem created within the hospital itself and how all the parts need to function together to address his customer’s needs. Only focusing on the patients and neglecting the community would not ultimately benefit his company as a whole.
He’s right about the constituencies he needs to serve, but we still need to focus on who buys our goods and services, and I think by and large that all businesses do.
The bottom line on customers is well understood. Assuming you have a good relationship with a customer, it is almost always easier and more profitable to sell to an existing customer than to acquire a new customer. In acquiring a new customer, you have to create awareness that you exist, interest in learning about your product/service, and desire to try it out. With an existing customer, that is all sunk cost and should be a much more efficient exercise. Existing customers are also more likely to buy again and again, and in some industries can be understood as an annuity. Acquiring new customers is generally a harder, much costlier, and higher‐risk proposition.
CHAPTER 3 Which GEOGRAPHIES AND LOCATIONS Will I Serve?
One of the highest risk variables to consider is the notion of geographic expansion.
When you think about expanding to a new physical infrastructure, you amass financial, logistical, and managerial risk. This is true whether you are thinking about opening a new venue in the next town or you are thinking about entering another country. The further the distance, the greater the risk.
Companies pursue geographic growth in a variety of ways, but they boil down mostly to organic and inorganic activity. Organic would be build. Inorganic would be buy. Build‐versus‐buy is generally accepted as a critical decision when considering growth options, and it’s particularly true when you think about the geographies you will serve.
When you pursue geographic growth, you run straight into a number of risks:
Build cost
Regulatory/taxation requirements
Offset requirements
Repatriation challenges
Recruiting talent
Acquisition costs (inorganic)
Distribution ecosystem
Customer acquisition cost
But, like most things that involve risk, there is also reward. By growing geographically you get
Access to entirely new customer base
Diversification of economic risk
Potential for growth at multiple levels
Test bed for new business models
New ideas that can be applied to existing geos
Older, larger companies that have worked through geographic expansion have a tremendous advantage in their ongoing operations that align with these benefits.
There are some really interesting stories out there about epic fails on geographic expansion. Take your pick . . . Target’s withdrawal from Canada after two years and billions of dollars spent. Home Depot’s 2006–2012 failed foray into China. Walmart’s 1997 failed launch of 85 stores in Germany. Starbucks’ 14‐year misstep in Australia. Best Buy’s 2010/2011 failed attempt to grow in the UK. And these misses had massive economic impact on their parent companies, not to mention the damage to brand around the globe.
Does this question hold in a post‐COVID world? The notion of a large‐scale company with an entirely remote workforce changing the dynamic of this risk after the pandemic isn’t so far‐fetched. Several leading companies have announced plans to either entirely or partially have remote staff, with Alphabet, Google’s parent company, considering a hybrid policy of three days in, two days out at the time of writing.1 There is precedent to refer to as you think about this future state. IBM began experimenting with this in 1979, and in 2009 reported over 40% of its workforce had no physical office.2 The game changed in 2017, when IBM started to force thousands of workers back into the office. The link between an office setting and productivity concerns had them reverse their position. The notion of work‐from‐home isn’t new. Gallup estimated in 2017 that 43% of workers in the US were remote! The data shows that through these periods, companies continued to expand their geographic footprint, and while during the time of pandemic a number of us are required to be remote, we will continue to see office presence as a key component of collaboration and growth. Assuming there is no health reason to prevent us from working together, as humans we will continue to seek the office environment and in‐person client interactions as the continuing standard for productivity and sustainable growth. That’s why even in a post‐COVID world, despite the likely increase in hybrid workforce, this key question stands.
The statistics are remarkable as you consider the investment required to support international growth. In a 2015 Harvard Business Review piece, Christian Stadler, Michael Mayer, and Julia Hautz estimate that it takes 10 years to generate a 1% return on assets from global expansion! They studied 20,000 companies in 30 countries that attempted this.3 Wow.
However, I didn’t title this question “which country” – I chose “which geography.” By that I mean simple physical geographic expansion, typically
