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On Becoming an Ambidextrous Organization

Special Presentation to:. On Becoming an Ambidextrous Organization. October 2015 Ryan Frederick. Section I: Where Have We Come From and Where Are We Now?. Page 4. Penetration Rate: Flat. Penetration Rate of 15% of 75+ Population. 85% of 75+ Population. 2.9M units. 900K units.

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On Becoming an Ambidextrous Organization

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  1. Special Presentation to: On Becoming an Ambidextrous Organization October 2015 Ryan Frederick

  2. Section I:Where Have We Come From and Where Are We Now? Page 4

  3. Penetration Rate: Flat Penetration Rate of 15% of 75+ Population 85% of 75+ Population 2.9M units 900K units 500K units 1.5M units Note: Based solely on Independent Living and Assisted Living units, penetration rate is closer to 7%. Source: NIC Investor Presentation 2012; NIC Investment Guide, Investing in Seniors Housing & Care Properties, 2nd Edition, 2012

  4. Aging in Place is the Prevailing Trend with Important Implications to Existing Models Consumers have a strong preference to age at home rather than in an institutional setting – nearly 90% prefer home (AARP, 2010) Aging in Place Within Seniors Housing Older Residents Higher levels of Acuity Shorter Length of Stay Greater Pressure on Staff Losing Appeal to Younger Prospects Sales & Marketing Not as Effective Smaller Addressable Market Diminishing Value Proposition Key Implications Note: “Aging in Place” refers to the desire of seniors to stay in a particular residential setting as long as possible, even as health care needs increase. Note: Additional information on aging in place can be found within the white paper “Why Aging in Place Matters”. A one-page executive summary is available at www.pointforwardsol.com. Page 6

  5. Increasing Age of Entry into Seniors Housing Average Age at Move-In for Independent Living Residents Source: American Seniors Housing Association (ASHA) – Independent Living Report Page 7

  6. Example of Impact of Aging in Place: Sales & Marketing Resident Turnover Smaller Market Historical Length of Stay: 10 to 12 Years 1x Today Length of Stay: 5 to 6 Years 2x Historical (a) Geographic 1x (b) # of people aged 75-84 12.4M 1x Today (a) Geographic 0.25x (b) # of people aged 80-89 7.7M 0.6x X Mile Radius X/2 Mile Radius + = Combined Effect:May require over 10x Productivity in Sales & Marketing to Maintain Occupancy Note: This is an exercise using hypothetical numbers that approximates the combined impact of greater resident turnover and smaller addressable market for entrance fee CCRCs. It assumes that communities that experience Aging in Place have: approximately ½ the length of stay, reach ½ the geographic distance from the community as before and cater only to ages 80 to 89 (vs. ages 75 to 84). Population figures from 2010 US Census. More detail available on impact of Aging in Place within white paper “Why Aging in Place Matters” Page 8

  7. Question #1:For our field of Seniors Housing & Care (i.e., think Housing & Services), what has you most excited? Most concerned? Page 10

  8. Section II:What Might the Future Look Like in an Aging America? Page 11

  9. “What this [demographic shift] means for housing is that the past cannot be relied upon as a predictor of the future… What they [Silent and Leading-Edge Boomers] will want is likely to be quite different from what today’s housing communities for seniors provide, or they may instead find new ways to obtain the support they need in their homes and age in place.” Urban Land Institute’s Report “Housing in America: The Baby Boomers Turn 65”

  10. Better, Faster, Cheaper Source: Compilation of key insights taken primarily from: “Senior Living for the Next Generation” by ASHA (2012), “Housing in America” by ULI (2012) and “Power of Infuence” by Zillner (2011). Page 13

  11. The Big Idea in Four Minutes • Coming of Age in an Aging America: Video

  12. Exponential Growth in Smart Phones

  13. Internet of Everything Source: BI Intelligence estimates.

  14. Perspective on the Future of HealthConvergence of Multiple Exponential Trends • Daniel Kraft: Medicine's future? There's an app for that: Video

  15. Innovation: Self-Driving CarArrival Expected in 2020

  16. Innovation: Food & Grocery Delivery Source: TechCrunch 7/11/15 – “The Billion Dollar Food Delivery Wars”

  17. Innovation: Uber for Home Care

  18. Innovation: smart homes in walkable mixed use w/Flex model Page 21

  19. Question #2:On the margin, do you see technology as more of a threat or opportunity for our industry? Page 22

  20. Section III:How Should We React? Page 23

  21. Types of InnovationDisruptive vs. Sustaining • “Disruptive Innovation” is an innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market and value network, displacing an earlier solution. • “Sustaining Innovation” does not create new markets or value networks but rather only evolves existing ones with better value, allowing the firms within to compete against each other's sustaining improvements. Source: Various materials and presentations from Clay Christensen including his website: http://www.claytonchristensen.com; Wikipedia on “Disruptive Innovation” Page 24

  22. Risk of Disruptive Innovations… Again? Skilled Nursing Price ($) Demand’ SNF Demand SNF Demand’ AL P’SNF D’SNF DSNF • Product is Older, Less Attractive • Higher Acuity Population, Less Attractive • Increased Regulation • Less Affordable PSNF D’AL P’AL Assisted Living Disruptive Innovations: Real Estate & Services Based Demand AL PAL DAL • More Attractive Product • Caring Culture • Less Regulated • More Affordable Q’AL QSNF Q’SNF QAL Quantity Page 25

  23. Ambidextrous OrganizationsAbility to Simultaneously Exploit and Explore Ambidextrous Organization Exploitative Businesses Exploratory Businesses Type of Innovation Sustaining Innovation Disruptive Innovation Strategic Intent Cost, Profit Learning, Growth Critical Task Operations, Efficiency Adaptability, New Products Controls, Rewards Margins, Productivity Milestones, Growth Culture Efficiency, Low Risk, Quality Speed, Risk Taking, Flexibility Leadership Role Authoritative, Top Down Visionary, Involved Note: Additional information available in Point Forward Solutions white paper “Making Innovation Work: A Blueprint for Seniors Housing & Care”

  24. Question #3:(a) Is your organization adequately prepared for the future? In other words, are you an ambidextrous organization?(b) If not, what’s holding your organization back? Page 27

  25. Point Forward Solutions Approach

  26. Q&A Page 29

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