Part 1: Senior Care Product & Technology Companies in China

With all the focus and attention on senior care operators and real estate developers in China, it can be easy to overlook the product and technology companies that will enable western standards of care to be able to be implemented across China.  The recent announcement by Tel-Tron, that its products were being utilized by Cascade Healthcare in their Shanghai senior care facility, brought this point home to me.

In many ways, the challenges Tel-Tron faces are more tactile:  when you think about localization, someone like Tel-Tron has to explore language, product design and user interface in ways that reflect similar challenges senior care operators have to take into consideration, but with a much more practical bent.  Because much of the technology a company like Tel-Tron offers a partner in China such as Cascade goes to the heart of an operator’s ability to stress quality of care and compliance with western standards, I was particularly interested to explore with and of Tel-Tron exactly what challenges they had to encounter when taking their products to China, and what these challenges might have to say about the senior care industry in the country at large.

Rick was quick to point out they were well positioned to make the jump to China because of earlier efforts to design their products for international markets, a process set in motion by a customer in Mexico.  China did present at least one localization challenge from the product’s point of view.  According to Rick, “the biggest roadblock in China was that the LCD screen was not able to do Mandarin characters.  Our alphanumeric letters and symbols only require 1 bit versus the Chinese language requiring 3 bit for the LCD displays.  This means we had to change out the type of graphic displays we were planning on using.”  Rick was quick to point out that Tel-Tron’s product line is “95-97% ready” for export to China, largely because of a conscious decision by the company to proactively get ready for what they agree is a very exciting growth market.

Thus far, Tel-Tron’s work in China has benefited from its reputation in North America.  Chinese developers are eager to present their facilities as “best in class” which obviously requires modeling their amenities and features along the lines of what they have seen while touring North American facilities.  This desire by Chinese developers to emulate what they see American operators doing is obviously of benefit to companies like Tel-Tron, but it also speaks to one of the problems we have discussed before on this blog, specifically, how infrastructure and amenities are easier to build out in China than the matching service elements. The more complex is how these products are deployed and what decisions caregivers are trained to make based on indications the product creates.  As with what the healthcare IT (HIT) industry has seen in China thus far, selling and installing top-shelf IT systems is not a problem.  Getting installed capacity trained and successfully using the system is another matter entirely.  Without effective training and implementation, much of the intangible value that western products offer becomes diluted, damaging the patient’s outcome and the satisfaction of the operators who installed the technology.

This points to an opportunity both Rich and Malcolm were eager to point out, that one of the most important insights western operators have to offer is what the western industry did wrong.  As they shared, “Our industry has gone through several re-vamps:  how facilities are designed, how they are financed, who staffs them, what that staffing should be.  We made all sorts of mistakes.”  These intangibles are going to be what western operators have to prove they can build on and deploy in China, all while minimizing the mistakes they make while getting to China themselves.  The training know-how that connects Tel-Tron’s technology to an elderly patient is many times the “secret sauce” that western senior care operators have.  What many aspiring Chinese developers are likely to find is that all the installed technology in the world does not help if you cannot translate it to effective utilization by both patient and staff.

Rick and Malcolm are in a unique position:  because their products can be installed in a range of environments and at various price points, they see a number of different types of senior care environments ranging from expensive to middle-income.  Rick pointed out that their product is “a lot like Legos … the flat mat that a Lego system builds on top of is like our base system, where you can add additional products on top of based on need.  You can do a Chevy or a Cadillac, it is up to you.”  Because of the breadth of view they enjoy on the industry in China at large, I was curious to get their thoughts on what they see as the primary obstacles.  Rick pointed out that “the education of the people working in these facilities still has a long way to go,” to which Malcolm added, “The concept of care for seniors – there just is no farm team in China of people who know how to take care of the elderly.” This is something the blog has touched on here, here and here.  It bears repeating that successful operators will need to think through how they are going to find, train and retain staff.  Multinationals in admittedly different industries across China will tell you that one of their top three problems is keeping trained mid-level staff.  Because so many jobs exist for trained Chinese, they will jump when they see another better opportunity.  In an industry as early on as senior care with such high growth potential, operators are going to need a very holistic and sophisticated approach to HR in order to prevent churn within your organization.

The second observation Rick and Malcolm shared was one I found particularly insightful:  the need for the senior care industry at large to come together and educate the Chinese consumer on what senior care means.  Malcolm noted, “Today, the industry doesn’t have an identity.  Every model we see is different.  The experts paving the way in China don’t agree on what is going to work.”  The point is two-fold:  if the experts aren’t clear on what model is going to work, then it is unlikely the market has confidence embracing solutions being offered – and – this lack of clarity prevents the sort of top-level national marketing campaign that might benefit everyone (operators, developers and consumers).

One analogy that came to mind was my in-laws hog farm.  Every year they contribute to the National Pork Board (most hog producers do).  A large part of this contribution goes to national marketing campaigns like the famous “Pork:  the Other White Meat”.  This raises the brand awareness of pork as a lean protein, something the brand needs given most people associate pork with bacon.  Laugh if you will, but something like this might actually be beneficial in China!  Given the near unanimity of bad opinions consumers have about what senior care looks like in China, could some sort of industry-wide pooled marketing campaign help elevate the brand of senior care?  This sort of top-level industry thinking (while probably not at the level of national marketing) is partially what and are working to facilitate at IAHSA.  The temptation in an infant industry is to go it alone; but given the sheer size of the market and the unique challenges the industry must face related to acceptance, there is an important role for some collective branding, marketing and lobbying.

The last major observation Rick and Malcolm offered was what they called “a mind shift from developers getting their money out in a couple of years to viewing senior care as an annuity.”  We spoke at some length on this and I think it would be fair to say that we share a fear over how the industry is going to successfully absorb some of the poorly planned capacity being built out across the country and how high profile failed developments could damage the senior care brand.  Towards the end of our conversation, they shared with me a story of how some time ago when they were evaluating potential Chinese software development partners they explained who their end customer was – a senior living operator – and how the management team “literally laughed us out of the room … they said ‘no one wants to move into these places!’”  This speaks powerfully to how Chinese currently view senior care, and in my mind it leaves open the question of how much elasticity the Chinese market has to absorb a round of failures.  It is always important to get early adoption by potential customers and positive word of mouth when putting a new service forward, even more so when consumers already have a bad impression about what you propose to offer, a reality that will color the market in China for some time to come.