Background and Challenge
The U.K. dentistry market has seen significant growth in recent years, with market value rising substantially in the past decade as spending on both the National Health Service (NHS) and private dental treatment spend has increased. Unsurprisingly, the market is highly competitive, requiring dental practices to develop new and innovative strategies if they are to create value and grow their market share.
L.E.K.’s client is the U.K.’s second largest dental chain, providing NHS and private dental care to over 1.5 million patients across England, Wales and Northern Ireland. Following its acquisition by a private equity firm in 2013, the chain was keen to transform its delivery of high quality dental care and engaged L.E.K. to design a new strategic platform with the aim of segmenting its portfolio, improving operational performance and determining expansion opportunities.
Approach and Recommendations
L.E.K. developed a two-pronged approach: firstly to develop an innovative segmentation of the client’s practice portfolio to identify areas for operational improvement; and secondly, to analyze all competitive dental practices in the U.K. and identify the potential acquisitions most likely to add value to the company.
A segmentation of the client’s practice network enabled L.E.K. to organize practices into distinct cohorts on the basis that dentists operating in similar practices with similar specialisms, funding profiles and client bases can help each other to improve performance using internal benchmarks. LEK identified practices that financially outperformed others within their segment, as well as identifying the operational metrics that were similar across these first-rate practices, before finally sharing the information between practices. This had not been applied before and gave the client’s management the tools to drive significant operational improvements across their business.
In the second phase, the L.E.K. team analyzed the U.K. competitive landscape, based on 9,000 electoral wards to build a detailed picture of commercial attractiveness to the client for both private and "basics" dentistry. The client was presented with a database including the details of close to 8,000 dental contracts the NHS held with individual dental practices and a user-friendly dashboard from which the client was able to define and target expansion opportunities on a continuing basis.
Equipped with the powerful tools and models developed by L.E.K., the client’s management has been able to improve their identification of where to acquire or invest in new dental practices and how to derive the greatest value from its existing network. Following the completion of the project, the client has successfully pursued its strategic growth ambitions, increasing its portfolio of U.K. dental practices by more than 50%.