Instinctive UK

Cranfield School of Management

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Success Story

A market to get your teeth into

Not many of us look forward to a trip to the dentist. BGP alumnus Julian Bedford would like to visit all 20,000 odd dental surgeries in the country – and sell them a dental laser. The prize is enormous: at an average system value of £35,000, Julian estimates the market potential at £750 mn. To date perhaps 150 dental lasers have been sold in the UK – which leaves an awful lot to go for. “The problem is,” remarks Julian wryly, “at the present rate of progress it’s going to take twenty years.”

We are all consumers of dentistry and we should all sit up and take an interest. Pain-free dentistry has been a reality for years now. Dental lasers for hard-tissue can do anything that a drill can do, and do so safely. Treatment may take a bit longer, but since there is no physical contact the patient feels no discomfort. Soft-tissue lasers take care of the cosmetic side of dentistry. But still only a few dozen practising dentists in the UK are offering their patients the option of laser treatment. In the eyes of a parent who has dragged children kicking and screaming to the dental chair the situation seems little short of scandalous. “The dental profession is unbelievably conservative,” says Julian. “It’s where the opticians were twenty years ago. Today the optical sector is about retailing to consumers, with plenty of choice, high levels of customer service and fast turnaround. That may not sound much like your or my experience of dentistry, but that’s the way that modern healthcare is going.”

His faith in the inevitability of progress is what sustains Julian in his efforts to unlock this market. By background he is an electronics engineer. He cut his teeth (no pun intended) at GEC in the old days under Arnold Weinstock, then moved to work as a service engineer with a small laser equipment distribution business in 1982. It was the infancy of medical lasers and Julian spent the next few years building a national team of four engineers, dedicated to the hospital sector. The commercial animal inside him was awoken in 1990 by a Management Studies course, following which he approached his boss with a proposal to buy out the service operation. The boss said no and not long afterwards the business went bust.

The Birth of Instinctive UK

That was in 1991. The UK was mired in recession, interest rates were rising and so was unemployment. Julian was convinced that lasers had a long-term future and he was prepared to back his hunch. He drummed up service contracts from manufacturers, put a desk in his (unconverted) attic, negotiated a repayment holiday on his mortgage and maxed on his credit cards. Instinctive UK was born. Faxes were sent from an agency in Harpenden where he and his partner were living. Unwilling to fund a car, Julian negotiated a deal with a local firm that allowed him to rent an Escort for £12 a day plus unlimited mileage, to enable him to visit hospital sites, all of which were miles away. After a year he graduated from the attic to a shed in the garden. He had, he says, no choice. They had hardly any savings and he was a lousy credit risk. It took two and a half years before he felt sufficiently confident to invest in a vehicle of his own.

At the start of 1996 he recruited his first employee, a fellow service engineer based in Sheffield, who took care of the north. By now the business model had evolved. The primary customers were no longer manufacturers but the hospitals themselves. A typical hospital set-up consisted of one laser for general surgery, another for eyes and a third for obstetrics and gynaecology. It made sense for all the machines to be serviced by a single contractor, and Instinctive proved adept at securing the business.

Market Development

Little by little Julian started to sell hardware, initially spare parts but graduating to the original equipment through acquiring agencies for US manufacturers. He also relocated the business to Bedford, which was a significantly cheaper location.

By the late 1990s the potential for lasers in elective eye and skincare was becoming clear, as the first corrective vision clinics and tattoo removal specialists opened their doors. Instinctive began to supply these new sectors of the market, which was at times quite a culture shock. Dealing with beauticians was a long way from the hospital consultants, but Instinctive adapted. Dental lagged behind. Finally, in 1999, Instinctive acquired a distribution agency that allowed them to make their first laser sale to a UK dentist. It then took two and a half years to sell the next one!

To explain why the dental market is so intractable, Julian contrasts the situation here and in the United States. “In the US dentists are medical professionals first but businessmen and women a very close second. They want to grow their business and they invest in the latest technology. The system of medical insurance encourages this, because they know they’ll recover the cost of the investment. In the last five years 5,500 laser systems have been sold in the States. The manufacturers support their home market because the market is big and dentists are eager to learn and improve their professional skills.

“Outside North America manufacturers expect their distributors to educate the market. Frankly the US manufacturers, who dominate the market, don’t really understand the state-funded systems in Europe anyway. Compared with the States, in the UK we suffer from one important cultural difference. Like GPs, dental practices here tend to restrict the range of what they do. Professional protocol says that they pass more demanding procedures to consultants. So there’s an inbuilt disinclination to expand their expertise once they’ve qualified. And since we don’t have the same system of medical insurance, there’s no comparable “push” from the supply side.”

Early Adopters

If this is the case, who are the early adopters of dental lasers in the UK? According to Julian they are either dentists in private practice or dentists in transition from NHS to private practice. They share an enthusiasm for improving their skills and the levels of service they offer their patients. Beyond that, there are no common factors that make them easy to target. The existing Instinctive customer base are spread up and down the country, in urban areas, rural areas, wealthy and deprived areas alike (one is in a depressed ex-mining area in south Wales and doing very nicely). In every case, however, once they make the switch to lasers there is no going back. And they do spread the word. Instinctive’s current marketing strategy is to build hot spot activity around customers who are willing to act as reference sites. But it is hard, slow work. To get eight dentists to attend an evening demonstration requires a mailing to at least 500, in the expectation that, eventually, one sale might result.

There are one or two dental niches where laser technology has obvious attractions. Football clubs, for example, where the fitness and wellbeing of expensive assets is worth investing in, and medical schools who will teach the next generation of dentists. But the biggest potential segment, that of corporate dental practices, has suffered setbacks and bad publicity in recent years. The fragmented dental market has looked ripe for consolidation for a long time. Eye Clinic was the first to attempt this, through incorporating dental services into its vision correction sites. They ran out of cash. At the start of the century Boots announced it was getting into dentistry in a big way, and four years later has pulled out, as part of a retrenchment to its core business. Julian maintains that both episodes are misleading if taken at face value.

“Eye Clinic was profitable but poorly managed. Boots’ dental division was becoming profitable, but the management made some basic errors. A lot of clinics were just too big, with too many staff. So, in terms of retail metrics, like sales and profit per square foot, the dental outlets were never going to match the performance of Boots’ mainstream business. But the fact is that when they made the decision to close down, some of their units were doing over a million a year.”

When the going gets tough..

If the market is so tough, why has Julian persisted? In 2003 he came on BGP with the intention of taking stock of the business and preparing for the next phase of growth. The service contract side had grown strongly and provided steady, predictable cashflow. Sales of laser equipment for eyecare and skincare were also rising in line with the growth in the marketplace. He could have chosen simply to focus on the core and leave the dental sector alone until the market was more receptive. There is, after all, no lack of evidence that the people at the top of the profession are still firmly wedded to the past. One prominent dental spokesman at the end of last year expressed his astonishment that people should be dissatisfied with the way their teeth looked. Providing their teeth are healthy, what does it matter?

In fact, since BGP Julian has stepped up his attack on the dental sector. In support of the strategy, he points to a number of recent favourable developments. A test case shows that the NHS may be prepared to subsidise innovative technology in a bid to retain dentists in the public sector. A forthcoming report from the influential King’s Fund on the need for greater public investment in medical technology is likely to support and encourage this. On the supply side, there are lower-cost laser manufacturers in continental Europe who could help bring down the capital cost of the equipment – if someone can help them make the market. And there is Julian’s unshakeable conviction that this is the way the market has to go. “Skin/eyes/teeth under one roof has to be an attractive proposition for consumers who see elective healthcare as a lifestyle proposition. The person who has hair removed by laser will want vision correction and teeth-whitening – and once they’ve experienced soft-tissue laser dentistry they’re not going to want to go back to a drill to have their fillings done. The consumers want it – it’s just the professionals who can’t see it!

But perhaps the biggest motivator is the tenacity of a man who has bootstrapped a business from nothing and is not going to let someone else get to that £750 mn market before him….

For more information on Instinctive, visit www.instinctiveuk.com. If you have any comments arising from this case, you can contact David Molian at d.molian@cranfield.ac.uk or Julian Bedford on Julian@instinctiveuk.com.


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