Discussion about entry: START: Consumer-centered less costly alternative to psychiatric hospitalization

Your group seems to be doing excellent work in an area that is terribly underserved, and you should be commended for your success over the past three decades. As you seek to expand your business model to new geographies, here are a few thoughts to keep in mind:

You mention that "it was not uncommon for the researchers to be met with skepticism from some in the psychiatric community who could not imagine patients with severe mental illness or acute distress being safely treated anywhere outside the walls of a hospital." We often see incumbent firms view new innovations as a direct threat to the way they do business, typically claiming that new entrants are somehow inferior to the status quo. While it doesn't appear that you have anything that approaches an antagonistic relationship with inpatient psychiatric hospitals, there may still be a warning sign here. This type of response is actually an indicator that the new business model is attempting to compete with the incumbent business head-to-head for the same customers. The fact that the number of inpatient psychiatric beds in your county has decreased supports this assertion. In your case, there could be a potential threat to your future if large hospitals decide to rally against institutions like START in order to protect their domain. The same dynamic resulted in the recent moratorium on specialty hospitals, which were accused of "cherry-picking" patients.

In contrast, classic disruptive innovations that attack the low-end or nonconsuming segments of the market tend to fly under the radar. They escape the vitriol of incumbents because they chase after consumers that are ignored by existing business models, often because those customers are not profitable or desirable for some reason. As you expand your service area, I would make sure that your strategic plan is prepared to address this issue. It's great that you are able to treat psychiatric patients who previously would have been hospitalized at a higher cost. There are too many hospital beds in general, and finding ways to manage patients more efficiently would go a long way toward improving healthcare. However, the greatest potential for improvement lies in figuring out how to target the nonconsumption of inpatient psychiatric services. You mention that your facilities offer a new treatment option for patients who would otherwise have no place to turn to -- patients who are beyond the reach of outpatient facilities and patients who refuse inpatient care because of the stigma of psychiatric hospitalization. For these patients, you would not be competing with traditional hospitals, yet there is still a tremendous benefit to society and a potential for growth that likely far exceeds the traditionally-defined segment of psychiatric care. This is where I would focus expansion and marketing, because these customers would be delighted to have a service like START when their only other option for psychiatric care is nothing at all.