Saturday was my daughter’s fifth birthday party. At 8:30am she was running at top speed (the only speed she moves at) through her grandparents’ house, tripped and hit cheekbone first into the edge of a flight of stairs. 30 minutes later we were all in the ER where she was getting 7 stitches. They say she’ll be fine. Oh, and we were home with 20 minutes to spare before 17 little girls showed up for a “princess party” in celebration of her birthday (I was one of the only “princes” allowed).
I guess any doctor at any hospital could have sewed 7 stitches. But the two nurses (one an older woman and the other a young man) at the hospital we went to spent a lot of time asking my daughter all about her birthday plans and made it clear that they felt it was a priority for her to get home in time for her party. Amazingly, we all left in good spirits and my daughter was able to fully enjoy her party.
Health care can be a commodity or it can be a premium product. A commodity is an item that is indistinguishable from competing products and therefore consumers make purchasing decisions based mainly on price . Gasoline is a commodity. If a station on one corner is cheaper than on the other corner, most people will always go to the cheaper station. Wine is a premium product. 750ml of wine is always just fermented grape juice. But the quality of the wine leads to vastly different prices.
This weekend, my family experienced health care delivered as a premium product. I would gladly pay a significant premium to entrust the care of my child to health care professionals who were sensitive to the emotional as well as physical needs of my daughter.
So here’s my question: Do nonprofits deliver a commodity or a premium product/service? This isn’t a leading question. Commodities are not inferior to premium products, they are just subject to different kinds of markets and business models. When you deliver a commodity, there is only one way to compete: Eliminate costs, strive to be the low cost producer and slash prices below your competitors. As an investor in this kind of business, you want to find organizations that are highly efficient, productive and know how to squeeze costs out of the system.
When you invest in a premium product company, you want to find organizations that are innovative, visionary and know how to create a product or service that serves people’s needs better than competitors so that customers will pay up and create high profit margins.
So in the nonprofit world, when we look for low overhead expenses, when we ask nonprofits to underpay their employees, when we want every dollar to go to “program” we are making the implicit statement that we believe they are supplying a commodity product. Is this what we believe? Is this what you believe?