Big Innovation vs. Little Innovation in Senior Living and Senior Housing
Disruptive innovation changes retirees’ calculus about housing and support transitions
The more things stay the same. We recently reread our one-year anniversary post from our original blog, recapping our first-year lessons looking at senior housing and retirement. https://agingwithfreedom.com/2016/06/02/one-year/
Our then six big observations?
- Senior housing is stagnant. The typical senior living housing design program features updated materials and colors but is anyone thinking about what we’re trying to accomplish in these constructed environments? We just didn’t see the level of change we expected.
- Loneliness is the Enemy. A loneliness antidote is what the industry should be selling.
- Aging-in-Place works until it doesn’t. And then it’s too late to win the battle against Loneliness. Just because aging-in-place is cheap doesn’t mean it’s better. The familiar single-family housing is isolating as we age and need social connections and emotional support more, not less.
- The Affordability Wall for Baby Boomers is the elephant in the room. Unless you’ve got a public-employee pension, or are on the tip of the wealth pyramid affordability is the barrier to senior community entry for aging Baby Boomers.
- Move beyond the senior housing industry’s physical walls to find broader successful retirement lessons. We started our blog focused on just Continuing Care Retirement Communities (CCRCs) but they seemed increasingly irrelevant, with exclusive pricing and serving the wealthy few. We pivoted to looking for lessons for the rest of us for successful aging derived from the best examples of senior communities.
- Everything else is changing. Will senior housing and the retirement services industry?
We thought it was time to look again as we approach our four-year blogging anniversary.
Do We Still Care?
We’re passionate about a successful third act, enjoying our retirement. But we see retirement as a new opportunity to engage with the world, not a withdrawal from life. Our personal motto? High Wealth, High Health, High Purpose informs our planning and our living. When we share insights or experience we envision informing our younger selves what we wished we’d known earlier rather than later.
We’ve worked in and around the issues of longevity and senior living. Lori as a developer and design manager. Dan as a regulator and policymaker. Our careers are all about realizing the ideal and expanding possibilities. We always saw senior living communities like the traditional CCRC as an ideal retirement objective.
So does the senior living industry still speak to us as consumers as we approach the realistic option to choose a CCRC or other senior living option?
What trips our trigger today?
What currently excites our passions or stirs our worries? Pain points and passions in entrepreneurial-speak:
- Off-grid energy independence and efficiency. We hate escalating energy costs and our power company. With a passion. Top of the list because our “utility” is asking for a 24% rate increase to our base rate from state regulators. This type of uncontrolled expense is anathema to a predictable retirement budget. And we are conservationists. We care about wasting scarce resources.
- Financial Independence Retire Early (FIRE) Movement. Dave Ramsey and FIRE are drivers for a large share of the social media communities we follow. Dave Ramsey changed our financial life for the better. We’ve hit the self-sustaining financial independence point and have the choice to retire. Not a lot early, but earlier than being forced out of the workplace. Smart financial stewardship matters.
- Travel and Time Together. We watched parents who enjoyed travel get too infirm before taking the time to travel together. We’re emphasizing big and small adventures together, now while we can. See our recent article on How to Plan an Adventure. And since the “we” includes, Gunner the Adventure Dog (a loyal Brittany), RVs and camping seem like a better deal than hotels for family adventures. We’re hitting the road this summer with our minivan and tent camping. But we have an eye on a Winnebago Travato 59K Lithium with solar cells and lithium power or maybe an ultralight RV trailer similarly equipped to defy the need for connected power. This enables snowbird plans.
- Autonomous-driving and Electric Vehicles. Our ideal motorhome is self-driving. But we eagerly watch the evolving transportation choices like Uber, Lyft, Waymo, Tesla, and Rivian and see more freedom ahead for retirees. We went through the pain of parents who could no longer drive and should no longer drive. It was an unnecessary point of risk, conflict, and broken spirits. Technology promises a better future in this and more.
- Health care cost and access. Okay, this one is more obviously a worry than a passion. Dan’s career is closely entwined with medical technology and the evolving health delivery system. But the view from consumerland for patients is still bleak. We don’t know what anything costs until after it’s bought. Everything and everywhere is expensive. Some places more so. Access and quality vary widely if they exist at all. Especially in rural areas. Rural America, Flyover Country, may be an inexpensive place to live, but it is increasingly being abandoned by government-run healthcare programs that underpay rural healthcare providers. More than half of the 65 million Americans living in rural areas are over the age of 50. Elders in rural areas (about a quarter of all elders) are more likely to reside alone, near or at the poverty level, and suffer from a chronic condition or physical disability. They require an average of 46 miles of travel to get to the nearest health professional. [U.S. Department of Health and Human Services Rural Task Force. (2002). HHS Rural Task Force Report.] Medicaid and Medicare are destroying rural healthcare access. We live in Flyover Country and worry about future care needs, access, and cost.
Senior Living Communities speak to these priorities? Do
Aging With Freedom is all about the freedom to choose our passions in retirement. So, does the Senior Living industry that claims to want to serve us hit any of these pain or passion triggers?
Sadly, not much. Some of these emerging passion options are de facto competitors to the senior living industry offerings by extending the option to age-in-place or to buy senior-friendly services ala carte.
We see hints that some communities are truly emphasizing wellness as more than just a marketing hook. Done well, wellness combats the worries of debilitating illnesses, costly healthcare, and extended dying by offering instead vibrant living.
Are we stuck on repeat? We worry if the senior living industry is relevant to our future.
In the last few days we’ve seen articles on:
- Finding the human genetic key for limb regeneration. https://sg.news.yahoo.com/harvard-university-uncovers-dna-switch-180000109.html
- The new Rivian electric pick-up truck with more than 400 miles of range and 11,000 lbs of towing capacity. https://youtu.be/rEkeu60vRMk Post reveal, Amazon invested in Rivian and General Motors (GM) is rumored to be considering an investment. https://www.forbes.com/sites/chucktannert/2019/02/15/amazon-invests-700-million-in-electric-vehicle-startup-rivian/#109422e212e0
- Lyft, the
ride sharingservice andself-driving car developer, partly owned by GM (7.8% purchased for $500 Million), is set for an initial public offering with a $15+ Billion valuation. More than doubling GM’s money in under four years since the 2016 investment. http://gmauthority.com/blog/2019/03/how-the-lyft-ipo-will-benefit-general-motors/
- Self-driving cars are now an assumed future. Cadillac Super Cruise can drive handsfree coast-to-coast. https://www.cadillac.com/world-of-cadillac/innovation/super-cruise/coast-to-coast.
- And if cars can drive themselves, do we need them parked and idle when we’re not using them? The technology changes the art of the possible. South by Southwest (SXSW) debuted a new documentary, Autonomy, on autonomous-driving that makes the case for a very different, and we think bright, future. https://www.theverge.com/2019/3/13/18262364/autonomy-film-review-self-driving-cars-malcolm-gladwell-documentary-sxsw-2019
- SpaceX successfully flew its Dragon space capsule unmanned to the International Space Station and recovered it for reuse in a future human-crewed flight. SpaceX promises to return Americans to space on the American spacecraft yet this summer. https://www.spaceflightinsider.com/space-flight-news/dragon-spacecraft-returns-earth-bearing-gifts/ https://www.spaceflightinsider.com/organizations/space-exploration-technologies/what-makes-a-dragon-a-quick-guide-to-the-spacex-capsule/
- And SpaceX is only one of several commercial launch companies preparing to return to space, the moon, and onto Mars.
We grew up with Americans on the Moon and visions of going to the stars.
Dan cut his teeth on science fiction reading Andre Norton’s, The Stars Are Ours. The 1954 book jacket looks suspiciously like a SpaceX BFR. https://www.amazon.com/STARS-Are-OURS-M-147/dp/B000MZ8RSA/
Lori still loves Captain Kirk’s crew of the Enterprise. “Space: the final frontier. These are the voyages of the starship Enterprise. Its five-year mission: to explore strange new worlds. To seek out new life and new civilizations. To boldly go where no man has gone before!”
- Star Trek’s communicators are daily fixtures realized in our ubiquitous smartphones.
- George Jetsonesque
quadracopterflying cars require little more than scaling up toy camera drones. Amazon and a host of delivery services bring the world to our door. Now with human drivers. But robotic drones and self-driving delivery vehicles are the grand plan. Sooner rather than later.
- Amazon’s Alexa and Google Assistant talk to us just like the Enterprise’s computer. No, correct that. Better than. More conversational. With the power of big data, machine learning, and artificial intelligence (AI) the uncanny valley of a contextually appropriate conversational computer indistinguishable from a human voice doesn’t seem impossible to cross. Or far off. Listen to Google Assistant AI make a phone reservation. https://youtu.be/7gh6_U7Nfjs
- And AI will transform medical diagnostics and delivery. (Remember one of our worries?)
Science fiction is fiction no more. And we’re excited as heck because we love tech. We’re Boomers after all! Boomers built the Space Shuttle and bought every new consumer electronics device from transistor radios to the Sony Walkman to the Apple iPhone and progeny. Forget that crap that Boomers are somehow technology adverse.
Retirement Living and Senior Housing are not immune to change
So, who believes living in retirement in 2030 will be the same as our grandparents in 1970 or our parents in 2000?
Big I vs. Little I
There are two types of innovation.
1. Little Innovation — Little I. Incrementally progressive, sustaining improvement within existing products, services, and markets.
2. Big Innovation — Big I. And the quantum leap of discontinuous, disruptive innovation that resets the table by fundamentally changing what’s possible, creating new products, services, and markets.
We like to think of these as Little I and Big I.
Innovation in Senior Living
Similar to the laundry list of big trends in the overall economy, a few
- Confessions of a Chief Strategy Officer: Senior Housing Industry Lacks Imagination. In this article by Tim Mullane, an anonymous senior housing industry officer bemoans the lack of innovation in senior housing. It struck a chord because we’ve also been struck with just how cookie-cutter similar communities look and feel. And how little has changed beyond color-schemes and finishes. The industry is betting on demographics to save it but is ignoring clear signals that Boomers’ psychographics are different than their parents. The why they buy is different. “Demographics are going to favor senior living in the future, but sometimes I wonder if the industry is being too complacent and that some companies’ “strategy” is just to wait until aging baby boomer come knocking.” https://seniorhousingnews.com/2017/12/18/confessions-chief-strategy-officer-senior-housing-industry-lacks-imagination/
We Moved to the City, Isn’t That Change?
- Exact Opposite Now: How Senior Living Design Has Changed Over 20 Years. Another article in Senior Housing News makes the case that the industry has changed. Mary Kate Nelson, points out that the typical sprawling suburban senior living community of 2000 is now more likely to be a smaller, more vertical urban community. https://seniorhousingnews.com/2017/05/23/exact-opposite-now-senior-living-design-changed-20-years/
- This is just following the crowd in our opinion. Urban development dollars and housing subsidies brought developers downtown. Great. We love New Urbanism in design. But what goes on in the buildings didn’t fundamentally change. This is at best Little I. Not Big I innovation. Incremental, Little I, innovation is better than nothing. We like similar and related trends to mixed-use development and intergenerational housing developments. But we fear it’s ignoring the thunder of the oncoming train of disruptive change and Big I innovation.
I can see the train coming but I can’t get out of the way
- Sears Object Lesson. We grew up on Sears as the annual start-of-school outfitting store cum home appliance and tool smorgasbord. Over the weekend, we saw that Sears tried to buy Best Buy twenty years ago. Sears saw the crowds leaving the malls for the big box stores, but Sears wasn’t willing to pay the premium Best Buy’s then growth demanded. The deal fell through. It’s not that Sears didn’t see the train coming. It’s that they didn’t have the courage for discontinuous change. They couldn’t get out of the way of the oncoming trend. And certainly didn’t see Amazon over the horizon. Or Sear’s own potential to leapfrog Best Buy to be the Amazon.
- Don’t Bank on
[Silver] tsunami. McKnightsLong-Term Care News recently examined the financial prospects of the senior housing industry. With leading-edge Baby Boomers entering their seventies, senior service providers are licking their chops in anticipation. But the typical age of a skilled nursing property resident today is about 82. So, nirvana is a ways off for the industry. There are forecasts that say we’ll need three times more senior housing units by 2040 or another 2 million new units. But that’s assuming the past predicts the future. Check your stock prospectus. Past performance does not guaranty future results. Almost every expert interviewed sees the growing numbers of boomers as a boon, but there’s always a but. A hedge. There’s great uncertainty about what Boomers really want and whether the industry is responsive enough to deliver. More fish in the pond is a great opportunity but only if you’re using the right bait. Old bait might not work. And the variety of product offerings is only getting more segmented and confusing for consumers and payers.
Trends that matter more than Boomer demographics
We think three other trends may matter more than boomer demographics.
- Third-party payers. Medicare and Medicaid, the two big government third-party payers are reducing how much they will pay and how they pay. Brick and mortar is at a disadvantage to more nimble, mobile service providers. Third-party payers matter more not less with the Boomers. As a generational cohort have particularly poor retirement savings, except in the upper wealth echelons. An upcoming study by the National Investment Center for Seniors Housing & Care Industry (NIC) says that middle-income seniors face a funding gap in paying for seniors housing units. The industry has a severe affordability problem ahead. https://www.nreionline.com/print/81663
- Labor shortages. Even if the dollars are there, the employees, especially skilled employees, are in short supply. If Boomer demographics favor demand, it hurts supply as Boomers leave the workforce and smaller generations behind can’t fill the traditional service model openings. Can robotics, automation, big data, and AI help? That’s where we’d be betting. For most of us, this probably means more interacting with machines and screens than caregivers. The New York Times sees evidence that there’s already emerging wealth disparity in people contact versus screen time. https://www.nytimes.com/2019/03/23/sunday-review/human-contact-luxury-screens.html
- Caregiver shortages. Baby Boomers are filling the current support gaps acting as caregivers for their parents. Baby Boomers are more likely to be single and with fewer children to look to for support than their parents’ generation. https://www.caregiver.org/caregiver-statistics-demographics
- Tastes and Preferences (Psychographics). Boomers really don’t want to move into an old-age home or a nursing home. Despite all the fancy names, euphemisms and different levels of care and offerings, most senior housing start with a huge stigma. Even if it’s unfair. The success of Margaritaville as a senior living brand? The exception proves the rule. It directly attacks the real problem of industry image. If senior housing felt more like returning to our youthful college days? When we loved group living (and socializing) in the dorms or Greek houses? It would sound like Margaritaville. https://www.nytimes.com/interactive/2018/11/14/magazine/tech-design-longevity-margaritaville.html
Latitude Margaritaville is promising in that someone is starting to figure out that the incoming generation of retirees wants something different. https://www.latitudemargaritaville.com/
There are also movers beneath the surface that are promising to help traditional senior housing industry members deal with the potential of technology to change the world. One we like is K4Connect, promising to integrate the power of Big Data and the Internet of Things (IoT) for senior living communities and their residents. It’s well backed by savvy and deep venture capital. And we like their approach of integrating and simplifying tech for the community operator and the community’s residents. And K4Connect rightly rejects that seniors somehow don’t like tech. We’ll love tech when it delivers tangible benefits in our day-to-day lives. We’d buy fairy dust if fairy dust worked. But technology serving the status quo runs the danger of fundamental disruptions to the status quo. We’re still looking for the Big I, the disruptors. http://www.seniorshousingbusiness.com/industry-voices/the-shb-interview-f-scott-moody-ceo-k4connect
What we wrote three years ago is still way too true. Some in the senior housing industry seem to be waking up to the challenges ahead. There’s a new world coming whether we like it or not. Personally, we’re excited by the promise of emerging technology to fundamentally change retirement for the better. Still, we think the senior housing industry hasn’t figured out just how much change is headed their way and ours. We’re looking for the innovators in the senior living and retirement services. Both Little I incremental innovation and Big I disruptive innovation.
A few final predictions.
- Stop pushing customers around. We think the future is more bringing services to retirees and less moving retirees to access higher levels of care or services. We’ll bring the care to you (or me). This is the single worst part of our experience with our parents in retirement. Every move is disruptive. Multiple moves multiply the disruption. It’s not just additive. The industry is crazy if it thinks Baby Boomers will tolerate this traditional medical model of progressive care bound to particular, specialized, segregated buildings. We’re not immortal. But we’re not crazy consumers either. We didn’t enjoy the experience as caregivers. We’ll reject it for ourselves.
- Adaptability built-in as a feature. Moving services and not customers requires building (or remodeling) spaces to be more flexible. This is more than just universal design. It includes the ability to accommodate the technology required for higher levels of care or services. These real estate distinctions between independent living, assisted living, and long-term care? Are almost all driven by third-party payors or operational
efficiencies.No rational aging consumer wants to be shuffled off somewhere new every time they get comfortable. We think this is the aging version of Sarah Suzanka’sNot So Big House. https://www.amazon.com/Not-So-Big-House-Blueprint/dp/1600851509
- Designed Experiences. Living spaces will become more designed experiences conscious of the social interactions and connections desired. We hate generic “flex” space that works well for nothing. Our friends at Brad Smith & Associates Planning talk about intentional PLACEcreation and compare creating senior living environments to experience as Disney Imagineers. We think BSA Planning is spot on. See our prior article
- Payment Incentives Must and Will Change. So many of the evils in the status quo trace back to the payment incentives. This is true in healthcare overall not just senior living. We’ve paid for efforts and not results for too long. There’s too little team play or coordination of effort. Why? Different payment silos. And it’s top-down driven, unresponsive to consumers as patients or residents. This can’t last. We see more transparent and less complex pricing ahead. Or we see consumers going elsewhere.
- Affordability is the challenge. The money always matters, but it’s never all that matters. In senior housing choices, affordability is a special challenge for the industry and boomer consumers. Boomers are a double-barrel demographic challenge and opportunity. We are a huge cohort. And the gift of longevity extends the questions. “
“. . . [F]ewer than one in 10 (7%) Baby Boom adults . . . purports even to be actively planning to buy a new or resale home in the next 12 months. . . Not the active “active adult” demand trend many would have expected, especially among Baby Boomer retirees and about-to-be retirees, who’ve made it a lifelong practice essentially to get what they want.”
- The unequal distribution of wealth means that serving the upper five percent won’t help society or Boomers overall with successful aging. Real world solutions at affordable prices will require Big I innovation.
- Smart AI-informed Remote Monitoring and Medicine. Technology is driving medicine out of the exclusive clinical setting and into our everyday living environment. Fitbit and Apple Watch are the tips of the spear. Senior living providers should be
the expertin facilitating and delivering care in nonclinical settings. The future is going to feature fewer physicians serving more patients. How? Monitoring and even diagnosis will be driven by more data collection, smart Artificial Intelligence (AI) diagnosis, and remote service delivery. Senior living either finds a role in this new world or becomes more irrelevant.
- More Like-Minded, Self-Directed Communities. Boomers as a group are proactive and less content to be told what to do. We’re the rebels rejecting the hierarchical authority of The Greatest Generation. This is not always a good thing. But, like The Big Sort at the societal level, we expect more grouping in retirement by ideology, worldviews, and passions. https://www.amazon.com/Big-Sort-Clustering-Like-Minded-America/dp/0547237723/ We see the selection of which senior living community being driven more by cultural affinity and less by just architecture. This social drive also suggests Boomers insisting on greater say or influence in the day-to-day operations of their communities. Successful senior living communities will encourage and direct this generational impulse. Legal structures may not change, but the result will feel more cooperative. Latitude Margaritaville is an example of this cultural affinity forward model. Success will require more.
- Automation including Self-Driving Cars. Automation will replace lost dexterity and strength and substitute for scarce, skilled labor. We want to send our car to work when we’re not using it. Our current desire? A Rivian R1T electric pickup truck. So cool. Or maybe we won’t need a car when we can call up one on demand.
More changes and one thing to keep
- Trailing Parents (Grandparents). Remember those helicopter parents of the 1990s? Same shtick, different venue. We see more Boomers trailing behind their adult kids and grandkids to live close to their smaller families. This really changes the marketing for downsizing or senior living communities as the consumer needs to connect with available choices often before knowing a city or region. This may increase the importance of brand power. Why do we love McDonald’s and Holiday Inn Express? Because we know what we’re getting even away from our familiar environs.
- Renting not Owning. There’s evidence of this trend already. We think it will accelerate. Boomer’s will be reluctant to tie too much wealth up in their residence after the Great Recession. Once burned, twice shy. We actually think another round of pain is ahead. We’re not sure who will buy all the McMansions. We fear a similar fate as for the big homes of the 1920s. Getting the current paper wealth (equity) out of big homes may be harder than Boomers think. So when the time comes for downsizing, it may be twice burned. RentCafe.com recently published data-backed proof that Boomers in retirement
areswinging hard to renting, not buying. https://www.rentcafe.com/blog/renting/the-future-of-renting-will-be-centered-around-a-new-older-demographic/
- Caring still in short supply. As caregivers, we’ve seen the huge difference a caring staff can make in senior living. We’ve had two good experiences and one terrible experience with our folks. As much as we love automation and virtual communication, a caring heart and human touch are still important, especially late in life when life by necessity. The innovation winners will remember the importance of caring. We value love above things. That won’t change.