Does Your Strategy Account For the Future?

"Your rearview mirror is so small and your windshield is so large because what lies ahead is much more important than the past." (@CHRISVOSS)

What can we say about the future? 

• It's uncertain and the end is always near. (Jim Morrison) 
• The future is much like the present, only longer.  (Dan Quisenberry) 
• The future is here.  It's just not widely distributed yet. (William Gibson) 

Uncertain. As near as tomorrow. Long duration.  Limited (and uneven) distribution.

Think about how hospital strategic plans account for future competitor decisions.   If they do at all,  it's little more than simple extrapolation of past performance, a technique which, though understandable since that's where the data reside, is nothing more than crafting strategy in a vacuum.
It's much easier to track competitor performance retrospectively than to forecast future decisions.

Volume trends, market share, patient satisfaction, quality indicators, financial performance, major capital investments are all in the public domain if one knows where to look.  A strategist's job is to synthesize all that data so that a few important, future-oriented questions receive sustained attention:

1. The Benchmark Question: 
What is our competitive position relative to the competition?

2. The Trendline Question:
Are we improving? I.e. what's the slope of our trend line? How do we know?

3. The Speed To Market Question:
Are we improving as rapidly as those around us? Are our improvement cycle times fast enough?

4. The Marketplace Expectations Question:
Are we improving as rapidly as the market demands, now and in the future? I.e. is our projected performance sufficient to succeed as customer expectations grow and evolve?

11:16 AM

Most Hospital M&A Transactions Are Financially Unsuccessful

From Healthcarefinancenews.com:  "Most hospital M&A transactions are financially unsuccessful, study says."

"According to a recent study, a majority of hospital and health system merger and acquisition transactions have not been financially successful.

"Booz & Company, a global management consulting firm, analyzed a sample of 220 hospitals with pre- and post-transaction performance data over a 10-year period (between 1998 and 2008) and found that less than half (41 percent) of all acquired hospitals outperformed their market.

[...]

"Sanjay suggested that it’s important for hospitals to merge with other hospitals that have like-minded views about the future and culture, as well as shared views around their positioning in the market.

"So, for example, a merger between an academic medical center and a small, community hospital in an underserved area may not be ideal."

12:36 PM

NFP Hospitals Hit the Wall

Have nonprofit healthcare providers' improvement efforts hit a wall?  Standard & Poor's Rating Services seems to think so, in this story (via Reuters.)   From the story:

"Adding to pressures, inpatient volumes are dropping.

"With pending budget sequestration at the federal level, health reform implementation, and continuing pressure on state budgets, we believe the next several years will be difficult for most providers," said S&P. "Furthermore, we believe that the improvements of the past several years may be reaching their limit and thus will not be able to keep pace with longer-term revenue pressures, especially in light of weaker volumes."

"S&P says more rating downgrades are possible for not-for-profit healthcare systems over the next two years. It noted that the proportion of systems with positive or stable outlooks is shrinking, which "supports our opinion the multiyear trend of improved financial ratios is unlikely to continue."

Sooner or later providers, notoriously risk adverse, will be forced to admit that cautious incrementalism is little more than death by a thousand cuts - a slow death, but death nevertheless.

Many see salvation in mergers and/or acquisition.  Putting a bunch of soon-to-be-crummy balance sheets together doesn't make the collective any less crummy.  And, usually, the consultants, lawyers and integration costs eat up the first 5 years of savings from any so-called "synergies."

Many see salvation in shiny new buildings with private rooms and in-lobby waterfalls.  Few will find the new business volumes to justify more balance sheet leverage (see "crummy" - above.)

And many see salvation in massive IT investments- Big Data, EMRs, portals, etc.  I hope they're right.  I fear they're not, but it'll take five years to really know how soundly these systems were reviewed, acquired and implemented.  Sitting here it's easy to predict more failures than successes.

In the meantime, under either fee for service or risk-based reimbursement, a "low delivered cost" position looks better and better.  It's the only strategy offering a possibility of success regardless of scenario.  But here providers have been far too timid, scrabbling in the dirt for a few percentage points of margin improvement instead of challenging themselves to find 30%, 40%, even 50% savings on an episode of care.

They're not going to achieve that by cutting the marketing budget (again) or designing buildings offering more of the same.

No, it won't happen until providers finally do hit that wall.  Maybe then they'll realize that the only path to survival requires getting radical about lots of things -  including ditching that leadership box in which they find themselves.

(Photo credit: Magdalena Gmur, Creative Commons)

3:11 PM

What Does Culture Eat For Breakfast?

Photo by: Cillian Storm Creative Commons

Not strategy.  Leaders, more likely, at least those managing by catchphrase, as Dan Beckham suggests.

From the article:

"The Problem of Buying into the Catchphrase


"One proponent of the "culture eats strategy" catchphrase, Shawn Parr, an innovation and design consultancy CEO, made his case in a Jan. 24, 2012, Fast Company article holding out shoe company Zappos as an example. In response, Bob Frisch, a strategy expert with experience at the Boston Consulting Group, had this to say in the same publication a month later:

"Parr attributes the success of Zappos to a culture that is inclusionary, encouraging, and empowering.' Customer service representatives write zany emails and company leaders have often affirmed their belief that if you get culture right, success follows. But Zappos also has fast delivery, deep inventory, a 365-day return policy and free shipping both ways. That's a strategy — not a culture — and if Zappos weren't competitive with catalog sellers and mall shoe stores, all the culture in the world would make little difference. … In the business world, it's easy to take a handful of current winners, give them a backstory about their cultures and conclude, like Parr, that authenticity and values always win out.' Always? Walmart is the winner in retail. McDonald's serves more meals than anyone else. And yet they're hardly praised as paragons of superior culture."

Read the whole thing, here.

12:51 PM

Healthcare CEO's Guide to Avoiding the Newspaper Industry's Mistakes

Imagine an industry, slow-moving, comfortable and secure in assuming its own irreplaceability.  Health care?  Well, yes,  But also newspapers, and therein lies a lesson or two.

From Forbes here's the Healthcare CEO's Guide to Avoiding Newspaper Industry Mistakes: (note that the underlined emphases are mine.)

"Health system CEOs would be well advised to study what newspaper industry leaders did (or perhaps more appropriately, didn’t do) when faced with a dramatic industry change. Turn back the clock 15 years and the following dynamics were present:

• Newspaper leaders knew full well that dramatic change was underway and even made some tactical investments. However they didn’t fundamentally rethink their model.
• Newspapers were comfortable as monopoly or oligopoly businesses allowing for plodding decisions. Their IT infrastructure mirrored the plodding pace with expensive and rigid technology architectures.
• Newspaper companies bought up other newspaper chains and took on huge debt.
• Owning printing presses was a de facto barrier to entry allowing newspapers unfettered dominance.
• Depending on one’s perspective, it was the best of times or the worst of times to be a leader of local media enterprise.

"Before they knew it, owning massive capital assets and the accompanying crushing debt became unsustainable. The capital barrier to entry transformed into a boat anchor while nimble competition dismissed as ankle-biters created a death-by-a-thousand-paper-cuts dynamic. Competitively, newspaper companies worried only about other media companies or even Microsoft, but their undoing was driven by a combination of craigslist, monster.com, cars.com, eBay, and countless other marketing substitutes for their advertisers. In addition, there were easier ways to get news than newspapers. Generally, the newspaper’s digital groups were either marginalized or unbearably shackled so that the encumbered digital leaders left to join more aggressive competitors. The enabling technology to reinvent local media didn’t come from legacy IT vendors who’d long sold to newspaper companies, but from “no name” technologies such as WordPress, Drupal and the like.
"The parallels with health systems today are clear. Consider the present dynamics:

• Health systems have been aggressively gobbling up other healthcare providers and frequently taking on debt to finance the growth. Concurrently, health systems often have capital project plans that equal their annual revenues even though no expert believes the answer to healthcare’s hyperinflation is building more buildings. Consider the duplicative $430 million being spent in San Diego to build two identical facilities just a few miles apart as Exhibit A of the problem. Studying other countries that shifted from a “sick care” to a “health care” system, more than half of their hospitals closed. They simply weren’t needed or weren’t appropriate.
• Until recently, complex medical procedures always took place in an acute care hospital setting. Increasingly they are being done more and more in specialty facilities that can do a high volume of particular procedures at a signifiantly lower cost.
• Just as newspapers were implementing multimillion dollar IT systems while nimble competitors were using low and no cost software to disrupt the local media landscape, health systems are similarly implementing complex systems to automate the complexity necessary in a multi-faceted system. Meanwhile, disruptive innovators are implementing new models at a fraction of the cost and time. For example, it’s well understood that a healthy primary care system is the key to increasing the health of a population. Imagine if a fraction of the billions being spent by mission-driven, non-profit health systems on automating complexity was redirected towards the reinvigoration of primary care. They’d further their mission and lower their costs. Of course, they’d likely see revenues drop but presumably maximizing revenues isn’t the mission of a non-profit.
• The plodding pace and scale of innovation at most health systems isn’t up to the enormity of the task. The vast majority of health system innovation teams are constrained by how they have to fit innovation into an existing infrastructure. That approach rarely, if ever, leads to breakthroughs, as its true intent is to make tweaks to a current system rather than a rethink from the ground up.

Great article, one that should be required reading for every hospital CEO, board member and executive team.  The rest of you innovators and disrupters needn't bother.

7:23 AM

5 Reasons Your Healthcare Integration Strategy Is Going To Fail

From Eliot Muir, iNTERFACEWARE, Special to ZDNet:

" I hate being the bearer of bad news, but I can tell you, with 100 percent certainty, that your integration strategy is going to fail. That’s the good news. The bad news is that when your strategy fails, there will be a start-up with only a handful of employees and even less money waiting in the wings to take over your market share. I am not trying to paint a gloomy picture; I am just sharing hardcore facts upfront.
...

" ...healthcare organizations looking to inoculate themselves from integration failure should follow a few common-sense, tried and true rules: develop a clear strategy up front, keep current with technology, leverage the cloud, be flexible about standards and always look at the opportunity costs inherent in custom development."
[Read more...]

3:00 PM

"I've Cracked It!"

Reportedly Steve Jobs' final words about Apple's long-rumored venture into the thickets of TV programming.  So has Apple, indeed, "cracked it?"  Let's hope so.

Analyst Shaw Wu on why Apple should enter the TV business: “What’s missing is live broadcast television,” he wrote. “One obvious way to offer this is via the traditional way where a user subscribes to cable or satellite. But a more revolutionary, disruptive and differentiated way, is via the internet or IPTV which would be more in-line with its iTunes and iCloud model. Because of the high dependence on content providers, we believe exact timing is difficult to pinpoint.”

He added, “We continue to hear what AAPL would love to do is offer users the ability to choose their own customized programming, i.e., whichever channels/shows they want for a monthly subscription fee. This is obviously much more complicated from a licensing standpoint. And in our view, would change the game for television and give AAPL a big leg-up against the competition.”  (Emphasis mine.)

Strategic separation of the magnitude Apple delivers is assembled from doing, not what others AREN'T doing, but doing what others CAN'T do.  The hard stuff.  The 'never been done before' risky stuff that nobody else has the fortitude or the imagination to tackle. 

Like the mobility to choose my own programming.  Whatever channels I want for a monthly fee.  No more surfing past the twenty channels I ignore to find the three I watch.  And maybe I can tell Siri  "NO MATTER WHAT THE CIRCUMSTANCES, DON'T EVER SHOW ME ALEX BALDWIN OR LADY GAGA!"

Like being the easiest hospital with which to do business, the no-hassle, no-BS hospital.  

Know anybody doing that?  Me neither. 

Is 2012 the year disaggregation and disruption (finally) come to TV?  Is it the year for cable providers' stodgy attitudes and crappy service to (finally) bite 'em in the ass?  Stay tuned (pun intended.)

6:54 AM

Wal-Mart Wants To Be Your Doctor

And your manager of chronic diseases. And your pharmacist. And maybe your health coach. They could even play in your ACO sandbox.

In response to the article, Wal-Mart says they’re NOT, repeat NOT “… building a national, integrated low-cost primary health care platform..." OK, got it.  Not.

Unless, of course, they are.

It’s hard to deny their interest when a few scant weeks ago the retailer sent out a request for partners to help it "dramatically ... lower the cost of healthcare ... by becoming the largest provider of primary healthcare services in the nation."

It's no surprise that hospitals and physicians face stiff competition from unexpected directions.  These deep-pocketed newcomers care not a fig for our outdated business models, our glacial decision-making and our ability to pervert most innovations that might disrupt the status quo.

[Read more from NPR blogs...]

4:34 PM

"It is so simple, just do what you love."

Christina Stevens writes about senior living at her blog "Next Wave." Good stuff.

7:08 PM

"Major segments of the US economy have been lost, in some cases, forever."

From Clayton Christensen being interviewed by Steve Denning for Forbes:

"Firms need to be evaluating future investments strategically in terms of how they will affect their capacity to go on delighting their customers for a sustained period in the future.

"For managers trained in traditional business school thinking, the idea that pursuit of profit is the problem, rather than the solution to the economy’s problems, may come as a shock. For business school professors who have spent their lives teaching the focus on profits and the use of IRR and RONA to measure profits, the coming change may be even more disturbing.

"Like all new ideas, in the first instance it will be rejected. Then it will be ridiculed. Finally it will be self-evident and no one will be able to remember why anyone ever thought otherwise."

10:04 AM

Knock Knock! Anybody Home In Strategic Planning?

From Georgia Everse at HBR Blog Network:  "Eight Ways to Communicate Your Strategy More Effectively."

Great ideas for those of you wondering why your strategy, lovingly crafted and lavishly announced, with great effort and more than a little expense, landed in your organization with a hollow thud...followed by deafening silence.

[Read more...]

10:58 AM