SOUND STRATEGY

In the April 2015 edition of the New England Journal of Medicine, Michael E. Porter, Ph.D. and Thomas H. Lee, M.D. wrote a remarkable article on strategy in healthcare under the title “Why Strategy Matters Now”.

The article is remarkable primarily because of its clarity and comprehensiveness. In three pages of printed text it delivers a rarely found irrefutable case for underpinning a whole sector of industry with a common strategy. It is remarkable also in that it addresses an industry, the healthcare business, which is of vital importance to the nation, its population and its economy. Reading the article, which never mentions the Affordable Care Act of 2010 by name, makes you wonder if our government started at the right place when, with Obamacare, it began to address some challenges and inequities in healthcare delivery in the USA.

Even though the article is written as an advice to healthcare organizations and businesses and not as a commentary to public health policy, it poses six basic questions that, if properly answered, would fit perfectly as the broad underpinning for the federal regulation of healthcare. The first of these six questions is “What is our fundamental goal?” and the authors answer this question by positing that, for the healthcare industry, it should be “Improving value for patients.”

The article drew my attention because I found it exceptionally useful as a platform for strategic planning in any industry, not just healthcare. The previously mentioned six questions, when properly addressed and answered, result in the articulation of a sound strategic outline in any business. What are the questions that need to be answered? Porter and Lee, in their article, state them as follows:

1.       What is the fundamental goal?

2.       What business are we in?

3.       What scope of business should we compete in?

4.       How will we be different in each business?

5.       What synergies can we create across business units and sites?

6.       What should be our geographic density and scope?

Too many business managers see strategic planning as a costly, complicated and time consuming process that they can easily do without and rather avoid. Porter and Lee point out in their article that until recently most healthcare organizations were getting by without a real strategy, leaning instead on operational effectiveness. But, they argue, those days are gone as many healthcare organizations are now running near full capacity but are facing flat or declining revenues. Sounds familiar?

Strategic planning is not a luxury reserved for Fortune 500 type businesses. There is no need to feel intimidated by the business school lingo and methodology or the perceived need for highly priced facilitators or consultants.  

As Porter and Lee point out, “strategy is about making the choices necessary to distinguish an organization in meeting customers’ needs.”  They rightly emphasize that “attempting to serve every need of every customer is a recipe for failure, leaving organizations vulnerable to rivals that choose to concentrate on specific conditions or complexity levels.” Strategy is as much a matter of deciding what not to do as it is determining what to do in the business. Arriving at these type of choices can be done in many ways and formats. It can be done on site and off site, professionally facilitated or internally managed, at one time or in sessions spread out over time. One is not necessarily better than another. It all depends on what it takes to get the six crucial questions answered, thoroughly based on careful analysis of the realities and with participation of a relevant selection of stakeholders in the business. It is vitally important that the answers are resulting from thorough analysis and debate of facts rather than from foregone conclusions of top management.

“Strategy” Porter and Lee write, “must reflect the organization’s fundamental purpose: what it is trying to achieve and for whom. Financial margins and growth targets will be the results rather than the drivers of strategy.” Complex business organizations may require strategies at two levels, one for each business unit and one for the business at large. The answers to the six questions need to be checked for their interdependence and internal consistency. The choices made must fit together and support the fundamental purpose arrived at for the business.

Sound strategy will ultimately depend on leaders in the business stepping forward, willing to make the hard choices coming out of the strategic planning process and doggedly pursuing their implementation. The caliber of these business leaders can then be judged by their tenacity to stay on strategy and their capability to bring their organization along in executing the chosen strategy.