Healthcare companies often focus on tactical business goals that seem to be the key to growth and profitability—receiving FDA approval, launching a product enhancement, improving manufacturing efficiencies, etc. But the real focus should be on how to sustain a competitive advantage. That comes down to choosing the right strategy and aligning your organization behind it.
Harvard Business School professor Michael Porter defined “strategy” in his classic 1996 article on the topic. Here are a few insights to keep in mind as you begin your 2020 planning.
Choosing the right strategy entails defining how your business differs from the competition, both in terms of your values, the activities you pursue and how you communicate what makes your healthcare company unique. That means proactive choices in the variety of products your business provides, the customer segments it serves, and the channels through which it goes to market. These need to happen concurrently not linearly—and it should be revisited over time.
Even the most thoughtful strategic choices, however, will not result in a sustainable advantage if they lack meaningful tradeoffs. Once those tradeoffs are determined, the crux of a strong strategy is how the chosen activities reinforce one and other to drive an unfair advantage.
To explain, Porter turns to the classic example of Southwest Airlines:
Southwest’s rapid gate turnaround, which allows frequent departures and greater use of aircraft, is essential to its high-convenience, low-cost positioning. But how does Southwest achieve it?
- The company has well-paid gate and ground crews, whose productivity in turnarounds is enhanced by flexible union rules
- With no meals, no seat assignments, and no interline baggage transfers, Southwest avoids having to perform activities that slow down other airlines
- It selects airports and routes to avoid congestion that introduces delays. Southwest has strict limits on the type and length of routes it makes and only uses Boeing 737s
Southwest’s strategy involves a whole system of activities, not a collection of parts. Its competitive advantage comes from the way its activities fit and reinforce one another. For example, if they wanted to offer meals, it would not fit their low-cost strategy. Plus, it would be a point of parity to other airlines, like United. That tradeoff would undermine their overall strategic vision and is not something they could support. What makes Southwest Airlines so successful is not a bunch of separate things, but rather the strategy that ties everything together.
Strategic planning is about making choices about where your organization should compete—and, more importantly, where it can win. In short, it’s as much about choosing what to do as it is choosing what not to do.
The strategic planning process is about getting from Point A to Point B more effectively, efficiently, and enjoying the journey and learning from it. It’s part strategy and part execution. Having a good strategy dictates “how” you travel the road you have selected, and effective execution makes sure you are checking in along the way. There should be well-defined key performance indicators (KPIs) with clear objectives and supporting initiatives. This process should be revisited annually to ensure internal alignment, responsiveness to changing market dynamics, and the necessary resources are optimally budgeted and allocated.
Planning should begin now for 2020. Don’t let client-related issues and business operations interfere with the important matters of building your company to maximize growth, thought leadership and market adoption. There are less than nine weeks left in this calendar year.
Pull out your calendar and set up a strategic planning meeting to realign, reenergize and refocus the management team for the year ahead. To be most effective, strategic planning sessions should be held off-site and ideally the management team should walk into a planning session with specific objectives and walk out with a clear action plan. A good offsite planning meeting can uncover key insights into the company’s current and future challenges, as well as determining priorities and tradeoffs that will move you forward.
Below are a few questions that will lead your team into your strategic planning process:
- In terms of participation, will you limit involvement to the executive team or extend invitations to different levels of the organization to get a wider range of perspectives?
- Why does your company exist? If your company ceased to exist, what would the world miss?
- What are the organizations’ values and are they understood and embraced by your employees? Change will only occur if culture leads.
- What did you do well as part of your last strategic plan and what was not successful?
- What are the success drivers in the company? What is creating the biggest impact to achieve your vision?
- Who is your most valuable core customer or strategic segment and what unique value do you provide to them?
- What’s your vision of the company in the next three years? Describe the number of employees, products, customers, geographies you would be operating in, etc.
- If you could choose one measure that would have the most impact on the achievement of that vision, what would it be?
- What obstacles and uncertainty stand in the way of achieving that vision?
- Where do you want your organization to be in one year’s time?
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