hospital impact

Continuing our series on hospital strategy, I read a very timely article in November 2005's edition of HFM on getting serious about hospital strategy. I may be a little biased, but I highly recommend HFM articles because they are the perfect combination of strategy & tactics. This article is no different. It goes through how to properly do a SWOT, how to close the gap on our perception of the environment vs. reality, and how to judge the quality of an organization's strategy.

I particularly like how this article talks through strategic trade-offs. No hospital can be all things to all people. Inevitably, the hospital has to say no in at least one of three dimensions:
(1) service variety - How much service (and how much variety of service) you offer
(2) customer need - How deep each service goes to meet customer needs
(3) customer access - how easily accessible your services are

Check out this quote that elaborates this point using Idea and Jiffy Lube as examples:

"Two well-known industrial organizations are illustrative. Ikea, a company that sells unassembled furniture, focuses on many customer needs, but offers limited access and has a limited range of products. Jiffy Lube, by contrast, has made its trade-offs by focusing on broad access to some very limited services, meeting very few customer needs."

Unfortunately, most hospitals haven't thought through trade-offs in these terms. Our hospitals end up either in the middle (and completely undifferentiated) or trying to be everything for everyone (and not doing a good job at any of it). Yes, there are many restrictions and regulations in healthcare, especially for critical access and rural hospitals. And granted, there's not as much "room" to differentiate as in other industries. That may very well be true, but look at the Mayo Clinic, the Rehab Institute of Chicago, and Shouldice Hospital (exclusively a hernia surgery hospital). They have chosen to differentiate themselves by being the best at #2, not care much about #1, and not care at all about #3. They are so successful precisely because of focusing on being the best in just one aspect. These are extreme examples, but maybe there is more room to play than we originally thought?

The other way the article talks about trade-offs is to decide whether to be the "low-price" good-enough provider or the "premium-price" niche player. More and more, we are finding that healthcare is big enough for some hospitals to offer Toyota Corolla-type products while others offer the Hummer H2-type products.