Monday, June 16, 2014

Disruptive Processes
How US healthcare companies can thrive amid disruption
The healthcare industry is undergoing sweeping change. To emerge as winners, incumbents should learn from other industries that have faced similar upheaval.

Here some key learning's for any company facing a disruption.

Disruptive change is now a fact of life for many industries. Healthcare is no exception. Although healthcare has been changing for decades—think about the introduction of diagnosis-related groups (DRGs) or the initial push toward managed care in the 1980s—the Affordable Care Act (ACA) promises to accelerate both the rate of change and the level of uncertainty confronting the industry… 
…. Over time, however, the transition should create new opportunities with significant upside. ……The promise of opportunity creation and upside is far from certain. In fact, the historical record is unambiguous: incumbent companies are often unseated by industry disruption……There are three strategic paths that companies in other industries have used successfully to thrive during and after disruptive change… 
Refocus your portfolio The most straightforward way to avoid the negative consequences of industry disruption is to shift the company’s emphasis to the customers or products that will benefit from the disruption (or at least be insulated from it) and to de-emphasize the areas of business that are most vulnerable…..Two challenges are inherent in this approach, however...First, when deciding where to concentrate, companies must be able to gauge the likely future attractiveness of various industry segments, not their current attractiveness…..Second, companies must be realistic about their capabilities, because the likelihood of succeeding with a refocused portfolio is far higher when an organization can build on existing strengths.. 
Transform your business model A second option is to make fundamental—and potentially radical—changes in the company’s core activities to meet the disruptive challenge head-on.  Charles Schwab used this approach after a wave of lower-priced, Internet-only stock brokerages gained significant market share in the late 1990s….The biggest challenge a company that wants to transform its business model faces is that new entrants often offer a “better mousetrap”—some combination of superior benefits and lower cost. It is usually hard for an established organization to transform itself to the extent and with the speed necessary to thrive (think about print magazines in an age of digital media). The odds of success are higher if the company can identify and exploit competitive advantages that others cannot … 
Build a major new businessThe third option is to acquire or build a new business that can leverage the company’s core capabilities and grow large enough to replace earnings lost from its existing business. This may be the most challenging of the three options….Over the past two decades, IBM has transformed itself in other ways. For example, it refocused its hardware business on high-end PCs rather than mainframes; it then sold off its PC business to concentrate on corporate-software solutions. IBM’s ability to keep transforming itself has enabled it to keep pace with several waves of change in the rapidly evolving IT market. 
Regardless of which path they took, these companies built the organizational capacity and agility required to lead during the disruption. They made big shifts in leadership focus and major changes to resource allocation, and they developed a faster organizational clock speed and leaner cost structure.

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