Monday, June 23, 2014

Disruptive Processes
How US healthcare companies can thrive amid disruption—Part 2
The healthcare industry is undergoing sweeping change. To emerge as winners, incumbents should learn from other industries that have faced similar upheaval.

June 2014 | byBrendan Buescher and Patrick Viguerie

This is from the same article as the last posting. This focuses on what companies must do to meet the challenge when facing a disruption regardless of the strategy you may chose per the previous positing.

Responding rapidly to industry disruptions is hard. At most companies, the economic constraints of operating a business at scale hamper the ability to make changes “in flight.” Many organizations are also prisoners of their past—and the more successful that past, the harder it usually is to make changes… 
.. However, the market does not care about the past or about any of these constraints… 
.. We believe that senior executives should undertake four sets of actions if they want to get in front of the coming disruption: 
Shift focus
First, senior executives should shift their own focus. In essence, they need to take on two jobs: they must run today’s business while creating the business of tomorrow. To do this, they should have a clear vision, based on solid insights, of the future. This vision should include the key present and potential market segments. Which of these segments do the executives believe will grow rapidly or become more profitable? Which ones will shrink? Questions like these are crucial, because healthy institutions need growth—growth drives value, creates opportunity, and enables distinctiveness.
Reallocate resources
Senior executives should also be willing to make significant changes in how and where resources are allocated. After all, a strategy is only a theory until resources are allocated to it. In making the allocation, the executives should take care to ensure that they are not under resourcing the new strategy… There is also a second danger the executives should guard against: at many companies, budget processes favor existing businesses over new ventures..
Increase speed and capacity for change
If a company is to survive industry disruption, senior executives must increase its speed and capacity for transformation and innovation. Their ability to accomplish this will be much greater if they have a clear picture of what the organization is good at and what assets can be leveraged in other areas. Thus, before they finalize their decision about which strategy (or strategies) to follow, the executives should make sure that they have a realistic understanding of their organization’s capabilities. 
Get lean
In the post reform world, administrative efficiency will be a must-have, not a nice-to-have—and not merely because of regulations governing medical-loss ratios. If history is a guide, many new entrants will be much more efficient than incumbents are and will have more favorable cost structures. Incumbents are likely to find it difficult to compete with them unless they have “leaned out” their operations.
Furthermore, performance differences typically become much more exposed during industry disruptions.

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