What makes a good strategy?
This is the fundamental question that Dr. Michael Guerriere dissected with 25 emerging leaders on the evening of Thursday, June 4th, 2009. ‘Strategic thinking’ is a skill that is difficult to develop by reading a book. Demand for the seminar was high; learning from the experience of seasoned healthcare strategist is a rare opportunity for young professionals in this industry.
It makes intuitive sense that the first step to deciding on a strategy would be to outline all potential options and assess the merit of each. Yet, Dr. Guerriere remarked how surprisingly common it is for leaders to skip this step and choose a ‘good enough’ option.
Many strategies may lead you to the desired outcome. That doesn’t necessarily mean they are all good strategies. There are various factors that should be considered when assessing the merit of a strategy:
- Uncertainty – There is an element of luck and unpredictability to every strategy. This is a result of uncontrollable environmental factors. However, some strategies have a greater probability of success. Purchasing a lottery ticket may not be the best strategy for gaining a million dollars!
- The ability to execute – A brilliant strategy is worthless if the people in the organization are incapable of executing it.
- Self-sustainability – The best strategies are those that are self-perpetuating. Once the strategy is put into motion, the cascade of subsequent events helps to propagate the desired outcome. The Wal-Mart strategy is a great example; the more Wal-Mart stores that are opened, the greater the pressure on weak competitors and the eventual closure of competing stores. The Wait Time Strategy in Ontario is also an excellent example of a self-sustaining strategy. By starting with five high-volume service areas, linking funding to results, and reporting the results to the public, the strategy developed momentum. Soon other service areas demanded to be included.
- Simplicity and clarity – Complicated strategies risk being misinterpreted. When a strategy is simple and clear, the ability to execute it is enhanced.
- Direction of action – The purpose of a strategy is to direct action. It delineates between acceptable and unacceptable courses of action. Without this specificity, the likelihood of individuals taking on activities that are not aligned with the strategy is high. The General Electric strategy defined by Jack Welsh dictates that each business within the GE conglomerate must be one of the top three companies in the respective industry. This clearly directs the company’s decisions to sell or maintain businesses within the GE portfolio.
In most industries, a company’s strategy is vital to its ability to survive. Market forces dictate the success of a strategy. Similar to Darwin’s theory of evolution, advancements in each industry are dependent on the dissolution of companies with weak strategies and the propagation of those that leverage innovation.
Is an organization’s strategy vital in healthcare?
It seems that healthcare organizations continue to exist regardless of the strength of their strategies. Why is that? In healthcare there is little true competition, thus the process of ‘creative destruction’ that is present in most other industries is inhibited. Many leaders have theorized that the introduction of market forces in healthcare would help to drive competition, and thus innovation and efficiency in the industry. However, there are a few fundamental characteristics of healthcare that prohibit it from functioning like most other market driven industries:
1. Healthcare lacks informed consumers
The direction of market forces are dictated by the choices of consumers. Healthcare services are far more complex than the commodities offered to consumers in other industries. As a result, it is extremely difficult for the public to make informed choices.
2. Healthcare is heavily regulated
To balance the public’s inability to choose ‘correctly’ amongst the healthcare services provided, systems are heavily regulated. Regulation also helps to balance the tendency towards activity. In healthcare, more activity is usually regarded as better by patients.
Within a heavily regulated environment it is very difficult for an organization to truly fail. When is the last time you heard about a hospital going out of business? When was the last time you heard about the government rescuing a hospital financially? Herein lays the answer to the question regarding the importance of a healthcare organization’s strategy to its existence. In healthcare, the viability of an organization is not nearly as dependent on its strategy as in other industries. However, the strategy of a healthcare organization has other valuable purposes. It helps to define the culture of an organization, it sends a message to the public and it instills confidence in the staff and governors.
Closing Quote :: Sir Winston Churchill reminds us:
“However beautiful the strategy, you should occasionally look at the results.”
For a copy of this meeting summary, click here to download the pdf file.
