Is Service Line Success Embedded in Design or Execution: Part 3

This is the third installment of four posts on healthcare service line strategy and structure. Watch for the 4th post in coming days.

Brand vs. Service Line Management

In comparing and contrasting healthcare’s service line model with industry’s product or brand management model, fundamental differences are realized across key factors:

Market orientation -- A key difference between service line and brand managers (and among better performers and poorer performers of service line management) is the vantage point from which decisions are made – poorer performers operate from the inside out (“here’s my program – let’s see if we can find some customers”) versus outside in (we’ve identified segments offering significant opportunity for growth – let’s build a product to attract them.”). In competitive consumer markets, maintaining an external focus while keeping a direct line into the operations team to deliver against changing consumer requirements is paramount to success.

Strategic focus – Historically, the strategic focus for hospital service lines has been development of profitable clinical services to compete with other health institutions; improving quality, lowering costs, aligning physicians, and adding services all are aimed at creating a better offering. Competitive advantage, however, isn’t sustained by being “better” than the competition but from being “different.” Brand managers seek to create markets and new sources of revenue by finding new and different ways to meet customer needs, extending the life cycle of the brand and representative products, forging strategic partnerships to enhance product offerings, and developing proprietary approaches for channel leadership.

Competitive posture – The health industry’s supply-side orientation to strategy tends to favor defensive posturing. Service line initiatives are over-invested in similar activities amongst providers in a market to protect position and share, as opposed to proactive strategies to leverage strengths against emerging market conditions that offer opportunity for substantial growth. A demand-side perspective acknowledges that consumers have shifting needs that can be met in a myriad of ways. It opens up our thinking as to not only “who” but “what” we compete against.

Value innovation – Organizations that consistently perform above industry norms are those that better anticipate changes in competitive dynamics and continually innovate to create greater value for customers and the market. However, the health industry’s penchant for benchmarking and low tolerance for risk-taking sentences service lines to numbing sameness and marginal improvements. Value innovation does more than raise the bar – it resets the rules of competition by de-commoditizing health care services. The ultimate pay-off is substantial gain in growth.

Marketing – The traditional service line marketing toolbox has offered up a limited set of tactical activities to promote service line offerings and cultivate referral relationships. In consumer markets, marketing is a strategy-critical core business competency to create profitable exchange relationships between an organization and its publics. It is the principal process for creating and linking customers to the organization’s products and services. In comparison, the traditional industrial marketing model includes major functions of producing, packaging, pricing and promoting individual products.

Scope of responsibility and authority – One of the fundamental issues with the service line management model is lack of agreement as to whether service line leaders are operations managers, clinical leaders, business developers, marketing managers or some combination of the mix. A matrix reporting structure, which is often poorly defined, limits the manager’s ability and authority to achieve service line objectives. If we contrast this model to that where cross-organizational teams work for a brand manager who reports to senior executives, there are lessons to learn about lines of authority and accountability for performance

Performance metrics – In poorer performing service line organizations, performance objectives and measures of success are unclear and reward systems are not linked to achievement of specific goals. Even worse are those where authority and accountability are so misaligned that turf wars break out inside the very service line structure intended to “break down silos.” Consider the service line leader who is held accountable for volume growth and profitability, but has no authority to impact capacity, through-put or supply costs. In competitive consumer markets, metrics such as preference share, conversions to trial, percentage of revenue growth from introduction of new products, and repurchasing rates, among others, are leading success indicators.

Coming next: Imitation is Not the Answer

Karen Corrigan