Is Service Line Success Embedded in Design or Execution: Part 4

This is the final installment of four posts on healthcare service line strategy and structure.

With Service Lines, Imitation is Not the Answer

The classic flaw of imitation is the assumption that someone else is doing it right.

For the service line management model to be an effective growth engine, providers must move beyond benchmarking and replication to forge a distinctive position in the market. The secret to competitive effectiveness is not to be better than the competition. But to be different in a way that is distinct, relevant and truly meaningful to your customer base -- by seeking different value-producing approaches to the market, by driving innovations in service delivery, by creating unique approaches to integration and service consolidation, by cultivating unique partnerships, by understanding how different degrees of centralization, delegation of authority, and functional specialization work together to achieve differentiation.

The key consideration for health care leaders is how those differences add value to the service line model in achieving the company’s strategic vision and goals.

So, the critical question for service line execs is how differentiated value is defined, created and delivered. This requires more than an aggregation of tactics, but a leadership-driven approach to identifying opportunities, crafting strategies to create a distinct and compelling value proposition, developing a effective business model and operating structure, forging physician partnerships, and prioritizing investments.

What's important to keep in mind is that service line management, in and of itself, is not the goal. When aligned to an organization’s strategy and configured to achieve results, it can, however, be a powerful model for creating and sustaining competitive advantage.

Karen Corrigan

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

Is Service Line Success Embedded in Design or Execution: Part 2

The following is a continuation of an earlier posting.

The Disconnect Between Strategy and Service Line Structure

At the risk of boring repetition, structure should follow strategy. There is no universal ‘right’ way -- or ‘wrong’ way, except perhaps blind restructuring of clinical services into service lines without a defined strategy as to how value will be created and what capabilities and resources must be brought to bear effective execution.

Strategy then is not just an aggregation of tactics, but a leadership-driven approach to articulating a futuristic vision for how a service line intends to compete. To get to this point, health systems must develop a point of view as to how the market is likely to unfold, identify specific strategies to create a distinct and compelling market position and then create a business model and structure to effect achievement of its goals.

In its generic form, the product line and brand management models developed by industry leaders such as Proctor and Gamble and GE, are useful frameworks for designing an approach to service line leadership with the fundamental intent of optimizing the organization’s market position for a defined service line.

There may be more to learn today from the product or brand management models that evolved in the consumer goods and services industries as we address increasing consumer influence in the selection, purchase and use of health services and products. However, to be receptive to the advantages offered by brand management models, we must suspend the predominant notion about brands as communication devices and adopt an understanding of brand as the totality of customer experience resulting from organizational decisions regarding positioning, design, development and delivery of products and services.

Fundamental differences are realized across key factors. Part III will compare and contrast healthcare’s service line model with industry’s product or brand management model.

Join the discussion. What do you believe to be the key strengths and pitfalls of service line management models?

Karen Corrigan