HCA 407 Healthcare Planning and Evaluation Week One Lecture HCA 407 Healthcare Planning and Evaluation Week One, Chapter One Chapter 1 The Nature of Strategic Management Strategic Management What is it? Why should we care? What does it look like? What is unique about health care that could impact how strategic management is used? Quote American Health Care is in a state of hyper- turbulence characterized by accumulated waves of change in payment systems, delivery systems, technology, professional relations, and societal expectations. It can be likened to an earthquake in its relative unpredictability, lack of a sense of control, and resulting anxiety - S.A. Shortell, R.R. Gillies, and K.J. Devers “The Only Constant is Change” • Legislative healthcare reform • Growth of outpatient care • Increasingly restrictive reimbursement env’t • Growth of home health • Demographic shifts • Changes in managed care strategies • The baby boomers • Increase physicians in executive leadership • Shortages of providers • Emerging focus on prevention • High costs of new tech • Pressure to reduce overhead costs • Further consolidation within the industry Foundations of Strategic Management Greek word stratēgōs, meaning “a general” which in turn comes from roots meaning “army” and “lead.” Greek verb stratēgēō means “to plan the destruction of one’s enemies through effective use of resources.” Development of Strategic Management • Long- Range Planning • Strategic Planning • Strategic Management • Strategic Management in the Health Care Industry What’s the difference? Strategic Management Health Care Policy Planning The Dimensions ofStrategic Management Strategic thinkers draw upon the past, understand the present, and can envision a better future. The Map and the Compass The Map • Analytical or Rational Approach • Logical Sequence of Steps • Specific Processes. • Better in Known Worlds. The Compass • Emergent Approach • Relies on Learning • Leadership Sets Direction • Better in Uncharted Worlds The Map and the Compass The Map • Analytical or Rational Approach • Logical Sequence of Steps • Specific Processes. • Better in Known Worlds. The Compass • Emergent Approach • Relies on Learning • Leadership Sets Direction • Better in Uncharted Worlds Map and Compass Map Compass Planned Emergent Rational Non- rational Sequential Random Performance Learning Consistency Change Logical Illogical Order Discontinuity Efficiency Effectiveness Prescriptive Descriptive Evolution Revolution Control Risk Present Future Management Leadership Analytic Approach Emergent Approach What determines what type of approach to use? Non-realized strategies Realized Strategy Emergent strategies Strategic Management Processes Strategic Planning Strategic Thinking Awareness Anticipation Analysis Interpretation Synthesis Reflection Situation Analysis • External Analysis • Internal Analysis • Directional Strategies Strategy Formulation • Directional Strategies • Adaptive Strategies • Market Entry/Exit Strategies • Competitive Strategies Implementation Planning • Service Delivery Strategies • Support Strategies • Action Plans Managing Strategic Momentum Managerial Action Strategy Evaluation Strategic Control Emergent Learning Reinitiate Strategic Thinking Leading Strategically • Strategic Thinking – an intellectual orientation, a way of thinking or mindset. • Strategic Planning – the periodic process of creating organizational momentum (a strategy). • Managing Strategic Momentum – a philosophy and process of continuously leading and managing an organization using strategic thinking and periodic strategic planning. Strategic Thinking Framing What are we doing now that we should stop doing? What ae we not doing now, but should start doing? What are we doing now and should continue to do but perhaps alter in some fundamental way? Leading Strategically Strategic Activity Description Orientation / Scope Strategic Thinking Fundamental Strategic Skill – an Intellectual Orientation, a Way of Thinking or Mindset Individual Leadership Process Strategic Planning Process of Creating a Plan Using Strategic Thinking Periodic Group Leadership and Management Process Managing Strategic Momentum Process of Leading and Managing the Strategy using Thinking and Planning Organizational Management Processes Strategic Thinkers • Do not assume that the organization will continue to do what it is presently doing. • Determine what the organization should stop doing. • Determine what the organization should start doing that it is presently not doing. • Determine what the organization should continue to do but perhaps in a fundamentally different way. Strategic Planning • Provides a sequential, step- by- step process for creating a strategy. • Involves periodic group strategic thinking sessions. • Requires data/information, but incorporates consensus and judgment. • Establishes organizational focus. • Facilitates consistent decision making. • Reaches consensus on how the organization fits within its industry . • Results in a documented strategic plan. Linking Today and Tomorrow plans plans plans plans budgets budgets plans budgets budgets budgets Profile of Today Mission Strategy budgets budgets plans plans year 1 budgets year 2 budgets plans year 3 budgets plans year 4 plans year 5 Profile of Tomorrow Vision (hope for the future) Managing Strategic Momentum • Addresses the management of the actual work to accomplish specific objectives. • Concerns decision making process and their consequences. • Provides the style and culture. • Evaluates strategy performance. • Controls strategy implementation. • Is a learning process. • Relies on and initiates new strategic thinking and new periodic strategic planning. Benefits of Strategic Management • Ties the organization together with a common sense of purpose and shared values. • Improves financial performance in many cases. • Provides the organization with a clear self- concept, specific goals, and guidance as well as consistency in decision making. • Helps managers understand the present, think about the future, and recognize the signals that suggest change. • Requires managers to communicate both vertically and horizontally. • Improves overall coordination within the organization. • Encourages innovation and change within the organization to meet the needs of dynamic situations. What potential problems exist with “Strategic Management?” What are the dangers? How can you avoid them as a leader? Link Between Levels of Strategic Management Ends – Means Hierarchy of Strategies Organizational Levels Strategic Thinking Corporate Offices Strategic Planning Strategic Momentum Strategic Thinking input Outpatient Facilities Long-term Care Home Health Hospital Division Divisional Level Hospital West Hospital Central Hospital Division Organizational Level Strategic Planning Strategic Momentum Strategic Thinking input Strategic Planning Strategic Momentum Strategic Thinking input Surgery Strategic Momentum Corporate Level Strategic Planning Orthopedics Pharmacy Unit Level Conclusion Key Term Key Term Key Term Analytical/Rational Approach Leadership Strategic Service Unit (SSU) Compass Long- Range Planning Strategic Thinking Complex Adaptive System Map Strategic Thinking Map Corporate- Level Strategy Organizational- Level Strategy Strategy Directional Strategies Realized Strategy Strategy Formulation Divisional- Level Strategy Situational Analysis System Emergent Approach Strategic Business Unit (SBU) Systems Perspective Conclusion Key Term Key Term Key Term Emergent Strategy Strategic Management Unit- Level Strategy Health Policy Strategic Momentum Unrealized Strategy Implementation Plan Strategic Planning Check Your Understanding Strategic Thinking is an intellectual orientation, a way of thinking or mindset. • True • False Check Your Understanding Strategic Thinking is an intellectual orientation, a way of thinking or mindset. • True • False You are done with Week One Interactive Presentation. Please proceed back to Week One in Blackboard to finish the curriculum for Week One. HCA 407 Healthcare Planning and Evaluation Week One Lecture HCA 407 Healthcare Planning and Evaluation Week One, Chapter Two Chapter 2 External Analysis External Analysis The most important task of an organization’s leader is to anticipate a crisis. Perhaps not to avert it, but to anticipate it …One has to make the organization capable of anticipating the storm, weathering it, and in fact, being ahead of it. - Peter Drucker The Strategic Planning Process Strategic Planning Situation Analysis • External Analysis • Internal Analysis • Directional Strategies Strategy Formulation • Directional Strategies • Adaptive Strategies • Market Entry/Exit Strategies • Competitive Strategies Implementation Planning • Service Delivery Strategies • Support Strategies • Action Plans Situational Analysis External Environment Should Do Strategy of the Organization Situational Analysis External Environment Should Do Internal Environment Wants To Do Strategy of the Organization Can Do Situational Analysis External Environment Should Do Directional Strategies, Leadership Wants To Do Strategy of the Organization Internal Environment Can Do The Strategic Planning Process Strategic Planning Situation Analysis • External Analysis • Internal Analysis • Directional Strategies Strategy Formulation • Directional Strategies • Adaptive Strategies • Market Entry/Exit Strategies • Competitive Strategies Implementation Planning • Service Delivery Strategies • Support Strategies • Action Plans Process for External Analysis Step 1 – Organize the External Analysis Process and Create an Issue Map Template Step 2 – Scan the General Environment, Health Care System, and Service Area Step 3 – Monitor and Confirm External Issues Step 4 – Forecast External Issues Step 5 – Assess External Issues Step 6 – Complete an Issue Map Nest Environment of a Health Care Organization General Environment • • • • • • Government Institutions Business Organizations Educational Institutions Religious Institutions Research Organizations/Foundations Individuals/Consumers Health Care System • • • • • Planning/Regulatory Organizations Primary Providers Secondary Providers Provider Associations Individuals/Patients Service Area • • • • • • Competitors Government Services Business Organizations Not- for- Profit Organizations Other Local Organizations Individuals/Consumers Organization The External Environment The General Environment • Government Institutions • Business Organizations • Educational Institutions • Religious Institutions • Research Organizations/Foundations • Individuals/Consumers The External Environment The General Environment • Government Institutions • Business Organizations • Educational Institutions • Religious Institutions • Research Organizations/Foundations • Individuals/Consumers Health Care System • Planning/Regulatory Organizations • Primary Providers • Secondary Providers • Provider Associations • Individuals/Patients The External Environment The General Environment • Government Institutions • Business Organizations • Educational Institutions • Religious Institutions • Research Organizations/Foundations • Individuals/Consumers Health Care System • Planning/Regulatory Organizations • Primary Providers • Secondary Providers • Provider Associations • Individuals/Patients Service Area • Competitors • Government Services • Business Organizations • Not- for- Profit Organizations • Other Local Organizations • Individuals/Consumers The External Environment The General Environment • Government Institutions • Business Organizations • Educational Institutions • Religious Institutions • Research Organizations/Foundations • Individuals/Consumers Impact Each Other Service Area • Competitors • Government Services • Business Organizations • Not- for- Profit Organizations • Other Local Organizations • Individuals/Consumers Health Care System • Planning/Regulatory Organizations • Primary Providers • Secondary Providers • Provider Associations • Individuals/Patients The External Environment The General Environment • Government Institutions • Business Organizations • Educational Institutions • Religious Institutions • Research Organizations/Foundations • Individuals/Consumers Impact Each Other Service Area • Competitors • Government Services • Business Organizations • Not- for- Profit Organizations • Other Local Organizations • Individuals/Consumers Impact Organization Health Care System • Planning/Regulatory Organizations • Primary Providers • Secondary Providers • Provider Associations • Individuals/Patients Issue Map Categories of Issues Economic Social / Demographic Legislative / Political Technological Competitive General Environment Health Care System Service Area Scanning the External Environment Serve as the organization’s “window” or “lens” on the external world. “Areas "of the Environment Information Categories Technological Social / Cultural Demographic Political / Regulatory Economic Competitive Customer Scanning the External Environment People • Direct: Within organizations • Indirect: Outside organizations Publications • Direct: Industry, technical reports, data bases • Indirect: Newspaper, journals, the Internet, etc. Monitoring the External Environment • Accumulate a data base around an identified issue. • Investigating the sources of the information. • Identifying the organizations creating changes. • Identifying the sources reporting changes. Forecasting Environmental Change If these trends continue, or if issues accelerate beyond their present rate, or if this event occurs, what will the issues and trends ‘look like’ in the future? Assessing Environmental Change Interpret the data based on perceptions, values, past experiences, and context. Assessing Issues High High Impact Low Probability High Impact High Probability Low Impact Low Probability Low Impact High Probability Impact on the Organization Low High Probability of Trend Continuing Assessing Issues High Critical Issues to the right of the line should be addressed in the strategic plan High Impact Low Probability High Impact High Probability Impact on the Organization Low Impact Low Probability Low Impact High Probability Low Critical Issues to the right of the line should be addressed in the strategic plan High Probability of Trend Continuing Environmental Analysis Tools and Techniques Technique Primary Focus Issue Impact and Probability Prioritization • • • • Scanning Monitoring Forecasting Assessing Advantage Disadvantage • Simple • Logic • Easy to communicate • Need a good deal of data in order to extend trend • Limited to existing trends • May not foster creative thinking Environmental Analysis Tools and Techniques Technique Primary Focus Advantage Disadvantage Issue Impact and Probability Prioritization • • • • Scanning Monitoring Forecasting Assessing • Simple • Logic • Easy to communicate • Need a good deal of data in order to extend trend • Limited to existing trends • May not foster creative thinking Delphi Method • • • • Scanning Monitoring Forecasting Assessing • Use of field experts • Avoids intimidation • Members are physically dispersed • No direct interaction of participants • May take a long time problems • Eliminates management’s biases to complete Environmental Analysis Tools and Techniques Technique Primary Focus Nominal Group Technique • • • • Scanning Monitoring Forecasting Assessing Advantage Disadvantage • Everyone has equal status and power • Wide participation • Ensures representation • Eliminates management’s biases • Structure may limit creativity • Time consuming Environmental Analysis Tools and Techniques Technique Primary Focus Nominal Group Technique • • • • Brainstorming Forecasting Assessing Scanning Monitoring Forecasting Assessing Advantage Disadvantage • Everyone has equal status and power • Wide participation • Ensures representation • Eliminates management’s biases • Structure may limit creativity • Time consuming • Fosters creativity • No process for making decisions • Develops many ideas, alternatives • Sometimes gets off track • Encourages communication Environmental Analysis Tools and Techniques Technique Primary Focus Advantage Disadvantage Focus Groups • Forecasting • Assessing • Uses experts • Management/expert interaction • New viewpoints • Finding experts • No specific structure for reaching conclusions Environmental Analysis Tools and Techniques Technique Primary Focus Advantage Disadvantage Focus Groups • Forecasting • Assessing • Uses experts • Management/expert interaction • New viewpoints • Finding experts • Forecasting • Assessing • Surfaces many subissues and factors • Conclusions are reached on issues • Based on analysis • Does not provide a set of procedures for deciding what is important • Considers only a single issue at a time • Time consuming Dialectic Inquiry • No specific structure for reaching conclusions Environmental Analysis Tools and Techniques Technique Primary Focus Advantage Disadvantage Stakeholder Analysis • Scanning • Monitoring • Considers major independent groups and individuals • Ensures major needs and wants of outside organizations are taken into account • Emerging issues generated by other organizations may not be considered • Does not consider the broader issues of the general environment Environmental Analysis Tools and Techniques Technique Primary Focus Advantage Disadvantage Stakeholder Analysis • Scanning • Monitoring • Considers major independent groups and individuals • Ensures major needs and wants of outside organizations are taken into account • Emerging issues generated by other organizations may not be considered • Does not consider the broader issues of the general environment Scenario Writing • Forecasting • Assessing • Portrays alternative futures • Considers interrelated external variables • Gives a complete picture of the future • Requires generous assumptions • Always a question as to what to include • Difficult to write Conclusion Key Term Key Term Key Term Assessing Inevitable Surprise Scanning Brainstorming Issue Map Scenarios Delphi Method Issue Impact & Prioritization Secondary Providers Dialectic Inquiry Medicaid Sensemaking Expert Opinion Medicare Service Area External Analysis Monitoring Service Category Focus Groups Nested Systems Stakeholders Forecasting Nominal Group Technique (NGT) Stakeholder Analysis General Environment Predictable Surprise Strategic Awareness Gray Rhino Event Primary Providers Strategic Issues Check Your Understanding One of the ways to monitor external environment is to accumulate a data base around an identified issue. • True • False Check Your Understanding One of the ways to monitor external environment is to accumulate a data base around an identified issue. • True • False You are done with Week One Interactive Presentation. Please proceed back to Week One in Blackboard to finish the curriculum for Week One. HCA 407 Healthcare Planning and Evaluation Week One Lecture HCA 407 Healthcare Planning and Evaluation Week One, Chapter Three Chapter 3 Service Area Competitor Analysis The Strategic Planning Process Strategic Planning Situation Analysis • External Analysis • Internal Analysis • Directional Strategies Strategy Formulation • Directional Strategies • Adaptive Strategies • Market Entry/Exit Strategies • Competitive Strategies Implementation Planning • Service Delivery Strategies • Support Strategies • Action Plans Focus of Service Area Competitor Analysis • Foster strategic thinking throughout the organization. • Identify market niches and discontinuities. • Select a viable strategy. Obstacles to Effective Service Area Competitor Analysis • Misjudging industry and service area boundaries. • Poor identification of the competition. • Overemphasis on competitors’ visible competence. • Overemphasis on where, rather than how, to compete. • Faulty assumptions about the competition. • Paralysis by analysis. Process for External Analysis Step 1 – Complete Situational Analysis of the General Environment, Health Care Industry, and Service Area Step 2 – Conduct Service Area Structure Analysis Step 3 – Conduct Competitor Analysis Step 4 – Analyze the Critical Success Factors Step 5 – Map Strategic Groups Step 6 – Assess Likely Competitor Actions or Responses Step 7 – Synthesize Analyses Services Analysis Potential Entrants Threat of New Entrants Bargaining Power of Suppliers Bargaining Power of Buyers Suppliers Buyers Rivalry Rivalry Among Existing Competitors Substitutes Threat of Substitute Products or Services Service Area Structural Analysis Porter’s Five Forces • Threat of new entrants to the market. Barriers to Entry • Existing organizations have economies of scale. • It costs a great deal (capital) to get into this type of business. • Switching from one service provider to another is expensive. Service Area Structural Analysis Porter’s Five Forces Threat of new entrants to the market Level of rivalry among existing organizations Intensity of Rivalry • Numerous or equally balanced competitors? • Slow market growth for these types of services? • High fixed costs (buildings, equipment)? Intensity of Rivalry Porter’s Five Forces Threat of new entrants to the market Level of rivalry among existing organizations Threat of substitute products and services Threats of Substitute Services • Many services available that perform about the same function. • There are lower cost substitute services. • Buyers of the service tend to experiment or substitute often. • Buyers of the service have difficulty in telling the difference in the effectiveness of the alternatives. Service Area Structural Analysis Porter’s Five Forces • Threat of new entrants to the market. • Level of rivalry among existing organizations. • Threat of substitute products and services. • Bargaining power of buyers (customers). Bargaining Power of Buyers Purchases products that are standard. • Buyers view all providers as having about the same service and quality? Pose a threat of backward integration. • Buyers could begin providing the service themselves? Service Area Structural Analysis Porter’s Five Forces • Threat of new entrants to the market • Level of rivalry among existing organizations • Threat of substitute products and services • Bargaining power of buyers (customers) • Bargaining power of suppliers Bargaining Power of Suppliers • Few suppliers (personnel, equipment, materials). • Few substitutes for the supplies. • The supplier’s products or services are unique. • The product or service supplied is important to the buyer’s business. • Switching costs from one supplier to another are high. • The buyer’s industry is not considered an important customer. • The suppliers pose a threat of forward integration Bargaining Power of Suppliers Bargaining Power of Suppliers If all five forces are favorable: If all five forces are unfavorable: • Little or friendly competition. • A great deal or very unfriendly • Difficult for new competitors to enter the business. competition. • Easy for new competitors to • Few or no good substitutes for the product or service. enter the business. • Many good substitutes for the • Buyers will not control the price, product or service. quality, design, or volume. • Buyers will control the price, • Suppliers will not control the quality, design, or volume. inputs to production. • Suppliers will control the inputs to production. Services Analysis A “Three Star” Product or Service Potential Entrants Threat of New Entrants Bargaining Power of Suppliers Suppliers Bargaining Power of Buyers Rivalry Among Existing Competitors Buyers Rivalry Substitutes Threat of Substitute Products or Services Services Analysis Evolving Products/Services Viability Potential Entrants Threat of New Entrants Bargaining Power of Suppliers Suppliers Bargaining Power of Buyers Rivalry Among Existing Competitors Buyers Rivalry Substitutes Threat of Substitute Products or Services Services Analysis Evolving Products/Services Viability Potential Entrants Threat of New Entrants Bargaining Power of Suppliers Suppliers Bargaining Power of Buyers Rivalry Among Existing Competitors Buyers Rivalry Substitutes Threat of Substitute Products or Services Services Analysis Evolving Products/Services Viability • New Regulations or Political Changes. • New Technologies or Services Improvement • Social or Demographic Changes. • Economic Changes. • Competitive Changes. Competitor Analysis & Strategic Groups What are the strengths and weaknesses of your competitors? Can your competitors be “mapped” with respect to two or more dimensions? Competitor Analysis and Mapping Strategic Groups Competitor Strengths and Weaknesses Service Category Critical Success Factor Analysis Service Area Plastic Surgery Competitors (2012) Service Area Plastic Surgery Competitors (2012) *Range of services included skilled nursing, organized social activities, outings, physical therapy, education, rehabilitation, speech therapy, Alzheimer’s care, nutritional services, infusion, pharmacy, homemaker services, live- ins, companions, and so on. Conclusion Key Terms Key Terms Black Swan Event Service Area Competitive Advantage Service Area Competitor Analysis Competitor Analysis Service Area Structural Analysis Critical Success Factor Analysis Strategic Groups Mapping Competitors Strategic Response Check Your Understanding One of Porter’s five forces are Threat of substitute products and services. • True • False Check Your Understanding One of Porter’s five forces are Threat of substitute products and services. • True • False You are done with Week One Interactive Presentation. Please proceed back to Week One in Blackboard to finish the curriculum for Week One.
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