The Importance of Strategic Positioning

Let's assume you have been working diligently within your organization to become more operationally effective. You acquired the best technology, improved processes, enhanced productivity. You can deliver care effectively, efficiently and with high quality. That's great, but here's the rub. Just as you drew from best practices and benchmarking, so will your competitors. So everybody is lowering costs and increasing value to customers. What are we talking about? Commoditization. Services are improved, but we become less distinguishable from our competitors.

If we want to distinguish ourselves and gain a competitive advantage, we need to determine what's unique or distinctive about our hospital/health system or other organization. We either have to provide different services, or at a minimum perform similar services in a different way. That's what strategic positioning is about.

So, you want to create a unique position...maybe you're going to provide fewer programs, but to a larger population. Or, maybe you want to serve a more select population, but with a broader range of services. This may likely require you to think about trade-offs. It may be a cliche, but it's true...you can't be all things to all people.  And, there needs to be a fit between the services offered, a way in which the services and programs interact with and reinforce each other. You may have to choose what not to do, in order to focus on your unique and appropriate service mix.

Here's an example. Some years ago, I was the CFO of an inner city health system that was surrounded by competitors, and was operating at a rather large deficit. We looked at the demographics, the clinical needs of the community, the relative profitability of each service and the fit of existing services. We determined several things. The community had a high incidence of tuberculosis and diabetes, and there were no programs serving those needs. Furthemore, the reimbursement for tuberculosis treatment permitted a surplus to be generated, and the diabetes treatment often involved unrelated medical complications which generated additional service opportunities. The obstetrics service had insufficient volume, and was generating a deficit. Finally, the community, which consisted of lower income families, was utilizing the overcrowded emergency room as its portal to the hospital.

Through some creative financing, we obtained the capital and operating funds to create a state-of-the-art in-patient tuberculosis unit and a diabetes clinic. We expanded and modernized the emergency room and created an effective triage system to redirect non-urgent cases to less expensive clinic settings. And, though it was not an easy decision, we shut down the obstetrics service. Although it had been an important component of the mission, the losses could not be sustained, nor the volume enhanced. As well, it was the least integral program from the standpoint of interaction and reinforcement of other programs.

It took discipline, an ability to set limits and strong internal and external communications to accomplish these changes, but the organization successfully differentiated itself. These actions, combined with the development of operational efficiencies, put the organization on a much stronger footing.

The message here is to reconnect with strategy. Look at what you currently do. Which of the services are most distinctive, and possible centers of excellence? Which are most profitable? What's driving our customer satisfaction? Refocus on the unique core of your organization, realign your service offerings, and make certain to take into consideration the near and longer-term industry trends driven by healthcare reform, aging populations and other environmental factors.