Aligning competitive strategy in the face of major industry change

Health care organizations are rapidly assessing their future in light of recent health care reform legislation. On the table: How will the new laws impact their ability to deliver quality care and in particular, how it will change the basis of competition for the future? What adjustments will need to be made to business strategy to maintain a competitive advantage in the marketplace?

In times of major industry structural change, new positions often arise and new, more nimble competitors emerge. Strategy can be threatened externally by competitive behavior, or internally, by a misguided view of competition, organizational failures or just by the desire to grow. These threats often increase imitation, rather than differentiation.

The requirements of hospitals and health systems to measure and deliver on a host of quality measures and become more operationally efficient, while important, elevate the bar for everyone and provide relative improvement for no one. In essence, all hospitals will look more alike than they currently even do.

This raises the question: How will hospitals compete? Strategy is about being different, about developing a set of activities to deliver a unique mix of value that is distinctive.

When determining changes in strategy, hospitals must now ask themselves:
• Which of our products or services are most distinctive?
• Which are most profitable?
• Which customers are most satisfied?
• Which customers and channels most profitable?
• Which activities are most different and effective?

It’s often more about deciding what not to do. Hospitals will need to focus on their unique core of business and realign activities, ensuring fit and sustainability of activities, as well as effective integration, making it more difficult for competitors to imitate or replicate their service offerings.

By choosing to perform a tailored set of activities differently from competitors, hospitals can begin to effectively differentiate themselves in the market. Hospitals should also consider deepening their strategic position rather than broadening – looking for extensions that leverage existing activities – offering features or services that competitors would find impossible or costly to match on a stand-alone basis. An organization can often grow faster and more profitably by better penetrating needs and offerings where it is distinctive rather than duking it out in potentially higher growth arenas in which the company lacks uniqueness.

The hospital systems that will perform best will be those whose strategy allows them to align activities for consistency, reinforcement and optimization of effort. Competitive advantage is sustained out of the coordination of the entire set of activities and how well they perform together to reduce cost or increase differentiation.