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Successful Competitive Strategy: How to Win the War For Markets and Share

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Describe how effective these approaches are in health care today ... Sears, Roebuck & Company. Source: Brown and Eisenhardt, Competing on the Edge, p.241 ... – PowerPoint PPT presentation

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Title: Successful Competitive Strategy: How to Win the War For Markets and Share


1
Successful Competitive Strategy How to Win the
War For Markets and Share
Voluntary Hospitals of America/ American College
of Healthcare Executives Dallas,
Texas February 20, 2003
2
Session Objectives
  • Review state-of-the-art competitive strategy
    approaches used in other industries
  • Describe how effective these approaches are in
    health care today
  • Identify how to begin to apply these approaches
    now to increase market area and share

3
Agenda
  • I. Competitive Strategy Defined
  • II. Competitive Strategy in Health Care Delivery
    Today
  • III. Competitive Strategy in US Industry Today
  • IV. How to Win the War for Markets and Share

4
Competitive Strategy Defined
5
5

The only constant in our business is that
everything is changing. We have to take
advantage of change and not let it take advantage
of us. We have to be ahead of the game.

Michael Dell, Dell Computer Corporation
Source Brown and Eisenhardt, Competing on the
Edge, p.1
HEALTH STRATEGIES SOLUTIONS, INC.
11/15/2009
Gdata/presenta/amz/vha0203.ppt
6
6

The hallmark of great companies is an ability to
recognize the game has changed and to adapt.

Arthur Martinez, Sears, Roebuck Company
Source Brown and Eisenhardt, Competing on the
Edge, p.241
HEALTH STRATEGIES SOLUTIONS, INC.
11/15/2009
Gdata/presenta/amz/vha0203.ppt
7
What is Competitive Strategy?
Competitive strategy is a search for a favorable
position in an industry. Competitive strategy
aims to establish a profitable and sustainable
position against the forces that determine
industry competition. (Porter, 1985)
Competitive strategy is about being different.
It is about choosing a different set of
activities to deliver a unique mix of value.
(Porter, 1996)
  • Examples of companies with a clear competitive
    strategy
  • Southwest Airlines
  • MedCath

8
Questions to Answer in Formulating Competitive
Strategy
  • Where should we compete? (which markets and which
    segments within those markets should we
    concentrate on?)
  • What products should we compete with?
  • How will we gain sustainable competitive
    advantage in these chosen markets? (1)

(1) Source Faulkner and Bowman, The Essence of
Competitive Strategy, 1995
9
Review Your Product/Market Approach
  • What is our approach today?
  • What should be our approach tomorrow?
  • Is there value in system-wide initiatives which
    cross markets?

10
Competitive Strategy in Health Care Delivery Today
11
From Meeting Needs/Gaps to Competing for Markets
and Share
  • Health care competition has been polite until
    fairly recently
  • Needs/demands continue to increase
  • Excess capacity emerged in 1990s
  • Growth continues in 2003, but not all growth is
    financially beneficial
  • Competition for preferred markets and share
    escalating

12
Competitive Strategy in Health Care Delivery
Today
  • Outspend rivals
  • Vertical integration
  • Horizontal integration
  • Diversification
  • Niching
  • Cost leadership
  • Quality differentiation
  • Customer service differentiation
  • Product differentiation

13
Outspend Rivals
  • Definition Develop/enhance facilities, acquire
    technology, and acquire other capabilities/resourc
    es to assert market leadership
  • Intent Put competitors out of business or
    seriously disable them
  • Effectiveness Minimal
  • Examples You know who you are

14
Vertical Integration
  • Definition A grouping of complementary business
    in an industry
  • Intent Control of the customer, seamless
    care/service, economies, market power
  • Effectiveness Minimal
  • Examples Kaiser, Henry Ford, and many aspiring
    IDSs

15
Horizontal Integration
  • Definition A grouping of the same or similar
    businesses in an industry
  • Intent Market power, economies of scale
  • Effectiveness Moderate
  • Examples Most of the major NFP health systems,
    HCA, Tenet, Beverly (and most other nursing home
    chains)

16
Diversification
  • Definition A grouping of diverse businesses,
    not necessarily all from the same industry
  • Intent Collect profitable businesses to
    maximize ROI and/or support core business
  • Effectiveness Minimal
  • Examples Popular in NFP health care in the
    1980s still some cases now, but mostly in the
    for-profit sector

17
Niching
  • Definition A business unit or firm which
    focuses exclusively on a narrow segment of the
    market
  • Intent Exploit opportunities which full service
    firms leave un- or under-developed
  • Effectiveness Moderate
  • Examples Wills Eye Hospital, Joslin Diabetes
    Center, Shriners Hospitals, Curative Health
    Services, Salick Health Care, NeurosourceAnd
    most recently, physician (largely OP) ventures

18
Cost Leadership
  • Definition Producing the same product or
    service at a lower cost than competitors
  • Intent Leverage efficiency
  • Effectiveness Minimal to moderate
  • Examples None. No NFP health care provider
    wants to be known as the lowest cost provider.
    Anecdotal evidence indicates this is being
    pursued, however, with some success. Some
    for-profits tout their cost/price advantage.

19
Quality Differentiation
  • Definition Providing the same product or
    service at a higher real or perceived quality
    than competitors
  • Intent Leverage high quality
  • Effectiveness Minimal to moderate
  • Examples Quaternary centers like John Hopkins,
    Mayo branding strategies University of
    Pennsylvania had an ambitious quality
    differentiation initiative until their recent
    financial troubles

20
Customer Service Differentiation
  • Definition Providing the same product or
    service at higher real or perceived service
    levels than competitors
  • Intent Leverage outstanding service
  • Effectiveness Minimal - not (yet?) sustainable
    across a NFP health organization
  • Examples Planetree care model some for-profit
    ambulatory care companies (Disney is the classic
    example of this in American industry)

21
Product Differentiation
  • Definition Developing real or perceived
    excellence in selected product areas (centers of
    excellence)
  • Intent Create halo effect for entire
    organization
  • Effectiveness Moderate
  • Examples Texas Heart Institute, Barrow
    Neurological Institute (Phoenix) many NFPs are
    employing this strategy with COEs

22
Five Stages of Competition
23
Watch Out for the New Competitors
  • Medical staff
  • For-profit niche companies
  • For-profits not in your market now
  • Brand new entrepreneurs

24
Competitive Strategy in US Industry Today
25
Distinguishing Characteristics of Competitive
Strategy Leaders
  • Sophisticated intelligence and analysis
  • Clear competitive positioning for individual
    products
  • Externally, future-oriented

26
Examples of the Application of Competitive
Strategy in US Industry Today
Strategy Type
Company
  • Outspend Rivals NY Yankees
  • Vertical Integration Disney/ABC
  • Horizontal Integration Aetna/USHealthcare/Prudenti
    al
  • Diversification General Electric
  • Niching Nokia
  • Cost Leadership Walmart
  • Quality Differentiation Intel
  • Customer Service Differentiation Nordstrom
  • Product Differentiation 3M

27
The Evolution of Competitive Strategy
The Quest for Competitiveness
Restructuring the Portfolio and Downsizing
Headcount
Reengineering Processes and Continuous Improvemen
t
Reinventing Industries and Regenerating Strategies
Generic Strategies
Smaller
Better
Dramatically Different
Different
Examples of industry reinventors
  • Wal-Mart
  • Apple
  • Charles Schwab
  • CNN

Source Adapted from Hamel and Prahalad,
Competing for the Future, 1994.
28
Questions for Tomorrows Market Leaders
Today
In the Future
Which customers do you serve today? Through what
channels do you reach customers today? Who are
your competitors today? What is the basis for
your competitive advantage today? Where do your
margins come from today? What skills or
capabilities make you unique today?
Which customers will you serve in the
future? Through what channels will you reach
customers in the future? Who will your
competitors be in the future? What will be the
basis for your competitive advantage in the
future? Where will your margins come from in the
future? What skills or capabilities will make
you unique in the future?
Source Hamel and Prahalad, Competing for the
Future, 1994
29
A Few Final Thoughts onWhat Is and Isnt
Competitive Strategy
  • Operational effectiveness is not strategy
  • A company can outperform rivals only if it can
    establish a difference that it can preserve
  • The essence of strategy is choosing to perform
    activities differently than rivals do
  • A sustainable strategic position requires
    trade-offs
  • The desire to grow has perhaps the most perverse
    effect on strategy
  • Leadership has degenerated into orchestrating
    operational improvements and making deals

Source Michael E. Porter, What is Strategy?,
Harvard Business Review, November-December 1996
30
How to Win the War For Markets and Share
31
1
Gather Intelligence Systematically
  • What needs to be done collect, compile,
    catalog, analyze and communicate info
  • How best to carry this out?
  • Group
  • Individual
  • Informal approach

32
2
Identify and Dissect Your Competitors and Their
Strategies
  • What is driving each competitors strategy and
    behavior?
  • What is each doing and what can they do?
  • What is the future strategy of each?
  • What is the likelihood of new competitors and
    their potential strategies?

33
3
Thoroughly Analyze Your Customers and Needs
  • What customer segments do we serve today and
    which should we serve?
  • How are we positioned with these customers
    relative to the competition?
  • How are customer groups and needs likely to
    change in the future? Implications for our
    position?

34
4
Thoroughly Analyze Your Industry/Business
  • How competitive is our industry/business?
  • What significant changes, if any, can we
    anticipate in the industry?
  • What is the forecast for the medium and long term
    future and implications for our business future
    position and role?

35
5
Employ Rigorous Business Planning
  • How does the competitive strategy fit within the
    overall business development strategy?
  • Assume outside funding is required (regardless of
    whether it is) - how would feasibility/desirabilit
    y of investment be demonstrated?

36
6
Attend to Product Development/Refinement
  • What is our plan for
  • Existing products?
  • Product extension?
  • New products?
  • How can we institutionalize the product
    development/refinement process?

37
7
Attack Target Markets
  • What is the approach to existing markets and new
    markets? What should be the balance of effort
    between existing and new markets?
  • What are the high priority segments and what is
    our plan for penetrating them?
  • How will we offset competitor initiatives in the
    high priority segments?

38
8
Become More Entrepreneurial
  • Can we identify and train budding entrepreneurs?
  • Where do we have gaps that require bringing on
    board entrepreneurs from outside?

39
9
Navigate Around Internal Politics
  • How can we avoid the traps associated with
    internal political constraints?
  • The need to spread resources around evenly
  • Not favoring a few over many
  • Mature vs. emerging products and businesses
  • The desires of entrenched, important leaders
  • Weve never done it that way before
  • Etc.

40
1
0
Really Commit to Competing
  • Select a primary competitive strategy
  • Avoid copycat and cookbook strategies
  • Just do it!
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