Title: Successful Competitive Strategy: How to Win the War For Markets and Share
1Successful 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
2Session 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
3Agenda
- 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
4Competitive Strategy Defined
55
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
66
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
7What 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
8Questions 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
9Review 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?
10Competitive Strategy in Health Care Delivery Today
11From 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
12Competitive Strategy in Health Care Delivery
Today
- Outspend rivals
- Vertical integration
- Horizontal integration
- Diversification
- Niching
- Cost leadership
- Quality differentiation
- Customer service differentiation
- Product differentiation
13Outspend 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
14Vertical 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
15Horizontal 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)
16Diversification
- 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
17Niching
- 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
18Cost 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.
19Quality 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
20Customer 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)
21Product 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
22Five Stages of Competition
23Watch Out for the New Competitors
- Medical staff
- For-profit niche companies
- For-profits not in your market now
- Brand new entrepreneurs
24Competitive Strategy in US Industry Today
25Distinguishing Characteristics of Competitive
Strategy Leaders
- Sophisticated intelligence and analysis
- Clear competitive positioning for individual
products - Externally, future-oriented
26Examples 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
27The 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
Source Adapted from Hamel and Prahalad,
Competing for the Future, 1994.
28Questions 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
29A 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
30How to Win the War For Markets and Share
311
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
322
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?
333
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?
344
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?
355
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?
366
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?
377
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?
388
Become More Entrepreneurial
- Can we identify and train budding entrepreneurs?
- Where do we have gaps that require bringing on
board entrepreneurs from outside?
399
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.
401
0
Really Commit to Competing
- Select a primary competitive strategy
- Avoid copycat and cookbook strategies
- Just do it!