Aligning medical practice market strategy via systems thinking and fast food

Leaders of America’s healthcare providers who are struggling to understand what kind of organization they want to create should take a closer look the next time they stop at their favorite coffee shop or burger joint.

That was the message from Jack Militello, PhD, MGMA member, professor of management, and Michael “Mick” Sheppeck, PhD, associate professor of management, both from the University of St. Thomas, Minneapolis, during the 2016 MGMA Annual Conference session, “Aligning Strategic Focus with Talent Management,” in San Francisco last month. The duo’s research and consulting during the past 15 years has yielded an industry database that includes hundreds of companies and viewpoints from various senior managers and executives about their place in the market.

“We’re talking about market focus and strategic focus that drives the operations of your clinics, hospitals, healthcare organizations,” Militello said. “This is tried and true in how we look at all organizational management. You usually start with that idea of mission and then you move your operations from that level of mission.”

Focus on improved performance

Aligning mission and operations is as simple as thinking about a stop at Starbucks and understanding the value proposition in play, he said.

“Think in terms of the value that you trade with other organizations, like why do you go to Starbucks for this crazy drink? Because it’s yours,” Militello said, pointing to the company’s focus on customer intimacy.

To illustrate three key value propositions for healthcare providers, Militello used the analogy of some of the country’s biggest hamburger chains:

• Customer intimacy: Militello cited Burger King’s “Have it your way” slogan as an example of personalized total solutions that an organization might want to focus on while developing long-term relationships with suppliers to provide exceptional services.
• Operational excellence: “A Big Mac in Cleveland tastes the same as a Big Mac in San Diego,” Militello said in referencing McDonald’s as an organization aligned with competitive pricing, product quality and selection, minimum wait times for order fulfillment and efficient delivery.
• Product leadership: Wendy’s frequently tests new products in the market while maintaining a certain level of overall product and service performance, Militello said. He also pointed to tech giant Apple as an example of product leadership: “Why do you buy an Apple product? Because it has the best features.”

Each of these value proposition disciplines, Militello emphasized, has a different driver. Customer-intimate organizations rely heavily on economies of scope, whereas those aligned for operational excellence must master economies of scale. Superior-performance groups generally have a short time to market as a driver.

Fine-tune your options

Sheppeck said understanding and aligning business strategy with these value propositions to determine market discipline are critical to fine-tuning the full range of operational management options.

“These variables reinforce your market discipline, and that kind of alignment then seems to lead to better performance. … What we’re trying to get to is a pattern or a picture of what your organization looks like in regard to market discipline,” he said.

Sheppeck and Militello have used a ratings form to survey leaders from nearly 100 healthcare providers to gauge their assessment of market strategy and organizational alignment. Leaders were asked to start by assessing the organization’s business environment (ranked from stable to dynamic) and then progress to market performance. Then they were told to connect the dots from each answer, creating a snaking line from the results. Militello and Sheppeck have compiled the patterns created from these survey results to inform their research.

“Something in [those patterns] tells me about how this place operates,” Sheppeck said, noting that the results speak well beyond the assessment of the individual manager or executive.

“Typically this configuration — I like to call it a squiggle — is often a very good predictor of employee morale,” Sheppeck said. “In other words, there are some squiggles that really promote employee morale, employee participation … and there are some squiggles that are employee killers.”

Three common “clusters” emerged from Militello and Sheppeck’s surveys:

Cluster #1: About half of all surveys result in this squiggle of mostly moderate responses. “From a market strategy perspective, there’s not much information here … suggesting we are really struggling” to understand what the organization is doing, Sheppeck said. “The problem [is] that the market strategy isn’t clear and distinct. It’s there, but it’s ambiguous.”

Cluster #2: About 28% of surveys were returned with high rankings for workforce competencies and organizational culture factors (though with only moderate risk-taking, innovation and competitive orientation). Paired with high rankings for human resource management practices and management support, this squiggle also rated relatively stable in terms of business environment.

Cluster #3: About 25% of surveys showed this mix of moderate to high rankings for market strategy, workforce competencies and culture, but with moderate to low ratings for many human resource management practices. Sheppeck noted these respondents generally rated their business environment as less stable than those in cluster #2 and provided only average rankings for market performance. With respect to market strategy and culture, many senior managers were not quite sure of their answers.

“If you take the next step down to middle managers … you see the same phenomenon. We’re not all on the same page relative to market strategy or culture. We see that a lot,” he said. “We also see that these patterns tend to have a strong impact on how people live, day in and day out, and how they perform and get along with one another.”

Sheppeck stressed the need for exceptional systems thinking — the ability to simultaneously hold multiple concepts in mind and understand how they combine to achieve success — to accurately assess market strategy and then use those results to align the organization.

“It requires the person being able to keep all the factors that are important in a system, keep them all active … while making decisions on how to move along,” he said. “And we have found [that] middle managers and executives whose systems thinking skill is below average have a dickens of a time trying to see any patterns and trying to figure out what things [they] should be trying to change.

“It’s a very powerful lesson in one of the skills our executives are going to need in healthcare,” Sheppeck said.