Chapter 1: IntroductionThis book focuses on the different strategic directions commonly adopted by strategists in different industries. The different strategic views conceptualized in health care in addition to a crafted strategic framework that can be used to draw a summary of the market competitive dynamics will be described. Once the strategist has chosen the strategic direction for its firm, a strategic plan must follow. The application of the most common strategies used in other industries to develop and sustain a competitive advantage are discussed with special focus on Porter's strategies, namely low-cost leadership and service differentiation. Last, but not least, eight strategic tactics are discussed thoroughly with special attention to the operational initiatives, indicators, and goals of each. In the last two chapters, the author highlights the application of Porter's strategies in a set of Lebanese hospitals with emphasis on the limitations, constraints, and correlation factors between types of strategies used and performance of these hospitals.
Chapter 2: Strategic Directions and ViewsTwo main strategic views are traditionally used in various industries including health care; these include the positional view and the resource-based view. In the positional view, strategic planning primarily lies in envisioning the position of the medical institution in the healthcare arena. The main competitive advantage lies in its current position in the market that mandates proper understanding of the various industries' attributes as well as the competitive forces that shape the position of the institution and its long-term profitability. The main industry attributes analyzed in health care are the rate of growth and profitability, geographic accessibility, strategic alliances, in addition to the weight and impact of technological innovation on its performance. An equally important strategic view is the resource-based view, where strategists look within the institution at its resources and capabilities in an attempt to develop new competencies that are of strategic relevance. The main question to be answered is "what are we good at" and how can we leverage on our competencies to expand our market share and grow further. This view is more commonly adopted in unstable environments characterized by turmoil, which makes industry attractiveness an elusive strategic start.
Chapter 3: Porter's Strategies in Healthcare: 3.1: Choice of StrategyTwo types of strategy, namely cost leadership and differentiation strategy in their focused and broad applications, have been used to co-op with the changes in the healthcare environment. Differentiation strategy is about the provision of a service or a product with distinctive attributes that are of added value to the patient. It is about meeting patient's needs by providing patient-centered care with state-of-the-art technology and expertise. One accepted approach is improving the level of offering vis-à-vis the key success factors or improving the final or intermediate healthcare outcome measures by differentiating the existing services and/or creating new ones. Cost leadership strategy, on the other hand, means to be the lowest cost producer in the industry. The competitive advantage is derived from widening the gap between the cost of production and what the patient is willing to pay. This entails minimization of cost in various operational fields, business restructuring, and revamping of the overall cost structure. A basic approach is catalog activity and value chain analysis, where each service is disintegrated into a set of activities and the corresponding cost drivers are analyzed in relation to the overall cost, to the customer's need and market segment.
Chapter 4: Sources of Competitive AdvantageA hospital possesses a competitive advantage over its rivals when it either earns a higher profit in the provision of an equally differentiated service/product as its competitors, or when it distinguishes itself with added-value service compared to its competitors. Competitive advantages can derive either from external sources, such as the emergence of new markets, new strategic allies, or change in payer mix, or from internal sources, such as incremental or radical innovation. This chapter discusses some of the types of competitive advantages extracted from cost leadership and service differentiation in addition to the principles used for a successful implementation and sustainability of value-based competition, namely the need to focus on value, to base competition on results, and the development of evidence-based medicine for all.
Chapter 5: Innovation in a Hospital SettingInnovation is invention that is commercialized. In a hospital setting, different sources of innovation can be derived, most important of which are technological shifts in components, modules, or processes; emergence of market channels; application of new marketing strategies or creation of new market segments; and last, but not least, are the organizational resources and competencies. This chapter focuses on the origin and constraints to innovation in a hospital setting, as well as the mandates for a radical innovation, namely developing organizational ambidexterity, increasing the ratio of exploration to exploitation, and knowledge brokering. Last, but not least, the various means for enabling innovation are listed, starting from effectual reasoning and radical mind-shift at leadership level, proper understanding of the complementary products of innovation, to the need for a receptive ecosystem that accentuates the importance of hospitals in the creation of value and defines the landscape for the development, transfer, and consolidation of inventions.
Chapter 6: Strategic Framework in a Hospital SettingThis chapter illustrates the key components of a strategic framework that can assist physicians and administrators in defining the right objectives, plan of action, and allocation of the proper resources towards the achievement of these objectives. It starts with external environment analysis that covers the competitive forces of the market, opportunities, threats, and key success factors, followed by internal environment analysis that focuses on the level of offering of the hospital vis-à-vis the healthcare key success factors, summary of the competitive dynamics, and selection of the right strategic variables that help the strategist reach the desired goals and objectives.
Chapter 7: Eight Strategic Tactics to Improve Hospital Performance (Strategies to reduce cost, increase load, and revenue)Given the financial constraints in health care, most managers are challenged to meet common goals pertaining to cost, revenue, and quality. Among others these include improvement in patient experience, improvement in operational performance, improvement in administrative support and organizational structure, sustaining and increasing medical expertise, while reducing cost and increasing the load. In this section, eight strategies to reduce cost, increase load, and revenue are described. These strategies stem from five strategic directions geared towards meeting the aforementioned goals and servicing the different stakeholders of the concerned institution and the community at large. One is evolution in patient care, two is integration between patient care and research, three is coherence and alignment in competencies, four is financial viability and sustainability, and five is gaining global netting. Eight strategic tactics are described in this chapter.
Chapter 8: The Application of Porter's Strategies in Lebanese Hospitals The performance of hospitals has been shown to differ markedly in accordance with the degree of environment-organization fit. Consequently, changes in the adoption of the various generic strategies in different contexts have been shown to vary. There are only two reports on the applicability of Porter's strategies in a hospital setting, one by Kumar, et al, on hospitals in the United States and the other by Hlavacka, et al, on the Slovak hospital industry. The purpose of this chapter is: 1) to identify the types of strategies used in Lebanese hospitals, low-cost leadership vs. service differentiation, vs. hybrid form often referred to as dual competitive strategy; 2) to investigate the performance of these hospitals with respect to quality of care; and 3) to analyze the correlation between the different types of strategies and levels of quality of care. This prospective study was performed using a variation on a modified questionnaire initially described by Kumar, et al.="" correlation="" between="" types="" of="" strategy="" and="" hospital="" performanceThis chapter analyses the correlation between cost leadership and differentiation strategy and performance in a hospital setting. In cost leadership, the focus is on utilization rate, creation of clinical pathways, and the importance of corralling the variability in supplies to reduce cost. As for differentiation strategy and quality of care, the three main reasons for correlation are the strong association between patient experience and clinical outcome measures, the strong interplay between patient experience and organizational structure and performance, and last, but not least, collocation, a descriptive term for the allocation or clustering of physicians and medical staff caring for a specific population of patients.
Chapter 10: Conclusion Porter's generic strategies are applicable and viable in a hospital setting in their pure and hybrid forms. Both differentiation and low-cost leadership can be equally chosen by hospitals' executive managers as strategies for the development of sustainable competitive advantage. There is invariably a significant correlation between the types of strategies used and quality of care measured by the patient's experience score and the ability to sustain patient's loyalty. To that end, what is needed is a "trade-on" strategic plan with emphasis on service differentiation, cost reduction, and value creation. A trade-on strategy can mitigate the rigidity in a given healthcare system, the volatility in its environment, and the constraints in the payer mix when present.