Strategy is the path to the achievement of specific objectives and describes how objectives will be reached. Think, where do we want to go, and how are we planning to get there?
Michael Porter is a professor at Harvard Business School who wrote a book and published it in 1980 called, “Competitive Strategy.” The book changed the way many companies analyze themselves relative to their competitors because it established the new tenet that you need a rough understanding of industry competition to position yourself strategically as an enterprise.
Companies within an industry, and medical practices are companies, all compete with one another to win customers, and either maintain or improve their position in the market. So, you need to have your own competitive strategy to create your best chance of winning more patients and growing your practice.
Porter teaches that industry competition is driven by five fundamental forces:
The first is the threat of entry, which happens when new entrants seek marketshare in an industry and drive competition. This threat is dependent upon the various barriers to entry that exist within an industry.
Thinking about a medical practice, becoming a doctor is a significant barrier to entry for most people. But a group moving into your area from an adjacent town may significantly reduce this barrier. This is why keeping an ongoing relationship and consistent communication with your patients is important, it creates a loyalty barrier that is difficult to overcome without great effort and investment.
The second force is the intensity of rivalry among existing competitors, that is, the on-going struggle to gain marketshare. This takes into account such things as price, advertising spend, new technology, and the patient experience.
Often times, driven by this second force, when one market participant makes a move, others respond to counter their initiative. Think LASIK price wars, no one wins on a race to the bottom!
The third force of competitive strategy is the pressure from substitute products, that is, products or services from outside industries that seek to win the same customers. To use another example from the industry near and dear to my heart, ophthalmology, contact lens improvement puts pressure on the LASIK market.
The fourth force is the negotiating power of buyers. In the medical field, this can take two fronts, insurance companies are the payers and the patient is a consumer. This presents a unique strategic and marketing challenge for many doctors, and the people who work with them in practices.
When you analyze your competition, this increase in negotiating power cannot be ignored - especially if you provide services with a high rate of medicare utilization. This is true because the rates Medicare pays may be reduced and the only way you may respond to the competitive threat is to accept it and look for ways to increase revenue in either new or adjacent procedures and services.
Last, the fifth force in competitive strategy is the bargaining power of suppliers. As a medical practice, this happens when medical device and pharmaceutical companies attempt to increase their profit margins by incrementally raising prices on the products you use to offer the procedures you were trained to perform. Hint: When they do this, look back at the third and fourth forces to gain some leverage and protect your interests.
Three General Categories of Competitive Strategy
The first general category of competitive strategy is the low-cost leader. This can mean keeping your own costs low and also offering the lowest price in the market. Competing in this manner requires discipline and a continuous focus on controlling all costs.
This strategy is sometimes successful because it defends against the fourth force listed above, the negotiating power of buyers. If your costs are low, you may win because you are the last rung on the ladder of profitability and your competitor cannot beat you in this area.
Personally, I’m a fan of a relentless pursuit of efficient costs, but not of using that to become the recognized low-cost provider in any market. The saying that, “We’ll make it up on volume” rarely holds true.
Another smart strategic approach is differentiation - or innovation, depending on how you wish to think about it. When you choose this path, you develop products, services, and experiences that allow your practice to stand out from the competition because of something you are doing that is unique from your competitors.
Differentiation and innovation may take many approaches, that’s one of the reasons it is a smart strategy to pursue. You may differentiate yourself with processes, technology, experiences, and personnel that may alone, or stacked together, make your business unique.
Once again, pursuing differentiation and innovation reduces the force of buyer power. This happens because, if what you’ve created is unique, customers may not go to another source to get the same product, experience, or service for a lower price than you.
Sometimes, being innovative and unique builds the perception of exclusivity. This can be good, and bad. It all depends on the segment of the market you are choosing to pursue.
The third general approach in competitive strategy is focusing on a particular niche in a market. This can be an effective strategy if it is applied to geography, demographics, and interests. The key is to pick your niche and exploit as much of it as you can.
As an example for doctors, there are two ways to explore niches where you may successfully expand your practice.
First, start with an interest map of all of your doctors and staff. When you have it, put it in an Excel file group by interest with the people’s names associated with their interests.
Next, over a two-month period, or via an email survey if you’re savvy enough to have a marketing list, ask your patients about their interests and hobbies. Again, group the interests, and associate people’s names (This is called segmenting).
Once you have these two lists, group the right people from the practice to be the leader of the group that looks to create content and curate information related to the interests and hobbies that they have identified. When you do this, your team feels part of what you’re building and you have a reason, other than medical reasons, to communicate with patients. Doing this builds trust.
While I enjoy reading the works of Mr. Porter and his meaty approach to strategy, there are others who make the sometimes boring topic of strategy hit a little closer to home for me. One of those is Richard Rumelt.
Mr. Rumelt, in his book “Good Strategy and Bad Strategy,” introduced me to the concept of, “The Kernel of good strategy.” Here’s what he wrote: “Good strategy is coherent action backed by an argument, and effective mixture of thought and action with a basic underlying structure I call the kernel.”
Rumelt goes on to teach the kernel of a strategy contains three elements:
A diagnosis that defines or explains the nature of the challenge you’ve identified. As a doctor, the diagnosis portion of the kernel may seem the most natural because you are identifying the critical aspects of the challenge much like you do with a patient.
A guiding policy for nailing the challenge is part two of the kernel. Think of this part as your roadmap for overcoming the challenges you identified in the diagnosis.
A set of coherent actions that are set-up to carry out the guiding policy are step three. If you’re at all like me, this is where it gets hard. The diagnosis and figuring out the guiding policy are fun to do and can be a great team-building exercise with your team. Establishing, and completing, a set of coherent actions, though, that’s execution and where the rubber meets the road.
Doing the right things right is a definition of strategy that Peter Drucker wrote about and I like that definition a lot, too. How do you know what are the right things to do right? How do you know what challenges youare facing and the solutions that are available? What if you’ve never seen this problem before, what do you do then?
This isn’t a site about strategy plan development. Hint: If you don’t do this at least annually, start now and watch how your practice, territory, or business changes.
Make Marketing Easy aims to help you examine your strategy and learn how and where to develop content, put it in the right place, at the right time, with the right message, and in front of the right person. Doing this is you doing the right things right. Sounds simple, right?
It can be if you put into practice what you’re learning in this book!
What separates winning strategies from losing ones? Ultimately, both set out to achieve the same goals, and yet their outcomes are vastly different.
As it turns out, part of this difference lies in what we actually consider to be a strategy; in other words, losing strategies may not be strategies at all!
So what is a strategy, exactly?
Consider this: the “2005 key strategy” of a major graphic arts company was a 20 percent revenue increase and a 20 percent profit margin. Does this sound like a good strategy to you?
The short answer: No. In fact, these are simply goals – far removed from a working strategy. A vision or goal is simply a stand-alone idea. A strategy, however, is a set of different ideas that include a plan to achieve these goals.
Often a goal or a vision can be a perfectly fine starting point for a strategy. However, the strategy itself must include precise information on how these goals will actually be achieved.
For example, if your football coach advises your team to win the next game, he isn’t providing you with any useful information unless he tells you how to win. In other words, he must provide a plan of action – a strategy.
It’s not only our goals that are often mistaken for strategies; motivational slogans and buzzwords sometimes get passed off as strategies too. This is usually made obvious by an absence of clear, simple words.
In these cases, “fluff” – superficially restating the obvious while applying a heaping portion of buzzwords – takes on the appearance of high-level thinking.
The fundamental strategy of one major retail bank is a perfect example – in their own words, they offered “customer-centric intermediation.”
Let’s unpack this, shall we? “Intermediation” means simply that they take deposits and lend them to others, and “customer-centric” means that they focus on the customer.
By taking the fluff and unraveling it into simple, meaningful language for the layman, we quickly discover that their “fundamental strategy” for banking was simply “be a bank!”
What’s missing in both these business examples is a plan of action. Essentially, if you have no plan of action, then you don’t have a strategy.