Strategic Planning in the Private Sector by localgirl

VIEWS: 113 PAGES: 41

									Strategic Planning in the Private Sector
August 19, 2003

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Agenda

• What successful companies do

• Examples from the private sector

• Applications to the MHS

BOS MHS.Strat

2

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Success is rare and few entities accomplish their goals
Percent companies meeting successive criterion 100% 80 60 40 27% 20 0 16% 13%
Earned cost of capital
BOS MHS.Strat

100%

Over $500M Grew revenue Grew profit revenue at 5.5% real at 5.5% real

3

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Keys to success

A well developed, differentiated strategy

A rigorous, fact based planning process to connect strategy with tactics

A well aligned, effective organization to execute
BOS MHS.Strat

4

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

“Strategy” defined: Bain perspective
• A dynamic plan to differentiate a business from its competitors profitably and sustainably • A proprietary set of actions that create and capture value by serving customers in a superior way relative to competitors

• Informs virtually all decisions
-Portfolio strategy: Where to play? -Business unit strategy: How to win?
BOS MHS.Strat

5

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Strategy is about making choices
Where we will and won’t compete Where we will and won’t invest

Markets
Businesses Customers Geographies Activities
BOS MHS.Strat

6

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Companies who succeed are focused and are the best at what they do
Percent of companies
100% 80 60 40
One business None Multi core Customer focus Regional focus Channel focus

20 0
BOS MHS.Strat

7

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Keys to success

A well developed, differentiated strategy

A rigorous, fact based planning process to connect strategy with tactics

A well aligned, effective organization to execute
BOS MHS.Strat

8

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

75% of U.S. organizations believe they need to upgrade their strategic planning process
“Our strategic planning process is effective”
100% 80 60 40 20 0
No

“Our strategic planning process is fully developed”
100% 80 60 40 20 0
BOS MHS.Strat

No

Yes

Yes

9

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Best demonstrated strategic planning process
Mission Portfolio Strateg y
• Decide what businesses and markets to compete in

Busines s Unit Strateg y

Tactical Plannin g

Executio n and Tracking

• Define the mission

• Develop • Set targets • Track differentiated and timelines performance offering against plans • Identify changing dynamics - External - Internal • Identify key gaps • Design key initiatives • Modify plans as necessary

• Determine success metrics by business

• Develop implementation plans
• Realign organization

• Rarely

• Every 5 years

• Every 2-3 years

• Annually

• On-going
BOS MHS.Strat

10

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Business unit strategy must be informed by the facts around the “3Cs”
Fact based diagnostic and value proposition Customers Competitors Costs

• What does our target customer value?

• What can • How can we competitors offer provide our value and how can we proposition at beat this offering? minimum costs?
• Cost position • Competitive position • Profitability • Strategy • Cost experience • Product profitability • Channel profitability

• Market size • Market growth • Customer segments • Channel segments

• Value chain economics
• Systems cost
BOS MHS.Strat

• Price experience

• Commitment

11

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Strategic planning is often done without reference to facts
Percent 12% 10 8 6 4 2 0
Actual average market growth Forecast average Forecast average company growth company earnings growth
BOS MHS.Strat

12.0%

6.0% 3.7%

12

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Planning processes of best-in-class firms
• Senior management devotes significant time • Systematic, with clearly defined steps • Rigorous, fact-based approach, and a consistent view of the future • Coordinated across business units • Enables quick decision making and course correction
Note: Examples include GE, Dell, Agilent, Abbott, Emerson Electric, Sun
BOS MHS.Strat

13

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Keys to success

A well developed, differentiated strategy

A rigorous, fact based planning process to connect strategy with tactics

A well aligned, effective organization to execute
BOS MHS.Strat

14

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

A high performance organization aligns five elements
1. Provides sustained leadership

5. Creates a high performance culture

4. Right people

Culture

2. Drives effective decisions

3. Aligns the front line with right jobs and right incentives

BOS MHS.Strat

15

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Agenda

• What successful companies do

• Examples from the private sector

• Applications to the MHS

BOS MHS.Strat

16

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Successful strategic planning begins with a clear, focused mission
• Force trade-offs between competing resource demands
• Test soundness of a particular action

• Set clear boundaries on what to do… and what not to do • Make clear what “the core” is

• Memorable distillation of strategy clearly understood by all
BOS MHS.Strat

17

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Examples of clear, focused, private sector missions: Dell and Southwest

Dell Computer “Be direct.”

Southwest Airlines “Meet customers’ short-haul travel needs at fares competitive with the cost of taking a bus.”

BOS MHS.Strat

18

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

In 1993, Dell strayed from its mission and its core
Situation
• Only in the direct channel (“core”) • PC market was exploding
50
$51M $27M

Complication
Profit $150M 100
$102M

• Wanted to capture a larger part of the growth

0 -50
-$36M

• Expansion into retail channel

1990 1991 1992 1993

BOS MHS.Strat

19

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Dell: Back to the core mission
Profit $300M 200 $149M 100 $27M 0 -$36M -100 1990 1991 1992 1993 1994 1995 $102M $57M
Dell withdrew from retail

$272M

BOS MHS.Strat

20

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Examples of clear, focused, private sector missions: Dell and Southwest

Dell Computer “Be direct.”

Southwest Airlines “Meet customers’ short-haul travel needs at fares competitive with the cost of taking a bus.”

BOS MHS.Strat

21

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Southwest translated its mission into clear, measurable goals
Achieve low cost position
Cost per available seat mile

Affordable travel
Average passenger fare

Superior customer service

Consumer complaints per 100K passengers

$0.10

$0.09 $0.07

$150

$140

4 3.3 3

100

$86 2

0.05
30% lower

50

40% lower

1 0.5 0

0.00

Southwest Industry average

0

Southwest Industry average

Southwest Industry average
BOS MHS.Strat

22

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Southwest researched target customer segment needs and preferences
Percent of responses 100% 80 60 40 20 0

Other Frequent flyer points

Price

Schedule
Customer purchase criteria

BOS MHS.Strat

23

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Southwest focused on key metrics for the target population vs. competitors
Price
Percent of customers: Excellent value for the money

Schedule
On-time performance

100% 80 60 40 20 0

100% 80 60 40 20 0 75%

70%

48% 28%

Southwest Industry average

Southwest Industry average
BOS MHS.Strat

24

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Southwest aligned its cost structure to support its positioning vs. competitors
Cents per available seat mile

Cost Initiatives
9.1¢

10¢ 8 6 4 2 0 7.2¢

• One type aircraft
• Secondary airports • Customer self service • No frills, no meals service

Southwest

Industry average

BOS MHS.Strat

25

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Southwest ignored traditional airline measures that competitors focused on
Repeat purchase
60% 58%

40 30% 20

0

Southwest

Industry average

BOS MHS.Strat

26

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Southwest aligned its organization to implement successfully
“Be low cost and deliver excellent service”

• Emphasis on
- Importance of people - Employee recognition - Having fun

• Selective hiring (2% acceptance) • Peer recruiting to ensure fits

Culture

• Decision making pushed to front lines • Employee loyalty focus to increase experience (50% less turnover)

• Flexible job descriptions
- Pilots and attendants “do it all”

• Rigorous customer service training

BOS MHS.Strat

27

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Key learnings from Dell and Southwest
• Define a clear mission and a clear core and stick to your core • Translate your mission into measurable outcomes • Build a value proposition based on a fact based diagnosis
-Customers -Competitors -Costs

• Align the organization to implement your strategy
BOS MHS.Strat

28

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Agenda

• What successful companies do

• Examples from the private sector

• Applications to the MHS

BOS MHS.Strat

29

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

The NCA MHS is experiencing significant pressures from a number of directions
Regulatory changes

Budget pressures

NCA MHS

Changing demographics

Evolving missions
BOS MHS.Strat

30

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Best demonstrated strategic planning process
Mission Portfolio Strateg y
• Decide what businesses and markets to compete in

Busines s Unit Strateg y

Tactical Plannin g

Executio n and Tracking

• Define the mission

• Develop • Set targets • Track differentiated and timelines performance offering against plans • Identify changing dynamics - External - Internal • Identify key gaps • Design key initiatives • Modify plans as necessary

• Determine success metrics by business

• Develop implementation plans
• Realign organization

• Rarely

• Every 5 years

• Every 2-3 years

• Annually

• On-going
BOS MHS.Strat

31

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

It is critical to understand the MHS’ multiple missions and how they relate to one another
Peacetime mission
• Calls for peacetime providers to provide health care to active duty, their dependents and serve retirees

Wartime mission
• Calls for providers to keep active duty fit and to provide casualty care in the theaters and at MTFs

• Calls for a certain mix of providers, including OB-GYN, pediatrics, etc.

• Calls for a particular mix of providers, focused on general surgeons, orthopedic surgeons, etc.

• Typically optimized along access for prime beneficiaries

• Requires a significant amount of challenging civilian pathology, which may be optimized around 65+ patients

BOS MHS.Strat

32

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Key outcomes are clear but they need to be translated into measurable goals
Key Outcomes
Readiness Training/ GME Resource optimization

Customer service and access

Quality of care

Targets ??? ??? ??? ??? ???

BOS MHS.Strat

33

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Success for the MHS will likely require focusing on certain activities and clinical areas
Activities

Research
Service lines
•
• • • • • • • • • • • • • • • • • • • • • • • • • • • •

GME

Hospitals and Clinics

Physicians

Health Plan Mgmt

Infectious disease
Cardiology Physical therapy GI Nephrology Pain management Vascular surgery Urology Endocrinology Neurosurgery Rheumatology Family practice Mental health Neurology Hem-onc Dermatology General internal medicine Orthopedics Ophthalmology ENT Plastic surgery Emergency medicine CT surgery Ob/gyn General surgery Pulmonary Organ transplant Pediatric surgery Pediatrics (all specialties)

BOS MHS.Strat

34

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

The MHS must pick the service lines and activities on which it should focus
High

Invest or partner

Focus

Critical to mission

Exit

Divest or partner or outsource

Low Low Ability to succeed High
BOS MHS.Strat

35

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

The MHS should collect a rigorous factbase to set strategy and targets
Demand Supply

Overall, service line and MTF levels
• Patient population • Outpatient visits • Inpatient admissions • Service line use rates • Volumes per provider • Pharmacy spend • GME program accreditation • Non-medical contracting costs • Provider mix and capacity • Provider productivity • Support staff productivity • Clinical outcomes • Direct and purchased care costs • Patient access • Geographic resource distribution • Patient satisfaction levels

Academic and private practice benchmarks
BOS MHS.Strat

36

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

A preliminary diagnosis suggests that various clinical areas have productivity below academic institution benchmarks

Percent of total 100% 80 60 40 20 0

Productivity below academic levels Productivity between academic and private practice Productivity above private practice

Service lines

MTF Provider FTEs
37

BOS MHS.Strat

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

A number of service lines are also experiencing access issues
Percent leakage due to capacity constraints

6%

6.0%

5.8%

4

2

0

0.2% Average for 21 service lines Service line A Service line B

BOS MHS.Strat

38

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Redesign initiatives for the MHS may take many forms…
Facilities rationalization Clinical program consolidation

Contracting/ collections from 3rd party payors

Resource allocations

Patient and provider retention

Shared support services Preventative care/disease management

Specialization of facilities

Re-thinking outsourcing

Incentives across system

GME program design

Procurement efforts

… but must be informed by data
BOS MHS.Strat

39

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Key questions for the MHS
• What is (are) the missions and how can they be translated into measurable goals? • What service lines and activities should be provided in the MTFs versus purchased from the civilian sector?
-Providers vs. hospital/clinic management -Primary vs. specialty care

• How is the MHS system performing vs. targets and the competition and what initiatives need to be put in place? • What organizational changes are required to implement these initiatives? • Which decisions should be made at an integrated versus at the Service (Army, Navy, Air Force) level?
BOS MHS.Strat

40

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

A single, integrated healthcare supply strategy needs to be developed to serve a single patient population

Supply of care:

Tri-Service, Coordinated, Integrated Army Navy Supply of Care Air Force

Demand for care:

MHS Beneficiaries
BOS MHS.Strat

41

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


								
To top