Navigate Uncertainty With Rapid Impact Strategic Planning
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As we emerge from the latest wave of COVID-19 hot-spots and flare-ups and look ahead to fall and winter, health care executives face the ultimate balancing act. Organizations may find themselves back in full-incident command mode, dealing with COVID-19, while trying to simultaneously move forward in a “new normal,” where strategic initiatives support new care delivery models and ensure financial stability after a devastating second quarter.
An adage comes to mind: building the plane while flying it. This typically serves as a metaphor for managing innovation while continuing daily operations, but it also assumes otherwise calm surroundings—we generally aren’t building the plane while simultaneously flying in a hurricane! However, our circumstances in 2020 are just that. So how can organizations succeed in these uncertain and rapidly changing times?
Weather the Storm
The answer lies in embracing agility across the entire organization, particularly in strategy. Yes, “agility” is more commonly associated with software companies, but health care can be nimble—even if it took a pandemic to prove it. Research shows successful organizations utilize 4 initial types of agility—analytical, inventive, operational and communicative—and over the past 6 months, operations, finance, innovation, and communications leaders and teams have demonstrated all of them. Interestingly, however, research also shows that even though companies exhibited these 4 types of agility, they were not always able to maintain their success.
The key is a fifth type of agility called visionary agility, which is the ability to recognize critical “here and now” issues but not allow these issues to crowd out future strategic opportunities. This is where strategy comes into play—and where strategy teams that were redeployed to operations or furloughed can focus moving forward. Strategy leaders and teams must work in multiple time frames: connecting to and supporting operations in the here and now, while also ensuring the prioritization and execution of a handful of longer-term opportunities to differentiate, transform and grow the business. No business survives in the long-term if it doesn’t grow and outpace the competition.
Viral resurgence, consumer confidence, economic uncertainty and deductible-driven seasonality are all factors challenging traditional volume projection models, which means planning for here and now or same-store growth over the next 6 to 18 months is an exercise in scenario planning. Sg2 recently released our Near-Term Demand Modeler, a short-term scenario modeling tool (anchored in our established Impact of Change® methodology, which has been fully updated to consider COVID-19 impacts) that leverages local market inputs and returns a range of IP volumes across multiple here and now scenarios. (Sg2 members can access the tool here.)
Understanding the resulting delta, what Sg2 calls the “cone of uncertainty,” allows leaders across the organization to plan for a full range of potential short-term volumes, enabling rapid shifts in resources—and immediate activation of competitive strategies—as necessary. These insights help strategy teams serve the “here and now” to operations and finance teams to inform short-term planning.
But the uncertainty extends beyond volumes (eg, telehealth reimbursement, Medicare-for-all, transition to risk), and strategy in health care was never about reaching a single end point. Successful organizations review a series of environmental scenarios and identify a handful of strategies that ensure future success regardless of market disrupters or national policy positions. Sg2’s Environmental Scenario Planning work supports this planning process, and executives routinely tell us it’s helped their board and community members embrace uncertainty and make key investment decisions—no small feat in these times.
Even with the addition of scenario planning, strategy leaders and teams must still identify longer-term opportunities for growth—which is where visionary agility fits in. Armed with an updated current state assessment, thoughtfully reviewed differentiators and the 2020 Sg2 Impact of Change forecast, strategists can identify any number of opportunities. This year, though, executives must find focus and commit to a manageable list of strategic priorities; if your 2019 list was overwhelming, cut it in half for 2020/2021. Novant Health’s leadership team took this to heart recently when they reviewed their list of 10 strategic priorities and decided to focus on 4 for now.
For help finding focus, Sg2 offered a road map in our 2018 report Transformative Planning: Strategic Prioritization and Deselection that provides principles that are even more relevant today. The method allows a handful (3–5) of initiatives to bubble to the top for immediate focus and execution, while a similar number of opportunities considered essential over the next months/years are teed up for ongoing focus, building necessary competencies or removing roadblocks. The remainder are deferred or deselected.
An expedited environmental scan, review of market conditions and reprioritization of strategic objectives is critical work many executives have asked teams to complete in the third quarter. Sg2 membership resources, as well as our consulting experts across Sg2 and Vizient, are available to support this process—contact your Sg2 account representative to learn more.
Decouple From Capital, Double Down on Differentiation
Agile approaches call for rapid-cycle testing of ideas and constant course corrections, and applying agile to strategy has always seemed challenging given tight margins and annual capital cycles. This year, financial uncertainty brought a complete capital freeze in this year’s second quarter, prompting many health systems to shift to more nimble quarterly capital allocation. As a result, strategic planning efforts this fall may be decoupled from capital planning—but there’s a silver lining.
When decoupled from the capital process, strategic plans can focus more on ideas that truly differentiate, and testing such differentiation translates into market advantage. Once a track record is established and more is known, larger, more formal business plans and capital requests can ensue.
Prioritization and formulating differentiated strategies are some of the concepts Sg2 members will practice in our virtual workshop Managing Strategy With Focus and Nimbleness, where a hands-on, interactive case study approach gives attendees that “a-ha!” moment, allowing them to return to their organizations and engage others.
Leverage the Incident Command Culture
Executives are proudly sharing accomplishments from the last 6 months under an incident command structure and now are actively working to embed that same speed in decision making in standard leadership structures. Effective execution has never been more important.
To that end, executives must determine a new cadence for managing the organization—rolling budgets, quarterly capital, etc. But what about making good on strategic goals? One Sg2 member’s leadership team focuses on “priorities for the quarter”: during one quarter, they test and measure identified opportunities, and at the end of the quarter, they reevaluate priorities (and reestablish if necessary). Agile software principles often anchor in 2-to-4–week sprints, which may or may not work for all health care organizations, but each organization’s leadership team must determine the right cycle given its market conditions. And don’t forget clear communication on timelines and priorities—take your shorter list and make it the focus of conversations at all levels.
One CSO recently told us their health system is updating its scoring mechanism for strategic plans due this month. In addition to pressure testing for multiple time frames and true differentiation, there is new criteria (health equity), and they will ask the tough question: is the plan bold enough? Divisional presidents will then provide updates on these plans during monthly one-on-one meetings with the system CEO, who has made it clear execution on these plans is a priority—financial results will be reviewed in other meetings.
50 years ago, a start-up airline was born. Partly due to a capital-intensive industry and partly due to regulations, Southwest Airlines only operated flights within and to 4 states. Focusing on fewer, shorter segments vs the full array of long-haul flights allowed Southwest to build extremely efficient operations, try innovative approaches to cost management and cement a culture that would drive the company’s success for decades to come. They were nimble but kept an eye on the bigger picture, and when the time was right, a major acquisition expanded their footprint and market share, while their early move online yielded the number one airline website based on revenue.
Now is the time for health care to take a page out of the Southwest playbook and embrace a more focused, nimble approach to strategy. Shorter “segments” (strategy cycles) and a scenario planning approach can help focus and navigate the here and now. And success in health care is no longer a straight-line exercise: well-placed strategic “moves” and a willingness to embrace innovative ideas position health systems for future growth, which is critically necessary to continue serving communities and patients. Finally, executive leaders who can clearly communicate the new, more nimble vision and strategy can help guide their organizations—even when flying through a hurricane while building the plane.
- Run a quick self-diagnostic: Is your organization exhibiting all 5 types of agility? Are you shortchanging that all-important category of visionary agility?
- Review teams and tools: Will you be able to plan for and take advantage of opportunities in multiple time frames? Have you updated planning processes to shorter cycles that embrace scenario planning?
- Refocus efforts: What are the handful of things prioritized for the next quarter, year? What do you purposefully pause and de-escalate to a “prepare” phase or stop doing altogether?
- Reach out to Sg2: As you revisit your strategies and how you approach strategic planning, reach out to us—we are here to help, every step of the way, with our tools and expertise.
Sg2 Resources to Support Rapid Impact Strategic Planning
CSO = chief strategy officer; IC = incident command; PPE = personal protective equipment. Source: Wharton University of Pennsylvania. Five ways companies can be more nimble [blog/podcast]. May 17, 2018.