Planning Radical Change: The Example of Health Systems

By: New Markets Advisors

No matter the context, radical change is tough. Just as people fight engrained tendencies to reach for another doughnut as they try to diet, organizations struggle with breaking long-established norms. 

Like frustrated dieters, staff may understand the macro-level case for change but reflexively resist the immediate implications. In some firms, senior management can force through change by fiat. Yet many organizations lack a means of dictating the everyday work practices that can lead change programs to succeed or fail, and they have highly sought-after workforces that must be kept aligned for the long-term success of the institution.
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Hospitals and physician networks — often grouped together as “health systems” — face a particularly severe form of this quandary. The unsustainable rise in healthcare costs, U.S. health reform, and new business models are combining to threaten decades-old practices. Health systems must urgently sort out their strategy for the new landscape: are they going to radically lower costs to win business in a handful of specialities, dominate metro areas so that health insurers find them indispensible, integrate from primary care through to surgical procedures and post-operative home care, or compete based on strong patient preference? Health systems can no longer try to be all things to all people — they must carefully choose their priorities and competitive strategy. These choices will likely lead some internal stakeholders to lose out, and difficult negotiations may follow. These challenges would be difficult for any organization — now picture how much harder it is for health systems where physicians can be intimately involved in governance, community groups may hold substantial power, and non-profit charters can lead to confusion about the organization’s ultimate objectives.
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In this setting, traditional approaches to change will struggle. The strategic planning process, for example, may excel in setting next year’s financial and operational metrics, but it does not create alignment among a broad set of stakeholders about radical change. Campaigns for operational improvements — such as fighting hospital infections — can succeed in instituting a small set of new work practices, but they do not tackle deep-rooted issues like distrust between physicians and hospitals, misaligned incentives between primary care and specialties, or controversial success metrics.

For radical change, a program needs a clear and far-reaching mandate, a group of senior stakeholders rolling up their sleeves to examine issues, a means of creating broad buy-in, and an objective party shepherding the process. One health system, which we’ll call UniversityCo, has tackled the challenge through creating a small working group of top executives, a series of regular meetings with clear objectives, a program of research to understand marketplace demand from stakeholders’ perspective, cross-functional ideation workshops, and a tight time frame for making decisions. Through this process the UniversityCo executives are working as a team to jointly re-imagine the organization’s future, rather than as delegates of internal interest groups bargaining about near-term objectives. It is time-intensive, uncomfortably unfamiliar, and urgently necessary.
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The keys to success are:

• Take a deliberate approach to strategic change, recognizing that this initiative is unlikely to follow in the footsteps of other, more everyday efforts
• Resist the temptation to outsource the process of making strategic recommendations, and instead engage in the kind of intensive, structured dialogue that produces both vigorous debate and long-term buy-in
• Step outside your everyday struggles to view the marketplace from the perspective of your customers and other stakeholders. Design your future state from the ground-up to meet marketplace needs, rather than as an iteration of your current strategy and structure

Story by Steve Wunker.