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Trilogy Tidings August 2009
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Bad times can become very good times from a corporate perspective - if you're attentive to opportunity, have access to capital, do your homework, and time things right. I address this notion from several points of view. Then I address the likely effects of healthcare reform on our industry, your firm's market orientation, and a scary risk posed by plans for computerizing medical records via proprietary software. Have a look - even if you're on vacation.
Carry on, and remember: Refuse to participate in the recession!
Regards,
Joe
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| Exercising Internal Due Diligence
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It's widely believed that lean times offer great opportunities for business development - if you have the capital to invest in important, new growth initiatives. Smartly managed enterprises maintain some "dry powder" for just such situations. These lean times (like now) provide excellent opportunities to leapfrog the competition with a new product or service offering simply because some of your competitors may be capital-poor or simply preoccupied with hanging on through choppy economic waters. The temptation can indeed be great to make a dramatic, market-shifting move during tough times.
If you can afford it, I heartily endorse exploiting such opportunities - with one caveat: Exercise rigorous internal due diligence. Convince yourself and your colleagues that you're making the most of the opportunity by advancing the right product concept at the right time and for the right reasons. One normally thinks of due diligence being applied to a prospective external relationship, but I think the very same principles apply to primarily internal initiatives as well.
I wrote about this notion as it applies specifically to new-product initiatives several years ago. But the ideas age well, and I offer them to those of you who have not read my article before. |
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Timing Your Strategic Moves
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In addition to validating what moves to make, it's obviously critical to know when to make them. The current economic climate is tantalizing because essentially everything is presently available at a discount relative to the "norm". How do you determine the "best" time? Are we in a trough now, or will markets weaken further? Is it best to assess the situation and project the future analytically or just go with your experienced gut?
A recent article in McKinsey Quarterly attempts to take the analytical approach to predict the best time to address "the growing range of attractive - even once-in-a-lifetime - acquisitions and other investment opportunities". The authors conclude that "much uncertainty surrounds the timing of the downturn's end, but companies waiting for clear evidence of a turnaround may find that they have been recklessly cautious and missed once-in-a-generation opportunities to acquire or invest".
I'm a skeptic on this one. The McKinsey model is tenuous and loaded with assumptions. I'm sure it has value, but that value may not be sufficient for betting the farm. Maybe the experienced gut is best after all. However, the really important takeaway message is that timing matters - a lot.
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Healthcare Reform Will Impact Medical Devices
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It's impossible to escape the reform storm these days. Information (rare) and opinion (not rare) abound! One recent article in MX: Issues Update caught my eye since it's focused on a large slice of our client base - medical device suppliers. The article attempts to clarify and predict the likely impact of reformed U.S. healthcare on device makers.
I came away from my reading with the following liberal interpretations, strongly colored by my own predictions:
- Overall, device companies will not be hurt too badly. Smartly managed ones will be helped in the long run.
- There will be pricing pressures applied by providers. So what else is new? Device makers are experienced in such matters and will continue to prevail.
- Increases in the numbers of insured patients will make a trivial contribution to device businesses.
- Proactive care will grow in relationship to reactive care, but this will take many years, and the way forward is unclear. There are few reimbursement codes for prevention.
- Cost savings driven by device pricing adjustments will have a tiny effect on overall societal healthcare costs. According to AdvaMed, devices contribute only 6.2% to total costs.
- Clinical effectiveness wins. Economic effectiveness wins. New procedures and new devices demonstrating both characteristics will win big! Avoid commodities if you can.
That last point reinforces our own "economic positioning" initiative here at Trilogy over the last few months. Read about it here, or talk to me about it at length.
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How's Your Market Culture?
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I assume by now that everyone knows that a market orientation is an essential ingredient in the success of any business enterprise. If you (1) don't believe this, or (2) think your firm's market culture is just fine, or (3) know your firm is deficient in this way, I suggest you contact Sean Gallagher of MarketCulture Strategies.
Sean and his company can help you and your business colleagues immensely with a benchmark assessment that will tell you exactly how strong or weak your market culture really is. If requested they will provide you advice on how to become more market centric to deliver improved financial performance. Want to learn more? Let me know and I'll connect you to Sean for a quick, no-obligation assessment. |
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Healthcare IT Could Scuttle Reform
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Think about your last encounter with poorly designed software. Not a pleasant experience, right? Didn't do what you wanted done. Or took too long and/or was unnecessarily complicated and counterintuitive. Maybe you just gave up. That outcome could very well screw up the entire U.S. healthcare reform initiative (assuming such an initiative survives the legislative process)! That's the conclusion of Phillip Longman of the New America Foundation in his recent Washington Monthly article.
Longman asserts that much of the $20 billion in the stimulus bill for computerizing medical records is likely to be spent on bug-laden, inadequate proprietary software sold by the very companies that lobbied for the money. He favors the open-source, clinician-designed integrated healthcare software used by the VA, some large private HMOs, and certain other leading providers (e.g. Mayo Clinic). I found his arguments compelling, and I'll bet you will, too. This is serious stuff. The choices made now could well spell the difference between modest success and abject failure of our healthcare reform initiative to enhance care and reduce societal costs.
As for the leading healthcare IT suppliers, I suggest they consider altering their business models to focus exclusively on supporting individual providers and delivery networks in adapting a universal healthcare IT platform to their specific needs and practitioner/patient populations.
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