Over the last couple of weeks, my focus has been on the many complexities (and opportunities) in a health and human service market reoriented toward coordinated care models (see In Case You Missed It – The OPEN MINDS Integration Toolkit all members). What do organizations need to do to prepare for the immediate (and sometimes unexpected) changes and the long-term shifts in demand?
A good plan, with a focus on the scenarios that will shape long-term “big picture” organizational positioning, is where I like to start. An essential part of that plan is the detailed tactics to move an organization from sustainability in the current environment to sustainability in the future environment. There are four essential elements needed by executive teams for organizations to make that transition – addressing organizational limitations (mission, vision, regulatory status, etc.), acquiring needed executive team expertise, access to required capital, and time for organizational evolution (see Get Ready For The New Normal all members).
It is usually at this stage—the plan is done along with the cost of the expertise and the amount of capital—where the one fundamental question emerges. Are we “big enough” to afford the cost of change? Are we “big enough” to be sustainable in the future market environment?
These are not simple questions to answer. “Big enough” to afford the cost of change is simple math. Change is expensive and the cost of the inputs—for changing your electronic health record (EHR), adding clinical expertise, developing a new service, adding a marketing department, creating a new website, building a new billing department or whatever—is easy to calculate (but difficult to successfully implement). Here, the question of “big enough” is one of liquid capital – Do I have the cash flow? Do I have a line of credit? Can I refinance my real estate? Can I borrow against my receivables? Do I have an endowment? Can I sell equity and get a capital investment? It’s not as much a matter of “big” as it is a matter of access to the required capital.
Big enough to be sustainable is a different question. It is a question related to value – the actual/perceived “benefit” of your service versus its cost. Where “benefit” is equal, advantage always goes to the organization with lower cost. And this is most often either a very small organization with the benefit of limited overhead or a very large organization with the advantage of better economies of scale. The market favors the two ends of the size spectrum – the big and the niche (see Be Big Or Be A Boutique: Economies Of Scale In Health & Human Services). Both have their challenges.
Over the next week, I want to look at the competitive advantage – and where value, economies of scale, and collaboration fit into the equation. These are the drivers of “big” strategic decisions – decisions that require the ability to change, and to lead that change.
For another free resource, see Should Your Organization Explore Mergers & Acquisitions? all members