How healthcare organizations can prosper through change

The U.S. healthcare industry is in the midst of a sea change, and organizations should study other industries to learn how to navigate the chaos, according to global management consultants McKinsey & Company.

Implementing the Affordable Care Act, for example, will require organizations to develop new consumer and retail capabilities. And companies must learn this quickly in an unsettled regulatory environment.  

"The net result of disruption," McKinsey wrote, "is usually a massive reshaping of the affected industry and its key segments--where the profit pools lie, who gets them, and through which business models. Entire parts of the value chain may be unseated or change in importance."

But change brings opportunities to adaptive organizations, and three paths that trailblazers elsewhere followed point the way through, according to the report:

Path 1: Refocus your portfolio

One way to manage disruption is to concentrate on customers or products that benefit from change while de-emphasizing areas vulnerable to it, McKinsey reported. For example, when Procter & Gamble was threatened by the rise of big box retailers and private label-products, it successfully refocused on health and beauty products rather than food.  

Path 2: Transform your business model

Another strategy involves changing core activities. Charles Schwab used this approach, McKinsey noted, when lower-priced, web-based stock brokerages mushroomed. Schwab quickly launched an online trading site to offer customers online and branch network services in addition to top-notch customer service.

Path 3: Create a major new business

The boldest response, the article noted, is to acquire or build a new business that uses core capabilities and grows enough to replace profits lost through functions becoming extinct. Just as hospital boards must understand emergent issues in an evolving industry, organizations should mark hockey star Wayne Gretzky's words to "skate where the puck is going, not where it has been."

When personal computers threatened IBM's primary business model, for instance, the company built a large, computer services business to help customers cope with the new complexity of computing platforms.

For more:
- read the McKinsey article