June 3, 2016
#1 Affliction Costing Businesses Billions
by Craig Lack
Healthcare is "managed" as a large operational expense — instead of as a strategic asset that delivers a sustainable competitive advantage.
Preserving the status quo (PTSQ) is repeatedly the cause of lost revenue, missed opportunities and even bankruptcies. The pace of innovation and change in business is accelerating at an ever-faster pace. Organizations with good leadership decide to move forward scared, rather than remain frozen with fear.
Recently, I had the pleasure of spending the day with Peter Diamandis, the founder of X Prize Foundation and the best-selling author of Abundance and BOLD. Diamandis was named by Fortune as one of “The World’s 50 Greatest Leaders.” He spoke about why we are living in a world of abundance and about how to recognize the future direction of technology and business opportunities. All of his examples and stories were directed at educating the audience on how to stay ahead of the competition and how to create disruptive innovation in any industry. (And, did I mention he graduated from medical school and has very strong opinions about the future direction of medicine? I’ll save those comments for another day.)
See also: 10 Reasons Why Healthcare Varies
His talk on the “6 D’s of Exponentials” was exceptional. It’s a way of thinking about how exponential technologies are affecting our world. He proceeded to describe business examples in robotics, artificial intelligence, 3-D printing, biotechnology, self-driving cars, space exploration and medicine.
So, how is it, in the face of exponentially increasing change and all this business opportunity, that managing healthcare for so many organizations represents a slow, linear decision-making process characterized by rigid thinking, detached leadership and high costs? Even more confounding is that many corporate C-suites have abdicated responsibility of a multimillion-dollar division (healthcare) to internal managers who inadvertently make the problem worse each year. The typical corporate culture talks about innovation, but it only reinforces and encourages business as usual and the preservation of the status quo.
Business as Usual, No Disruption Here
For the majority of mid-sized organizations, healthcare is “managed” as one of the largest operational expenses on the balance sheet —instead of as a strategic asset that delivers a sustainable competitive advantage. Continuing to manage healthcare as an expense while somehow expecting a different result will continue to be costly.
If you don’t disrupt your business practices, then someone will disrupt you. A study from the John M. Olin School of Business at Washington University estimates that 40% of companies in today’s S&P 500 will not exist in 10 years.
The world of healthcare is changing rapidly. The Affordable Care Act was merely a catalyst that has triggered a tsunami of endless change in the future of healthcare in America. The challenge is to recognize new opportunities and to implement them effectively.
In PwC’s latest CEO study, almost 75% of those surveyed said they are concerned their companies lack the skills needed to meet future competition.
Think about all the job duties, responsibilities and competing demands a typical healthcare manager experiences. These day-to-day competing priorities mean a manager must focus time and energy on eliminating the tallest fire first, regardless of the schedule, all while managing the second-largest capital allocation for the organization: healthcare. Is it any wonder that incrementalism, fear of change and choosing the path of least resistance run rampant in corporate America?
See also: Healthcare at the Tipping Point
The C-suite needs to get involved and apply its business finance skills to healthcare. The C-suite must wake up to the fact that linear thinking — like the illusion that vendor size creates market leverage in healthcare — is as outdated as flip phones and fully insured insurers who refuse to substantiate annual billing and rate increases with financial transparency.
According to an AON/Hewitt Survey of more than 1,000 companies, 77% of respondents said the actions of their peers influence their organization’s healthcare strategy. Comparing your results with other organizations trapped by the same poor outcomes of legacy best practices and groupthink is like listening for an echo and expecting a different answer. The survey results should make the C-suite sheepish.
If you’re a CEO or CFO, you have to ask yourself these questions: With all the evidence about increasing change in business, do you honestly believe managing healthcare to preserve the status quo is the prudent thing to do? Can your organization’s stakeholders afford the cost of doing nothing?