Tuesday, September 21, 2010

What is a Business Strategy?

Harvard's Michael Porter says that the purpose of strategy is "alignment within the organization". Theodore Levitt's teachings on marketing are clear about the link between marketing and strategy. And Peter Drucker offers that we should "know the future that has already happened" as we reflect on the correctness or folly of our previous assumptions about what we thought was right, thus possibly requiring a shift in our thinking, especially as a lesson for preparing for what lies ahead. Preparation does not require clairvoyance.

So, what is strategy, and why/how is it relevant to business owners, including those of medical practices? Strategy is what one uses to differentiate oneself from one's competitors. It is the thinking that formalizes the style and tools we will use to gain an advantage in the marketplace. It is both thinking and execution. It requires an understanding of the market, our customers, what products and/or services we are selling, how we plan to deliver them, and how we can become the preferred provider of those goods and services. Once a strategy is well-articulated, it becomes a guide for all who work for a company/practice to best deliver the desired product/service. This is the alignment referred to by Porter. If everyone knows why the company exists (mission), and how the company will differentiate itself from it's competitors (strategy), by also incorporating the firm's values into their day to day behavior, they can help deliver the product/service in a manner consistent with the firm's goals. Managers are free to use their resourcefulness for the benefit of the organization. Physican partners can more confidently interact with potential referring physicians and their patients. This is who we are and this is how we aim to work with you.

The usual ways to differentiate are based upon quality, service and/or price. In medical practices, while each of us thinks of ourselves as being of higher quality than our competitors, that goes largely unsupported. And as price tends to be something out of our control (see the Medicare Fee Schedule), this leaves service as the available differentiator.

We thus most often need to focus on the service we provide, to many if not all of our stakeholders, including referring physicians, patients, hospitals, insurance companies, etc. How this ties to the concept of marketing is quite interesting.

More on Levitt and marketing next time.

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