Strategy Made Simple for Academic Medical Centers

“The most challenging concept of the Balanced Scorecard is identifying the best metrics to support goals for the tripartite mission areas.”                                                                                            

                                                                                    -Dr. Stephanie Gardner

In today’s hyper competitive healthcare industry that consists of evolving changes in the healthcare delivery system and healthcare financing, academic medical centers (AMCs) must create a strategic plan that integrates their tripartite mission areas to leverage their internal resources to sustain a competitive advantage. Some organizations outperform others by leveraging their internal resources to create a sustained competitive advantage (Barney, 1991; Campbell & Park, 2017; Wallace, 2019; Wernerfelt, 1984). Penrose (1959) expressed that the goal of leaders in an organization is to know the limits of their bundled internal resources to leverage them for the growth of the organization. Green, Brush, and Brown (2015) stated internal resources of all organizations include human resources, financial resources, physical resources, technological resources, and structural organizational resources. 

AMCs are multidimensional teaching hospitals that provide medical education and training for future medical professionals, science discoveries for research, and care for patients. AMCs must constantly evolve to deliver innovative education, breakthrough science, and high-quality care for patients. But they are extremely complex and structurally have three independent mission areas that can stifle their evolution. The three mission areas in am AMC are clinical, education, and research. Since the inception of AMCs, leaders have functioned independently with minimum efforts to cross collaborate with the collective intent to bundle resources. The lack of cross collaboration is the catalyst for independent efforts, low marginal returns, operational inefficiencies, and low execution of organizational strategic priorities. Some leaders in AMCs lack a clear understanding of what organizational capabilities and bundled internal resources are necessary to sustain their organization (Kaplan & Norton, 2008). According to Barney, organizations create value by intentionally creating internal resources that are heterogeneous and immobile (Barney, 1992). 

The inability of some leaders in AMCs to integrate their tripartite mission areas enhances independent leadership thinking and creates organizational fragmentation – silos. Silos are designed to structurally drain resources by creating barriers between mission areas. Physical and psychological silos prevent the occurrence of synergy across mission areas and the leveraging of internal resources for competitive advantage. Leaders who possess the behaviors of independent mission leadership thinking create opportunities for competing priorities. They are so competitive regarding their mission area that they are selfishly guided. Although they understand how to leverage their internal resources and organize them to sustain a competitive advantage, they lack the ability to foster integration of the organization’s collective internal resources to grow the organization as one unit. Independent mission leadership thinking prevents leaders from doing the following: 

1. Sharing resources instead of hoarding them,
2. Recruiting human capital that leverages all three mission areas,
3. Procuring technology that merges cross-functional data for optimal business decisions, and
4. Closing capability gaps in human capital, technological capital, and organizational capital (Kaplan & Norton, 2008). 

To succeed in a healthcare industry where service line business models are common, shrinking reimbursement is the norm, consumerism is approaching, and value-based care is the new standard, leaders in AMCs must channel the behaviors of independent mission leadership thinking into collective organizational leadership thinking to compete and/or dominate. AMCs must become strategy-focused organizations. Strategy focused organizations are those that are aligned to better leverage their internal resources (Davenport, Kaplan, & Norton, 2001). A strategy-focused organization consists of five elements: 1) translating strategy to operational terms, 2) aligning all areas within an organization to the strategy, 3) making the strategy everybody’s job, 4) making the strategy a continuous process, and 5) mobilizing change (Davenport, Kaplan, & Norton, 2001). To initiate this process, leaders at AMCs must create a new strategic plan using a multidimensional strategy system that integrates its internal resources and aligns its multidimensional health system. Leaders must use the Balanced Scorecard (BSC). The BSC is the most researched and proven strategy management system to meet the multidimensional challenges at AMCs. 

Authored by Drs. Richard Kaplan and David Norton in 1992, the BSC is a complex, multidimensional strategy system that not only measures financial tangible outcomes, but also non-financial intangible drivers. It is designed to translate a strategic vision into organizational performance metrics for executing and operationalizing the strategic priorities for an organization. The BSC organizes the strategic priorities into a complex matrix called a strategy map. A strategy map is a one-page, cause and effect diagram that communicates the strategic plan (Kaplan & Norton, 2008). It includes a strategic vision and four perspectives: financial, stakeholders, internal process, and talent & technology. The financial perspective includes objectives that support the short- and long-term return on investment and return by the institution. The objectives in the financial perspective measure the added economic value to the institution. The stakeholder perspective includes objectives that contribute to the institution’s value proposition for stakeholders (e.g., patients and family, students, and employees). The value proposition is a promise of value to be delivered, communicated, and acknowledged to the stakeholders. The objectives in the stakeholder perspective measure the outcome value of the promise. The internal process perspective includes objectives that support the creation and delivery of value to stakeholders. The talent and technology perspective include objectives that support the human capital, technological capital and cultural capital that drive performance improvement. The objectives in the talent and technology perspective measure the development and effectiveness of human, technological and cultural performances of the institution. The application of the BSC is multifaceted, time consuming, and laborious for a mature strategy-focused organization and potentially chaotic for an immature one. As a result, I simplified the application using the ADEM Strategy Management Model (Wallace, 2019). 

Figure 1: The ADEM Strategy Management Model.

Strategic planning is an old concept with many variations of models and processes. Leaders have used many of these models and processes for years and still some leaders fail to effectively apply them. A lot of this is due to the difficulty of applying the models and the lack of explaining the significant relevance of the processes including the tools used in each phase. The ADEM Strategy Management Model (ADEM model) is a strategy management framework for busy leaders across industry to communicate a clear path of application from the beginning to the ending of the strategy management process. The ADEM model offers a linear application and a succinct cyclical solution that help leaders reestablish a commitment to strategy management while building their confidence throughout the life cycle of the strategy. Leaders know what to expect in each phase without having to waste time on the process. The acronym stands for five strategy management phases: Analyze, Develop, Execute, and Manage.    

Based on the work of more than 50 business strategies, I have been able to identify the phases in the strategy management process and develop a model that includes the most practical theoretical concepts, pulls together the best strategy management tools, and identifies all the elements in a linear application. 

References

Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120. doi:10.1177/014920639101700108

Campbell, J. M., & Park, J. (2017). Extending the resource-based view: Effects of strategic orientation toward community on small business performance. Journal of Retailing & Consumer Services, 34, 302-308. doi:10.1016/j.jretconser.2016.01.013

Davenport, T. H., Kaplan, R. S., & Norton, D. P. (2001). The strategy-focused organization: How balanced scorecard companies thrive in the new business environment. Harvard Business Press.

Greene, P., Brush, C., & Brown, T. (2015). Resources in small firms: An exploratory study. Journal of Small Business Strategy, 8, 25-40. Retrieved from http://www.jsbs.org/

Kaplan, R. S., & Norton, D. P. (2008). The execution premium: Linking strategy to operations for competitive advantage. Harvard Business Press.

Penrose, E. T. (2009). The theory of the growth of the firm (4th ed.). New York, NY: Oxford University Press.

Wallace, M. (2019). Strategy is spelled ADEM. All Things Strategic Press.

Wernerfelt, B. (1984). A resource‐based view of the firm. Strategic Management Journal, 5(2), 171-180. doi:10.1002/smj.4250050207

Wallace, M. D. (2019). Leveraging Internal Resources for Business Sustainability in Independent Quick Service Restaurants. Retrieved from: https://scholarworks.waldenu.edu/cgi/viewcontent.cgi?article=8148&context=dissertations