The importance of reinvention and response in a world where technology is a catalyst of change
Maintaining entrepreneurial practices and an entrepreneurial mindset in healthcare’s complex and highly regulated world is no easy task. Yet it is the one essential quality that may ultimately separate winners from losers. That’s because an entrepreneurial spirit is all about reinvention and response in a world where technology is a catalyst of change and an accelerant of the pace of change itself. Fortune favors the bold, and bold often requires being uncomfortable more often than being comfortable. But how to do it?
Believe in Dynamic Planning
The five-year plan that organizations develop at a retreat and put on a shelf are often outdated a year later. A better approach is to incorporate the development of three-year plans into each annual planning and budgeting process.
Under the three-year system, every operating plan is accompanied by a two-year forward look that considers the then-current SWOT analysis. This is best done in two sequential phases:
First, the annual plan for next year is completed according to zero-based sales forecasts, expense budgets, and hiring plans.
Second, a disciplined look at the next two years takes place in which historical and often misguided Excel formulas (=last year*.05) are strictly forbidden. The two-phase outcome is compared to what was produced last year to objectively assess how clear everyone was thinking or to humbly ask, “What was everyone thinking?” If properly done, key learnings will emerge.
Crafting three-year plans does not replace long-term strategic planning in which product and market forecasts are made and long-lead activities are undertaken. The approach does, however, improve strategic planning by strengthening the team’s planning abilities.
President Eisenhower once remarked that, “Plans are useless, but planning is indispensable.” What was correct 80 years ago when markets moved more slowly is even more truthful today. Considering the speed of change in today’s markets, why would you surround yourself with anything but disciplined planners who execute with excellence while possessing the resiliency to shift when needed?
Embrace Seasonal Regulation
In highly regulated industries the speed and frequency of change is accelerating faster than ever. The combination of a contentious political environment and a near constant election cycle means that regulation is evolving into two-year phases. These cycles have become more volatile and as important as the larger cycle (presidential elections) and have devolved into outright wars where victory is followed by revenge (let’s repeal everything that just happened!). Along the way, gubernatorial and statehouse tectonic plates are shifting as well.
As it pertains to healthcare, Medicare for all is unlikely to happen; but Medicare for more is quite likely. What happens when more people suddenly join the roles than forecasted on the baby boomer actuarial tables? Will the government squeeze pharma prices or eliminate flu shot coverage? Will telemedicine fill in the gap? What will the unintended consequences look like?
Unintended consequences and government intervention in a free market go hand in hand. That’s why smart companies are overlaying any three-year plan with electorally timed contingency plans. While nobody can predict the future, having a game plan for regulatory contingencies still makes sense. If your projections are correct, you are prepared to implement the contingency. If you are wrong, you are still prepared; but you are uninterrupted by the need to do it.
Be an Ongoing Student of History
The status quo is comfortable and doesn’t invoke risky debate. But thinking differently means admitting you don’t have answers, taking risks and often becoming a naysayer versus the (pre-) resolved company line.
The membership of the S&P 500 teaches a painful lesson for those who continue to cling to the past. According to Innosight’s 2018 Corporate Longevity Briefing, the 33-year average tenure of companies on the S&P 500 in 1964 narrowed to 24 years by 2016 and is forecasted to shrink to just 12 years by 2027. Why? Innosight observed that, among other things, “The rising dominance of digital technology platforms continues to shift massive market value,” and “disruptive change across industries highlights the importance of continual business model innovation.”
Healthcare is a highly regulated industry with thin margins. Follow-up that with this fact: healthcare has eight times the FTEs per $1B of revenue collected versus other sectors. Unnecessarily complicated pricing (requiring processing headcount) and processing efficiencies (cost savings despite product complexity) are ripe targets for innovation. Enter Oscar and other entrepreneurial companies delivering on this opportunity. Recognize these trends or prepare to be left out in the cold.
You don’t get to choose which macroeconomic forces will cross your path, but you can choose to build an organization in which planning is part of an entrepreneurial mindset that challenges the assumptions of today. innovates its business model and invariably and successfully, looks different tomorrow.
