Business strategy — a focus on 5 questions

When I look at strategy for businesses of any sort, including healthcare companies, ASC chains, practices and/or hospitals and healthcare systems, I believe business leadership is well served when starting with five key questions. This may seem simplistic. However, we are often amazed at how important these key questions can be to the success of the business.

1. What is working? Where is the business coming from? What is doing well? Where can we add to expand success? In essence, in every business strategy situation, we advise clients and companies to start with the questions of what is working and where are revenues and profits coming from? For example, what are high-, medium-, and low-revenue generators? Then, which ones are high-, medium- or low-margin? Then, we prod the business to spend more and more time on the highest margin and revenue areas. I.e., we encourage the business to focus its efforts toward the medium- to high- margin and revenue areas. In another article, we can discuss the concepts of threshold targets for revenues and margins. That is, a target contribution amount where a company does not target or put resources into an area unless it can meet or exceed that target.

2. Should we double down on what's working? We advise companies that before looking into the next new thing or next great endeavor, they should protect or double down on their base, particularly if there is still growth or serious profit there. There is a concept that profitable businesses can be boring. It is often more exciting to take a business in many different directions. However, it is often more profitable to constantly double down on strengths and what is working well. Many people don't like to do this, because it is not as exhilarating compared to starting and looking at new things. In general there is an old concept that a business should spend 75 percent to 85 percent of business time, strategy and energy on core businesses that generate profits and 15 percent to 25 percent on newer types of endeavors and initiatives. We think this rule still largely makes sense.

3. Probability of winning; Is it worth winning? When examining new initiatives, we look at a handful of starting questions. Can we win in an area? What is the probability that we can win, and if we do, is it worthwhile? In essence there are lots of small initiatives that you can win, but the ultimate impact will be small. In contrast, there are big initiatives where big market share and profits are available, but those can be divided into two areas — those in which the competition is so steep that it is very hard to win or those where it's quite winnable. In general, you want to spend time on areas where you can win and where it is worth winning.

4. What initiative or areas should be abandoned? One of the most important business concepts comes from how Peter Drucker defined different businesses. He said there were certain businesses that you are a winner in, much like Boston Consulting Group would say there are cash cows and rising stars. Then Peter Drucker would refer to other businesses and areas as "investments in managerial ego." These endeavors may be exciting, but are so hard to win in that a company should rarely be in them. Here, if certain areas cannot generate the profits or margins you target, absent very special reasons, a business should abandon them.

5. Who are your key people and what is your key strategy for doubling down on people? There is a concept from Jim Collins, one of the other great business authors and business thinkers of our time, that basically says you can win in a lot of things once you have the right people in place. You can develop a lot of different strategies as long as you have great people. We agree with this concept. It is critical to have a great people strategy to go with a solid business strategy. The two should go hand in hand.