Capital Part 4: Organizational / System Impact

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In an era of limited capital, and slowly recovering margins, organizations must exercise more caution and scrutiny than ever in deciding what will be funded.  The changing landscapes of competition and consumer expectations can further complicate these decisions.  In this series, we describe four types of criteria, and then some additional considerations, all designed to to help you choose the projects most likely to succeed.  In the previous two posts, we introduced the first two of four important criteria: Strategic Alignment and Financial Feasibility.

Like Strategic Alignment, the third criterion, Organizational / System Impact, is based on a broader, overall view of the organization. It could be seen as a derivative or hybrid of strategic and financial views. However, it can add some additional helpful perspectives in evaluating a capital investment.

Growth and Sustainability: Each of these first two attributes have their own separate value and importance.  However, when they are considered together, they have the added value of taking a more complete, longer view. Which potential projects have growth - in volume, revenue, and/or market share - as likely short-term outcomes, thereby helping to restore depleted capital reserves?  While this is important, the possibility of organizational failure looms beyond the short term as competition responds, resource costs increase, or ever-changing consumer expectations outpace product/service improvements. These threats to long term sustainability suggest prioritizing projects that also have well-substantiated longer term growth projections, thereby contributing to organizational sustainability.

Personal Alignment: A second kind of sustainability is important to a growing number of customers who look beyond the goods or services received for a way in which they can personally connect with the providing organization. Some of these consumers are “shopping” for organizations that promote environmental sustainability, as evidenced through measures such as Carbon Footprint, LEED Certification, or Biodiversity Impact.  For others, environmental sustainability is only part of a broader commitment expressed in the form of an Environmental, Social, and Governance (ESG) Score. Still others look for organizations with clear tangible evidence of Fair Trade or Diversity, Equity, and Inclusion practices. In health care, successful achievement of objectives outlined in a Community Health Improvement Plan will be valued by those looking to have a substantive impact on the health of their local community. Capital projects including one or more points of personal alignment will resonate and engender loyalty.

Portfolio View: Will the investment maintain favorable share in a growing market (Star Quadrant) or possibly fuel growth by improving share in a growing market (Question Quadrant)?  How do you maintain items still providing high return but pay attention to product or service life cycles? The answers can be found by understanding where the capital investment fits in the traditional portfolio view (see Diagram). However, also take stock of how all other current services would be positioned in the portfolio.  Remember the best portfolio for achieving long term sustainability is one with investments balanced among the four quadrants. Your organization may be better served by a capital project fitting into an under-represented quadrant.

Patient Flow: Enhancing the patient’s experience is one of four critical components of the Quadruple Aim. Careful consideration should be given to the potential each capital project has to directly improve the customer experience. In addition, look for projects likely to improve the patient’s flow across the continuum of care. Will the project benefit the transitions to and from other services? Will it eliminate the need for additional service encounters or abbreviate the overall care experience by requiring fewer patient visits? Does it positively impact any other part of the patient’s journey? For example, Care/Case Management efforts are having significant beneficial impact on patient care and overall outcomes. This beneficial impact can be augmented through capital investments that, in and of themselves, make it easier for patients to transition from one care setting to the next.

Are you and your leadership team prepared to get the most out of your capital investments?  Let us know if you have any additional thoughts as this series unfolds, or if we can be of any help applying these ideas in your capital project review, selection, and implementation processes.

Roberta Jelinek and Jeff Schilling

(This is the 4th of 7 posts in the series.  For the full article, contact either one of us.)

Capital Part 3: Financial Feasibility

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Many organizations are working through an era of tight capital, reducing the margin for error on investment decisions to just about zero.  And the current market volatility is only adding to the stress level surrounding these decisions.  In this series, we describe how leadership teams can select the “best” projects to fund with limited capital from a large number of potential “game changers.  The previous post introduced the first of four recommended criteria for selecting the best projects to fund.  Some elements of that first criterion, Strategic Alignment, are well established, while others add new perspective to reflect where health care is heading.

This second criterion is also a blend, with the first two elements being well-established and four more to advance your discernment of the “best” projects.

2. Financial Feasibility: Whether familiar or not, nearly all these six elements could apply to just about any capital project, while the last one relates to “Bricks and Mortar” projects.

A. Performance on Standard Valuation Metrics: For any capital investment we recommend examining three key metrics: 1) Internal Rate of Return, 2) Payback Period and 3) Net Present Value (using a Discounted Cash Flow Model).

B. Cost Saving: For replacement projects, how do the operating costs for the proposed project compare with existing costs? Will the new project create operational efficiencies? Are the estimates accurate? Have they been considered in the valuation metrics?

C. Incremental Income: Consider the ways the project will (or won’t) generate truly new income. Moving an existing service line to a new building doesn’t necessarily bring in new revenue. What is an additive? Conversely, is there potential for new downstream revenue by increasing referrals for other needed services? For example, space used for cancer screening can lead to surgeries, chemo infusions, or radiation treatment.

D. Incremental Expenses: It is also critical to examine what new expenses will be incurred. Will a new service line require adding a new physician? Will marketing costs be incurred? Does growing a service line require additional staff, equipment or supplies. Are these readily attainable? Are the supply chains reliable?

E. Reimbursement and Inflation. Another critical consideration to be carefully examined is the impact of reimbursement. Will the project result in any changes in reimbursement (e.g. HOPD vs. ASC rates)? Relatedly, payer mix may change if the project involves a relocation, participation in a new network, or a different marketing plan. Lastly, consideration should be given to inflation which may impact the cost of materials and labor for new construction and specific line items in the operational financial projection.

F. Buildings: Bricks and mortar investments have important additional considerations:

    • Lease? Where possible, leasing or renovating existing space should be considered in addition to building new. The growing commercial real estate glut (resulting from the trend toward remote work) has made leased space more plentiful and affordable.
    • Minimize Non-Revenue Producing Space. With renovations, consider converting administrative or support space to revenue producing space. With new construction, consider if support services like finance or human resources can be maintained in a remote or partially remote capacity.
    • Flexibility by Design. Design flexible space that can easily adapt to a variety of services as the market changes. For example, design office space that can be modified for primary care or wellness offerings (e.g. physical therapy, mental health counseling, or lab), to better meet consumer expectations and community needs.

Are you and your leadership team prepared to get the most out of your capital investments?  Let us know if you have any additional thoughts as this series unfolds, or if we can be of any help applying these ideas in your capital project review, selection, and implementation processes.

Roberta Jelinek and Jeff Schilling

(This is the 3rd of 7 posts in the series.  For the full article, contact either one of us.)

 

Capital Part 2: Strategic Alignment

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When capital is limited and the possible investment opportunities are numerous, how can organizations select the “best” ones for funding?

This is the current environment for most health and human service organizations.  The starting point might seem obvious – apply selection criteria and see which projects “score” the best!  With tight capital and lower margins, short-term financial impact is an obvious important criterion.  And, with little room for failure, another might have more to do with more with likelihood to succeed, especially in the long run.

Four types of criteria (see sidebar) when taken as a group, help us in both ways. One includes important aspects of financial feasibility, while the other three add other considerations that reflect how the role of health care (and health care providers) is evolving.  This broader definition of success mirrors the broader definition posed by concepts like the Balanced Scorecard and the Quadruple Aim.

Let’s explore the first one, Strategic Alignment, in more detail.  The best projects make sense strategically, and the following five elements are particularly important in the era of tight capital. The first two are well established ways to evaluate strategic alignment, while the remaining three reflect more recently developed points of strategic focus:

  1. Fit with Vision / Goals: Preference would always be given to projects that have a clear, direct fit with the organization Vision and at least one of the Goals or Objectives. Projects that will help enable multiple Goals or Objectives deserve even more consideration.
  2. Leverage Industry Trends: Since sound strategy should be influenced by developments in the broader industry, the best projects are those that leverage one or more industry trends, respond to one or more industry issues, or adapt one or more emerging industry best practices.
  3. Community Benefit / Market Need: Sound strategy is also derived from a thorough market assessment. The best projects are those that would address one or more high priority needs identified in the Community Health Needs Assessment (CHNA), and even better, be instrumental in implementing one or more recommendations in the Community Health Improvement Plan (CHIP).
  4. Customer Satisfaction: Capital projects that related to one or more Key Quality Characteristics (the dimensions of quality deemed most important by your customers) should receive extra consideration. Customer satisfaction is critical to patient loyalty (driving volume) and engagement (driving outcomes and referrals).
  5. Health Equity Impact: The Covid19 Pandemic highlighted growing disparities in care access and health. Increasingly highlighted in thorough CHNAs, the best capital investments will address health inequity at some level.

Are you and your leadership team prepared to get the most out of your capital investments?  Let us know if you have any additional thoughts as this series unfolds, or if we can be of any help applying these ideas in your capital project review, selection, and implementation processes.

Roberta Jelinek  and  Jeff Schilling

(This is the 2nd of 7 posts in the series.  For the full article, contact either one of us.)

Getting the Most Out of Capital – Part 1: Risk & Opportunity

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What’s that old saying…the Chinese word for Crisis (Wei Ji) is a blend of Danger (Wei) and Opportunity (Ji)?  While the truth in this literal translation is debatable at best, the concept has endured since the 1960s, probably because many have found it to hold elements of truth.

The “Dangers” of Tight Capital  Emerging from Covid19, inarguably a major crisis, many organizations found capital scarce, in part because lower margins during the pandemic resulted in lower (or no) funding of capital pools.  While there has been some improvement in margins for the industry as a whole in recent months, they may be slowing to a new normal.1  And, the improvements have varied significantly across hospitals. Sustained profitability is a delicate balancing act. Funding for capital investments is still limited.

Lower margins usually translate to less capital to allocate to potential projects, and with lower margins, there is less ability to compensate for lower-than-expected returns, so the risks associated with any underperforming or failed projects are much higher. This clearly resonates with the “danger” part of the crisis definition.

The Post-Covid Opportunity  In true fashion regarding the other half of the crisis definition, many health and human service organizations found the Covid19 peak years to be a period of opportunity, in part because it required substantial innovation to respond effectively to the scope and depth of human need.  Responding to the Pandemic accelerated the pace of many innovations (e.g. tele-medicine, working remotely) and initiated others (e.g. supply chain improvements).  Furthermore, the pace of innovation seems to be continuing, inspiring as many proposals for capital investment as ever…maybe more. Many of these innovations require substantial funding, including shifting care to new settings, leveraging technology, and workspace redesign.

The Dilemma of an Era of Tight Capital  When viewed in this way, the Crisis of Covid19 Pandemic indeed meant both danger and opportunity for capital investment. If these conditions persist, at least into the foreseeable future, how do leadership teams select the “best” projects to fund with limited capital from a large number of potential “game changers?” This series explores how to get the most out of capital investments in a period where capital is tight, and risks are high.

Selecting the Best  In the next three posts, we will cover four key characteristics, and a few useful tools, for selecting the capital investments most likely to succeed. Your organization may have already established criteria for evaluating various capital requests. However, in the current environment the focus needs to sharpen on investments that will balance a rapid rate of return with other important considerations.  We will review considerations that help ensure both sustainability and also synergy with the evolving US health care landscape in future posts.

Ensuring Success  Then, in two additional posts, we will cover six important considerations, and the associated steps you can take to help ensure the success of the investments that you choose.  Selecting the capital investment opportunities that best fit your criteria is still no guarantee of success, especially in this transformative period.  Societal pressures, evolving consumer expectations, and technological and clinical advancements result in a dynamic environment.  However, there are ways to foresee, or at least minimize the impact of, potential disruptors, and enhance the resiliency and impact of your project.

Are you and your leadership team prepared to get the most out of your capital investments?  Let us know if you have any additional thoughts as this series unfolds, or if we can be of any help applying these ideas in your capital project review, selection, and implementation processes.

Roberta Jelinek  and Jeff Schilling

(This is the 1st of 7 posts in the series.  For the full article, contact either one of us.)

1 April, 2024 edition of Kaufman Hall’s National Hospital Flash Report.

Summer is (still) the Best Time to Prepare for Planning

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For most organizations, summer is the best time to prepare for Strategic Planning.  However, given everything that has transpired in recent years as well as everything that is unfolding, you might be wondering if that is still the case.  Here are two good reasons, one internal to your organization, one more externally focused, that you should prepare now for great planning in the fall.

1. Organizational Timing: Most organizations have fiscal years that end in December or June, and it is very helpful if strategic planning is timed to occur in step with the fiscal year. That way, the funds needed to implement tactics over the lifespan of the Plan can be built into yearly budgets. That makes the fall through early winter the ideal time for work sessions focused on developing a new multi-year plan or preparing an annual update.  And backing up a little further, that means summer is a great time to accomplish the work that will make those sessions as productive as possible.  That includes the research, data gathering, and information analysis comprising the industry, market, and organizational assessments.

2. Adjusting for New Developments: But what about when emerging innovations or major issues such as AI, Health Equity, and Work Force Shortages impact your organization and the communities you serve? The disruption and need to reprioritize experienced by most organizations with Covid19 are still fresh in everyone’s mind.  And new developments like these are often the impetus for changing customer needs and expectations, as well as a sudden flourish of innovation as many organizations rush to respond to those changing customer needs and prepare for a “new normal”.  From that perspective, this is an important time to be in contact with your customers and stakeholders, and to learn what you can about the innovation occurring both within and beyond your industry.

Right Sizing the Effort: The good news is that these summer preparations can be customized to fit with your organization’s unique Strategic Planning needs.  Here are three general scenarios and how you can use these summer months most effectively:

1. New Plan: If you have not prepared a Strategic Plan before, or a new one is long overdue, preparing for the actual planning work sessions is critically important. The depth and scope of the three assessments mentioned earlier strongly relates to the quality and insight of the desired future state...the vision or goals...at the heart of your new Plan. Organizations in this scenario may benefit the most from working with a consultant this summer, one who can help you prepare an affordable research plan and to whom you can outsource much of the assessment work, especially if your resources are already stretched thin.

2. Scheduled Update: If this is an “update” year for a recently developed Strategic Plan, and that update is scheduled for this fall or winter, now is a great time to refresh your assessments and stay on course for that update. Postponing the update at a time when so many things are in flux may mean you fall behind important shifts in your market and industry. An outside consultant can help you plan where to target efforts to refresh your assessments and get the most out of limited resources and time.

3. Business as Usual? If you do not need a new Strategic Plan and there is no “update” looming in the next 6 – 9 months, you may have the least amount to do this summer of any of these three scenarios. However, the number and magnitude of recent events may still warrant a limited and targeted amount of research including customer needs feedback, strategy affirmation / adjustment input from stakeholders, and identification of emerging new / best practices relevant to your current strategies. Pressed for time?  Outsourcing this limited, but important, research may be the answer.

For most organizations, the summer months are the best time to prepare for great Strategic Planning, and this year is no exception.  And another emerging trend, the increasing comfort level of people working remotely, can make this work easier and more affordable than ever.

I hope you have a chance to really enjoy these summer months, safely of course.  If I can be of any help with your planning needs, contact me at your earliest convenience.

Jeff

What I learned (again) at 151 MPH

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Five years ago this month, I had a chance to do something I had always wanted to do, but never thought I would.  The previous Christmas, my family surprised me with a paid pass to the NASCAR Racing Experience: a chance to drive a real race car on one of the championship series tracks.  Having always been a car racing fan, they knew this would be a very special gift.  So, in May 2019, I headed to Michigan International Speedway (MIS) to live out that dream.  But what I, and my family, didn’t know is that this experience would be very memorable in more ways than one.

Confidence is Good, Right?  Like almost everyone, I suppose, I thought of myself as a pretty good driver.  I’ve seen many races of different types of cars over the years on TV and was fortunate to see some in person, from dirt track races to premier events including the Daytona 500 and the Detroit Grand Prix.  But on top of that, I’ve also studied cars and car racing throughout my life, accumulating knowledge of things like “push” (understeer), downforce, and flattening a curve, so I thought all of this might make me a better than average first timer in a real race car.

A Whole New Ball Game  However, none of this armchair knowledge could have prepared for me for the actual experience of guiding a 700 horsepower race car around 18° banked turns at 150 mph.  Even in the beginner package, you’re driving a fully equipped race-ready NASCAR on a championship series course.  It’s very different than driving your own car to work or the grocery store, and you’ve got about three to four laps to try to adjust.  I quickly found myself making many adjustments.  For example, my sense of timing of when to start turning the wheel as the next curve approached was very “late” at these speeds, at least for the first lap or two.  Suddenly, I felt very humble.

It may sound like this all goes by quickly, and I guess it does.  But like many things that get your adrenalin flowing, time also seems to slow down, making the memories of those few laps very clear.  And with time to reflect over the next few weeks, I started realizing how much I had relied on things already familiar to me.  Three important attributes of high-performance teams were very evident that day, attributes that I learned years earlier in classrooms and online learning courtesy of the Talent Development Team at Trinity Health.  Here’s what I learned again at 151 MPH:

Safety First  This may be surprising when talking about something like car racing, which on the surface seems risky and dangerous.  But from the moment I arrived, everyone I met and everything I did before and during the driving, conveyed a focus on safety...and in a reassuring and educational way, not in a way that made me nervous.  This intense safety focus is also very evident in the quality of equipment, clarity of the mandatory class you attend before getting into the car, and ongoing guidance from the staff. This resonated with me on so many levels of my experience with Trinity Health, as an employee and as a consultant seeing the many ways it is woven into curriculum, process, and culture, but also as a patient in the way care team members interact with me.

Customer Focus  Every staff member I interacted with at the NASCAR Racing Experience struck the perfect balance of serious tone and fun, making the whole experience reassuring and enjoyable.  I don’t think they could have achieved this without first learning what customers would want (and even be delighted with) in this kind of experience, and then always trying to find ways to make it better.  I have seen that same customer (patient) focus over the years at Trinity Health, in their long-standing commitment to seeing the “whole patient” (mind, body, and spirit), and the emphasis on continuous quality and process improvement, all things I learned about as a Talent Development Team member.

Trust  When you are doing something you’ve never done before, something where you have no real comparable experience to lean on, is there anything more valuable than a mentor or guide?  As I took those first laps at MIS, I immediately relied on my “spotter”.  Each driver is assigned to one, and from his viewpoint above the grand stands through radio communication wired into your helmet, my spotter calmly talked me though every shift and turn, let me know if there were any other cars near me, and coached me on how I could improve on the next lap.  With positive reinforcement and helpful guidance, he immediately earned my trust.  I learned many team building skills working with the Trinity Health Talent Development Team over the years, and trust…how to earn it, build it, and give it…has been one of the most enduring of those lessons.

Then and Now  It’s been five years now, but the memories of that experience – the sights, sounds, and exhilaration - are still very clear to me.  And some important lessons, first learned years before in a totally different setting, are clear to me as well.  And today, I think I understand them at a deeper level, and can see more opportunities where they could be applied, than I did before.  I guess that’s what “relearning” can do for you.

Thank You!   Thank you to my family for a once in lifetime experience and the treasured memories that I can add to so many others.  To the people of the NASCAR Racing Experience, thank you for the chance to live out a dream, if only for a few laps, and one of the best customer service experiences I’ve ever had.  And to D'Anne Carpenter, Jill Kotwicki, Renee Therrien, and Geralyn Quick, and the whole team past and present, at Trinity Health Talent Development, thank you for teaching me (the first time) some of the fundamentals of high-performance teams.

Benchmarking: A “Better Way” Probably Already Exists

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More Innovation - Yes Please!  In my last post, I talked about the resurgence of interest in innovation.  The Covid19 Pandemic, as well as some other factors, contributed to this interest as individuals and organizations who had never worked together before pooled their knowledge and skills to respond to some urgent needs.  This “next level” collaboration led to many new and innovative ways of doing things, and those involved are hoping to find ways to keep that collaboration, and the innovative solutions that came from it, going.

Learning from Others  One important aspect of this collaboration was the willingness to learn from others.  Everyone brought different perspectives, knowledge, and experience to the table.  Learning what others did, or would do, was inevitable.  Interestingly, there is an improvement methodology built around learning from others, one that often leads to real significant breakthroughs.  Benchmarking (the process of identifying and adapting best practices) has been around since the early 1980s, but I maintain that it is the most underutilized improvement method.  So, if learning from others is becoming comfortable, even attractive, for those seeking innovative solutions, perhaps Benchmarking may experience a similar rise in popularity.

Again, it’s About the Process  In Benchmarking, a team working to improve a process first learns all they can about that process.  Then they seek out best practice approaches to the same process elsewhere in the same organization, in similar organizations, or even different processes (that share some common key elements) in completely different organizations.  The group then prepares for a structured learning work session with one or more best practice organizations willing to share what they know and have learned.  Finally, the group uses what they learn to make changes to, or significantly redesign, the process they set out to improve.

Time…and Work…Saved  On the surface, Benchmarking seems simple.  However, like most improvement methods, the best results come when it is applied in a disciplined, carefully planned and executed manner.  And, it has a few characteristics that may seem counterintuitive to some.  Still, when done well, the results are often at breakthrough levels.  And, the time and work required almost always seem like very worthwhile investments compared to those results.

If you would like to learn more about benchmarking, I have a White Paper on the subject that I would be happy to send you.  I would also be happy to talk with you about facilitating a Benchmarking effort with you and your team.  Contact me at your convenience.

Jeff

Innovation: The Path to the Prize

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As a Strategic Planning Consultant, I am definitely a “trend watcher”, and one of the reasons is to make sure clients are considering any relevance of what I call the “Strategy du Jour” to their Mission, Vision, and Goals.  It seems that there is always at least one strategy (sometimes more than one) that is getting a lot of attention in leadership and management literature.  Back in the first half of the 2010s, one such strategy was innovation.  The idea of becoming “an innovative organization” and making “increased innovation” one of their Goals was becoming very popular.

The Innovation Learning Curve  So as a trend watcher, I was reading a lot about innovation during those years, and some of what I learned was surprising.  I found that there is a lot more involved than one might think with becoming an innovative organization.  Certainly, true innovation can have significant rewards, but the innovation rarely, if ever, comes without significant investment.  The subject of innovation had become so popular, that I assembled what I had learned from the literature and some clients into a presentation, “Innovation: From Start to Sustainability”, that I was honored to make at the Spring, 2017 Conference of the Michigan Society for Healthcare Planning & Marketing.

It’s about the Process  One of the most important things I've found out is that a successful innovation involves much more than the initial spark of an idea.  Moving from idea to a market ready change that will be readily adopted  is a process with four distinct stages (see diagram at right).  Each of these stages has to be consciously and actively managed, or the overall process will be less effective…producing fewer or no real innovations.

Once organizations understand all that is involved in the process of innovation, they also need to be prepared to support the process by meeting three other requirements, each with some important nuances.  These three requirements are:

  • The Right Motive
  • The Right Organization
  • The Right Resources

Back on Top?  I’ve been fascinated by how many people have talked with me about one silver lining in the Covid19 Pandemic.  They described how when they and others from different organizations came together to respond to the crisis, it led to a number of innovations.  Necessity is the mother of invention, as they used to say.   To a person, their hope was that this collaboration, often leading to innovation, might continue in some way.  Indeed, the topic of innovation seems to be very popular again.  Maybe it’s time for a refresh on how to create the best pathway for innovation.  Let me know if I can help with a quick discussion or a full presentation on the topic.

Jeff

Minimizing Risk in Strategy Implementation

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With Fall being such a popular time for developing a new Strategic Plan, it’s not surprising that after the holiday break, the focus begins to shift to implementation.  Most Strategic Plans include the development and deployment of new initiatives, expansion (or contraction) of services, or the execution of Tactics to help achieve one or more Goals.  Some of these inherent changes come with risk and uncertainty.  Problems may occur during implementation, jeopardizing the entire effort.  And these days, no one wants the added drain on time and resources needed to address unanticipated problems. Fortunately, there are a few tools that can minimize risk and ensure you have effective contingencies for any unwanted surprises that may emerge during implementation.

Invaluable Preparation  One of these tools is particularly well suited for larger scope initiatives.  It’s even a great tool to use in the final stages of Strategic Plan Development. "The Process Decision Program Chart (PDPC) systematically identifies what might go wrong in a plan under development. In a PDPC, each potential problem is linked to one or more undesirable effects, and in turn, each effect is associated with a specific countermeasure. Countermeasures are developed to prevent or offset those problems. By using PDPC, you can either revise the plan to avoid the problems or be ready with the best response when a problem occurs.1" The PDPC helps you anticipate where problems could occur during implementation, and then design effective countermeasures, or in some cases, even reverse-engineer a better plan that avoids the problems all together.

Solve Problems Before They Occur!  If you are implementing at a more detailed, operational level another tool can help: Failure Modes and Effects Analysis (FMEA).  This structured analysis takes a small team sequentially through three major phases:

1. Identification of possible failure modes (ways the implementation can fail)

2. Comparative ranking of the failures based on the severity, frequency, and detectability of each failure

3. Prioritization of the highest ranking (worst) failures and the determination of the most effective way(s) to prevent them from occurring.

FMEA can be used as part of any new product or service design as well as current product / service improvement efforts, regardless of whether it is part of your Strategic Plan.

It’s About Managing Risk  We often associate Risk Management with daily operations and the prepared response to situations that we hope will never occur.  However, there is always some level of risk and uncertainty associated with implementing strategy; after all, Strategy is about change...and improvement.  Fortunately, there are some great tools to make the implementation of improvement at any level easier and more successful.

If you would like help with using the PDPC or FMEA, or with other aspects of Plan implementation, including Business Plans or Feasibility Studies, contact me at your convenience.

Jeff

 

1 American Society for Quality Web Site (www.asq.org)

2 For more information on FMEA, I recommend a great little book on the topic, The Basics of FMEA, 2nd Edition, by R. Mikulak, R. McDermott, and M. Beauregard (ISBN-13: 978-1563273773).

Mission Matters

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In a recent Strategic Planning work session with a client, a Board member asked if the organization was running the risk of “Mission Creep”, which they felt should be avoided.  Also called “Mission Drift”, this is when organizations begin to diversify into services or products that are increasingly different from their original purpose and offerings.  In the US and some other economies, when taken to the extreme in pursuit of more earnings, this sometimes resulted in a conglomerate, a holding corporation with many subsidiaries that are unrelated, or at least seem to be.

Stick to Your Knitting  Critics of Mission Creep warn organizations not to stray too far from their core purpose, and to stick to what they know and do best.  Moving into areas where the organization had no experience or fundamental capabilities, either of it own or though partnership, is certainly a high risk and could have severe consequences.  And there is much to be said about knowing what you do best…and continuing to improve it.

We’re in the Railroad Business  But taken to the extreme, a complete lack of any evolution in purpose and portfolio is also dangerous.  This Mission Obsolescence ignores the reality of a constantly changing world, society, and customer.  It’s true that with customers, some of what they need and want from your organization rarely (or never) changes (e.g. safety, respect).  However some of your customers’ key quality characteristics - the attributes they use to evaluate how good your services or products are – do change over time.  This is inevitable in a world of constant innovation.  History has many examples of organizations and even entire industries that failed, or almost failed, due to mission obsolescence.  Remember learning about how railroads almost completely disappeared because they thought they were in the railroad business, all the while choosing to ignore the rapidly expanding world of transportation (cars, trucks, planes)?

Timing…and Information   So how does your organization find the prosperous “middle ground” between Mission Creep and Mission Obsolescence?  By keeping an ear on what your customers need and want and what’s happening with organizations like yours.  I refer to these as Market and Industry Assessments, respectively, and they are a critical early-stage component of Strategic Planning.  If like many organizations, you develop a new Strategic Plan every three years (or maybe less), make sure the process starts with thorough Market and Industry Assessments.

But don’t stop there.  The beginning of a new calendar year is one of several perfect times to refresh your understanding of what’s going on in your industry.  Why?  Because it is often when associations publish updated “Environmental Assessments” or other annual publications where they report on the latest trends, issues, and emerging best practices of interest to members. It’s also a good time, after the holiday rush starts to subside, to reach out to customers for their latest feedback and perceptions.  Staying tuned to your customers and your industry on an ongoing basis is the best way to avoid Mission Obsolescence and build the rationale for well-timed and well-planned Mission Evolution.

Let me know if I can help with an Assessment refresh, or anything else.

All the best in 2024,

Jeff