Tuesday, November 6, 2012

Blog 1: A Strategic Reinvention or a Reinvention of Strategy?

As a policy-driven industry, healthcare organizations often find themselves driven gradually by customer demand yet drastically by policy innovation.  This is particularly evident in the healthcare insurance industry, who many see as an enviable sector of the economy possessing a goose that lays golden eggs, graced with enormous mounting profits and high barriers to entry for potential competitors.  However, as illustrated by The Hidden S Curves of High Performance in Nunes and Breene's article "Reinvent Your Business Before It's Too Late", financial performance is often a lagging indicator of effective corporate strategy.  Prior to 2010, a lack of market changes, and movement towards structural similarity were quite prevalent in the health insurance industry.  Though customer demands have had very little effect towards reformation, the hand of public policy has swiftly made violent strides towards pushing it towards more consumer-friendly innovations.  . 

Recently, a drastic clash with organizational inertia was the caused by the passage (and subsequent supreme court upholding) of the 2010 Affordable Care Act, which paved the way for the medical provider-payer hybrid known as Accountable Care Organizations.  Although untested and yet to have made a measurable effect on the industry, this new model has caused at least one insurer, Aetna to reconsider its entire business strategy. 

Mark Bertolini, Aetna CEO
CEO Mark Bertolini has declared a complete strategic overhaul, with the eventual aim of turning Aetna into a provider of back-end administrative, financial, and IT services to support the emergence of new ACO's.  His actions appear to closely follow the model of Kaplan and Norton's "Balanced Scorecard" which advocates initial communication of the vision (internally, and then later externally through instances such as his presentations at the 2011 Columbia Business School Health Care Conference, and Health 2.0 Conference).  Aetna is also following the model by eliminating nonstrategic components, and updating long-term investment plans (such as the purchase of the IT service iTriage to enhance its potential technology offerings).  Kaplan and Norton's theories would also strongly advise that performance evaluations be linked to the success of Aetna's new strategy, new business unit targets and individual strategies, as well as the continued refinement and review through "Feedback and Learning" loops.

Although a complete corporate overhaul may seem drastic to other large organizations, it would appear to be both expected and necessary for a company such as Aetna.  These type of strategic innovations are why Reeves, Love and Tillmanns in their article "Your Strategy Needs a Strategy" label the Insurance industry as a "Visionary Environment", where the environment is predictable, yet a single organization may have the power to change it.  If that proves to be true, then Aetna would appear to be on the forefront of innovating not just itself, but the entire industry along with it.


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