The Rise of Strategic Management

In our first lecture, we provided the basic backdrop as to how and when strategic management came into being. This lecture will provide a working definition and discuss why strategic management (SM) is of critical importance to the field of healthcare. Looking ahead, week 2 will evaluate the two emerging models of SM while week 3 will discuss the various levels in the development of strategy.

If you asked 10 experts to define strategic management, you would more than likely get 10 distinct, albeit related, answers. The reason being is because strategic management is as complex or as simple as the business itself. A few examples should help us understand the problems of providing one catch-all definition. Let’s start with the rather simple business of making dining room tables and chairs.

To make our tables and chairs, we need a supply of wood. Let’s assume that we work solely with pine. Odds are that we are purchasing our pine from a wood supplier rather than growing and maintaining the trees ourselves. As such, by the time we get the wood shipped to our warehouse, it has already been “touched” by several people along the way. The tree was cut down by one person, probably gathered by another, and then stacked by yet another individual onto the trucks. Those trucks then drive the material to their own warehouse where it is offloaded by someone and then counted into inventory by yet someone else. When we call for an order to be sent to us, one person takes the order while another person loads the product onto a truck, driven by perhaps a third party company. It finally arrives at our warehouse where one of our employees touch it for the first time.

Once in our warehouse, the material is only pulled as the orders come in. Depending on the size of our operation, we may or may not have the assembly equipment in the same locale as where it is stored. The wood is then brought to the production equipment where someone then assembles it into the finished product. It is likely that the same person who makes the table is not the same person who makes the chairs; different skillsets. One of our employees now must prepare the finished product for shipping and we may or may not have internal shipping to either customers or to furniture wholesalers. Point being is, look how many people were involved in the process of making a simple dining room table. This doesn’t include our sales team, receptionists, or management personnel required to make sure we remain viable. In simplest terms this is the supply chain. We will be reviewing this again later in the course.

Imagine what would happen to our business if a competitor entered into the mix. How do we stay abreast of what they are doing, how do we monitor costs, inventory, sales volume, break-even point? What happens if a fire wipes out our original wood distributor? Pine-beetles? What if our shipping company goes on strike? A main wholesaler shuts their doors? An accident in our warehouse prompts the need for increased safety? In essence, strategic management is an ongoing process. SM takes into account competitors, both the political and financial environments, changed circumstances, possibility of new technology, all while balancing both short and long-term goals. Again, Strategic Management is complex and demanding, yet in today’s competitive environment, companies will not last long without it.

In our example above, we were working with tables and chairs. Imagine today’s state of the art hospital system. Everything from food service to computers are present in the hospital. By the time new technology is implemented into our healthcare system, it is nearly antiquated by something newer and better. What appeared to be science fiction is now possible. We have robots who make rounds in the hospital so that the doctor does not physically need to be there. We have smart toilets that automatically test urine for infections, presence of blood, and medication efficacy, and we have tele-medicine where doctors can perform surgeries in the hospital while sitting in their office thousands of miles away.

Where the table and chair had a dozen touch points, today’s hospitals have thousands and thousands. Just thinking about the healthcare system itself, we are all aware of the major changes currently taking place – from healthcare reform, to severe staffing shortages. In essence, healthcare is the single most complex industry on the face of the planet – it is not surprising that Strategic Management is absolutely critical for the industry’s survival.

 In lecture 2 of week 1, healthcare was proclaimed to be the most complex industry. Discuss this claim and whether you agree or disagree. Support your position with appropriate references.