What to do when your long-term and present strategies are at odds

Sometimes the forces that drive competition shift so radically that keeping up with changing markets necessitates a complete redrawing of an organization's long-term vision. In doing so, organizations may find it difficult to connect new long-term goals to near-term actions, especially when the changes required to reach those future goals seem to be at odds with how the organization makes money today, according to the Harvard Business Review.

To illustrate how to successfully mitigate conflicting goals, the Harvard Business Review analyzes the strategies employed by Columbia, Md.-based MedStar Health, the largest nongovernmental healthcare provider in the Baltimore-Washington, D.C., region.

In the early 2000s, MedStar's leadership team decided it needed a new strategy to reimagine the system by 2020. After realizing its previously held objective of increasing revenue and profits at its nine hospitals was unsustainable, MedStar began planning for a future in which more care was delivered in outpatient and ambulatory care centers at a much lower cost. According to HBR, this required MedStar to completely redesign its business model, in which it would be paid for keeping patients healthy, not utilizing inpatient services. Also included in this new growth plan was becoming a larger player in the insurance business.

To make the new goals a reality — while maintaining financial success in the present- and near-term — MedStar created three operating portfolios, each with a specific objective and timeline, according to HBR.

The state of the future portfolio. This portfolio includes an image of the organization 10 or 20 years into the future. It is comprised of broadly defined markets and strategies, rather than a fully parsed business plan. Both future core business as well as opportunities for possible new-growth ventures were included to ensure the core remained stable while leaders reserved room for further growth and evolution. At MedStar, this portfolio positioned the system to emphasize preventive care and reduce health disparities among different segments of the population, while shifting its hospitals to focus on the most complex, specialized patients, according to HBR.

The innovation portfolio. The innovation portfolio aimed to define specific initiatives that needed to be enacted in the next year or so to set the foundation to realize the future-state goals. According to HBR, for MedStar, this involved becoming a substantive healthcare insurer in addition to a provider. MedStar created a small Medicaid health plan in 1997 that served roughly 25,000 low-income people. To increase their scale as an insurer, MedStar, sought and attained licenses to launch a more general health plan in D.C. and Maryland. Since then, MedStar Family Choice has grown to include more than 120,000 total enrollees.

Also included in the innovation portfolio is the MedStar Ambulatory Services business unit, which includes a small network of storefront clinics, diagnostic labs and primary care offices. To improve its core business, MedStar developed new devices, software, diagnostics and therapeutics to refine specialized care at its hospitals, according to the report.

The investment portfolio. The investment portfolio contains various budgets to fund projects in the innovation portfolio as well as new initiatives in the core business. Importantly, this money is distributed to different initiatives as projects evolve and become more demanding and promising over time. Additionally, the budget needs to be mapped out for the same time period as the state of the future portfolio.

By continually rebalancing investments among the present and the future, MedStar could effectively implement new strategies to improve its core business while simultaneously adding new-growth initiatives that match healthcare's future.

Now, drawing near to the 2020 future date MedStar had mapped out, the market has indeed shifted to emphasize ambulatory care over hospital visits. Because of its careful yet flexible portfolios, MedStar has positioned itself to succeed. According to HBR, though the system's revenue has been flat in its core hospital business, MedStar's overall revenue increased from $3.9 billion in 2010 to $4.9 billion projected for fiscal year 2015.

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