Hospitals historically made the same play as the P&G we’ve long known: Be all things to all people. Bigger is better, and so is a diverse portfolio, even if it means holding on to lackluster lines and maintaining multiple offerings in one category. But, this level of complexity can be a “major barrier to success in a transformative environment,” writes Kaufman.
“Taking into account all of these factors, hospitals need to consider whether the all-things-to-all-people model is still viable and relevant, or whether they need to apply a Procter & Gamble-style review to the portfolio of services,” he says.
Many hospitals and health systems are beginning to realize what P&G, and its CEO A.G. Lafley, already have: Only so much efficiency can be realized by focusing on the profitability of all existing products/service. Much greater efficiency can often be realized by eliminating duplicative offerings and discontinuing products or services that others can offer at a lower cost and higher quality.
“Like Procter & Gamble, hospitals need to reexamine their portfolio of services based on strategic fit, quality and contribution margin,” writes Kaufman. “A.G. Lafley offers a valuable message for hospital leadership: Simplifying structure and operations is a critical first step in preparing for even more dramatic changes to come.”
