Use strategic planning to reshape your lab’s future

Use strategic planning to reshape your lab’s future

Paul A. Raslavicus

Use strategic planning to reshape your lab’s future

In the laboratory of the 1990s, success will depend more than ever before on defining a goal and learning to run toward it efficiently. The first step is to develop a cohesive strategic plan.

There are various types of strategic development. Only when strategy involves planning are the terms “strategic” and “planning” redundant.

The term “strategy” conjures up images of generals poking at maps with pointers. The word is derived from the Greek strategia, “office of a general.” This article is directed at those who sit in that office, directing the goals and energies of the laboratory. The position occupied is variously called lead technologist, supervisor, laboratory manager, and director. * Unique attributes. Strategic planning differs from business or operations planning. The equivalent military terms are strategic versus tactical planning.

The eminent Swiss theoretician A.H. Jomini, author of Precis de l’Art de la Guerre (A Brief Essay on the Art of War, 1836), regarded strategy as “the art of getting forces on the field of battle” and tactics as “the conduct of forces in battle.” In nonmilitary parlance, operations planning involves execution of the strategic plan. Managing is a strategic issue; executing plans and delegating responsibilities are related to operations.

Strategy includes the development and implementation of a plan that integrates goals and actions into a cohesive whole, allocating resources based on an appraisal of internal competencies and anticipating environmental changes and moves by intelligent opponents. A major portion of this process is often called SWOT analysis: the assessment of strengths, weaknesses, opportunities, and threats.

Successful laboratories incorporate strategic planning into their business plans. These labs are acutely aware of the highly competitive and maturing industry in which they operate.

Four stages of industrial development have been described. The first stage, invention and foundation building, took place in the laboratory with the introduction of automation during the 1960s and 1970s. The laboratory industry has passed through the second stage, which consists of the “price umbrella” and innovation and growth.

Under the price umbrella, costs begin to come down, primarily because of automation and increased efficiency. Prices, however, remain roughly the same as before because these advances have not yet been universally acknowledged. Tests done largely by machine might be charged for as if still done manually, for example, as they were in the 1970s, bringing unwarranted profits.

The laboratory industry is now in the third stage of development, a period of maturity that comprises a “shakeout” of the least efficient operations and various consolidations. In the fourth stage, decline, price subsidy by newer and more profitable testing is needed to maintain viability.

The labs that are successful have matured in their approach to strategy. An early approach is an entrepreneurial mode of strategy in which all authority resides with the “general,” whose goal is growth. This type of planning is typical among start-up companies in which the organization is sailing on uncharted waters.

In the past, laboratories have been centers of innovation and expansion. Retrospective reimbursement and rapidly growing demands for laboratory testing during the last two decades have led to expansion in nearly all U.S. laboratories. Some are continuing to expand as the competitive environment provides greater opportunities for growth.

The second method of planning is the adaptive mode of strategic development, by which each laboratory responds to continually arising crises with reactive solutions tainted by political choices that owe more to personalities and preferences than to objective evaluation. Many labs and hospitals presently act in this fashion. The lab “general” who remains strictly adaptive will become trapped in crises to which the laboratory will be unable to respond.

The third method of strategic development is the true strategic planning mode. To anticipate opportunities and engage in participatory planning, the general utilizes multiple approaches and sources of information. True strategic planning is achieved in only the most competitive and future-oriented laboratories. * Rationale. In that case, why does the average lab need strategic planning? The traditionalist responds, “We aren’t paid for planning; we’re paid for results.” The general and others in the organization, however, must recognize that success without planning will not endure. The true value of planning is to produce not plans (maps) but results (to win the war).

A strategic plan serves as a framework for carrying out strategic thinking, direction, and action to achieve consistent and planned results. A strategic plan allows the organization to select the most propitious among many available opportunities.

Who has the time and resources for strategic planning? Everyone must create that time and find those resources.

(*)Indentifying goals. Strategic planning helps managers distinguish between activities that are essential for achieving goals and those that seem essential but are not. Running faster and faster won’t improve matters if the organization is running in several different directions simultaneously.

(*)Setting priorities. Strategic planning assists in ranking activities according to their importance and in allocating sufficient resources for those at the top of the list. Usually the most important yet the most difficult of these resources to allocate are the time and energy of the management team. Management must develop a system to evaluate the manner in which the better decisions at that institution have been made.

(*)Sustaining success. Only with strategic planning can success be sustained. As the business environment, including the laboratory and health care industries, changes at an increasingly rapid pace, successful organizations recognize those changes and adjust to them quickly.

The objectives of strategic planning include developing a framework for thinking and action, achieving a sustainable competitive advantage, managing in turbulent times, and creating strategic change. * Mission. Anyone preparing to develop strategy must understand the overriding goal, or mission, of his or her organization. A mission statement is a consensus statement developed by, and then used by, members of the organization in an effort to focus its energies. A complete mission statement clarifies the direction in which the organization is not going. Spelling out what is not wanted – a specific decision not to offer urine drug testing, for example – helps prevent unnecessary research and wheel-spinning from staff members who might otherwise prepare detailed proposals without the knowledge that they will not be accepted.

The modern nonhierarchical organization requires a mission statement to maintain shared goals and values among its members and to define the best method for expending limited resources. Traditional organizations had previously established divisions and subdivisions and defined lines of authority; the modern organization is removing many of these barriers.

The modern general does not sit alone in an office, issuing decrees. In our laboratory, for example, medical directors have no titles defining specific areas of responsibility. In this way, the talents and knowledge of each can be employed throughout the lab as best suits the situation. In addition, technologists are cross-trained to fill multiple roles. By spreading out abilities in this way, the purpose – the mission – of the organization, rather than climbing the ladder for personal advancement, becomes the driving force.

The mission statement for each organization should be unique. Only organizations that define the unique and distinctive advantages available to their clients can succeed. If an organization and its closet competitor share an identical mission, the two organizations may be best served by merging. An organization derives success from making the most of its distinctive and therefore the most fundamental feature the laboratory has to offer is quality.

All distinctive features, including quality, must be recognized and considered desirable by the client. The client drives the organization. The organization should attempt to select its market, its clients, and the needs it wishes to fulfill. The successful organizations invites clients to participate in defining the distinctive features to be cultivated and promoted. A mission statement should provide answer to all the questions in Figure I.(2)

Table : Figure I 10 questions each lab’s mission statement should answer

1. What is our business?

2. Why do we exist?

3. What is unique about our


4. What personnel does our

organization support?

5. Who constitutes our market

and clients?

6. What services, and at what

level, do our clients require?

7. What are our market


8. What are our distribution


9. What philosophical and

ethical issues are important

to our organization?

10. What business ventures

should we pursue?

All members of the organization and its major customers should be welcome to participate in creating the mission statement as well as in all other stages of strategic planning. At the least, interested parties should not be discouraged from being involved in the process. The day when the general autonomously decided what was best for the organization and its clients is gone. Only recently participant in planning.

For the hospital laboratory, the primary client is the medical staff. Sometimes the client is an outside organization, such as a health maintenance organization, or patients who deal with the lab directly. The medical staff and other clients will patronize the laboratory only as long as it meets their needs better than an alternative. The modern organization and its mission statement must therefore focus on the needs of its clients.

The organization and the clients must jointly understand what services are needed. If necessary, the product must be diversified according to those needs. To achieve the synergy between lab and clients, organizational changes should be made to reflect priorities, established with client involvement, as they arise. * Analysis. The next phase of strategic planning is strategic analysis. This analysis comprises three components, each demanding a substantial amount of time and resources.

(*)Trends. First is to assess present and future opportunities and threats in terms of national trends. What will the hospital and laboratory be like in 10 years? What trends are anticipated locally and nationally, such as physician office testing and self-testing?

As times change, hospital services must be realigned, with some diversification and expansion. The hospital patient’s laboratory service needs are viewed by some as best managed and operated by business-oriented centralized reference labs with diminished participation by trimmeddown hospital laboratories. Lab generals must ask: How can we take advantage of these changes while distinguishing short-lived fads from long-lasting trends?

(*)Competition. The second component of strategic analysis is an evaluation of the external competitive environment. Strategic planners must find answers to the questions posed in Figure II.

Identify the top one to three competitors in your geographic area. List and assess their strengths and weaknesses. Ask yourself: * What drives the competition? How is your mission statement different from theirs? * What does your laboratory offer to physicians that the competition does not or cannot match? * Are organized groups of physicians in your community, such as HMOs, now contracting for services collectively?

(*)Internal environment. The third component of strategic analysis is an evaluation of the internal environment – that is, your own facility’s capabilities. If your staff is subject to a high rate of turnover, don’t expect to be able to expand labor-intensive services.

Assess your institution’s financial status. Do you need a partner with capital? What products and services do you offer now and what might you consider offering in the near and distant future to group purchasers such as industry, health organizations, colleges, and other hospitals? How competitively should you bid for such contracts?

How will your lab incorporate changes in technology? Should you be providing flow cytometry services on site? Is it time to begin a bedside fingerstick glucose meter program? What information on the lab report would make the data more useful to the physician who receives it? Having the patient’s home phone number, for example, would enable the physician – perhaps covering for the attending physician – to call the patient immediately upon receiving the report rather than having to make a separate call to the office to obtain the number.

Can you provide a home phlebotomy service? Do you provide one-day turnaround for approximately 95 per cent of your testing, as some large reference labs already do? If not, what would it take for you to do so?

Delineate a spectrum on which to focus your laboratory’s attention, from developing a specialized niche to becoming a low-cost leader. The niche provides a limited market but potentially excellent returns. The low-cost leader has a tremendous potential market but limited returns. The key to using this system is to evaluate the external and internal situation and predict a balance that will maximize the overall return.

To assess your lab’s internal capabilities, do a portfolio analysis. What are your cash cows? Milk them! What are your stars? Let them shine! What problem children are being subsidized by the cash cows? What are your dogs? Discontinue defunct and obsolete products and services. Consider purchasing outside services, joint ventures, or other creative concepts to prevent the “dogs” from consuming your valued resources. * Strategic statement. Performing a complete strategic analysis will help you understand and anticipate the major factors that influence your organization. The next step is to use that analysis to work toward achieving the goals of the mission statement.

One way to begin is to prepare a statement on strategy that is expected to become the driving force for each member of the laboratory. A strategic statement describes the changes that must be made to achieve projected goals. A strategic statement is aligned with the lab’s mission and meshes with the strategic analysis.

The statement highlights what is neede to progress. Some laboratories have insufficient managerial expertise, while others lack the technical staff to execute an operations plan. Still other labs have low capital resources. Whatever the situation, laboratory management must be able to determine what entity will aid in meeting its mission.

Joint ventures with other hospitals, physician groups, or commercial reference laboratories may be one answer. Gaining autonomy from the hospital is another. Each laboratory must consider what organizational structure will best serve its needs. A flow cytometry laboratory will require different partners than will an outpatient phlebotomy service. Consider breaking things down into component parts – on paper, that is – and reassembling them into a more efficient system.

Similarly, laboratories must be aware that a competitor may be a potential venture partner. Keep in mind, however, that collusion in pricing or market allocation is illegal under antitrust statutes.

Speak with your competitor to determine whether you might, by working together, provide a specific product or service that neither could provide alone. Collaboration might, for example, lead to your offering toxicology or radioimmunoassay testing; a home phlebotomy, courier, or billing service; or one or more of the emerging technologies, such as testing with DNA probes.

The “cross-fertilization” taking place among American and Japanese businesses would surprise many hospital workers who are accustomed to the political protectionism of their traditional independence. The lesson is to elevate the quality and public image of laboratory products and services in general. If the result benefits your competition, it will benefit you as well. * Only so far. Although the goal of strategic planning is to define, develop, and market distinctive customer-desired advantages, there is a limit to how far labs can pursue that course. Most activities of any laboratory organization have little product distinction. Unless products and services can be packaged as having distinctive features, they are not necessarily best managed and operated from within the organization.

Entering into partnerships with other laboratories that have made what they provide more distinctive may free your lab to focus on its mission. Many hospitals, for example, have contracted out such mundane services as dietary and maintenance to firms that specialize in these areas. The outside firms often can provide the service at less expense than could be done in-house and with improved quality. The hospital can then concentrate on patient care. * Long-term goals. Once you have performed a strategic analysis and established your institutional strategy, focus on the tactics needed to accomplish its goals. Begin by establishing long-term objectives. What are the desired results? When are they expected to be attained? What resources will be needed to attain them? Who is accountable to whom in assuring that the necessary resources will be available when needed and that the results will be achieved on schedule and within budget? What feedback mechanisms exist for adjustments and corrections?

Fundamental to the above evaluation is measurement and monitoring. Measurements are needed to assess quality, client loyalty, marketing preferences of physicians who use the lab, and resource allocation. This means that timetables, budgets, and service level expectations must be estimated a priori. Objective methods should be established to understand why clients choose to conduct business with you rather than your competition – or vice versa. Quality is multifaceted. We can consider something to represent quality only if we can define “it” and measure “it.”

This step requires and examination of operations – that is, the implementation of ideals converted to ideas with strategic planning and then to action with operations planning. Operations planning translates a mission statement into a plan of activities for the individual staff members of the laboratory. Success cannot be evaluated unless results are measured and monitored.

Effective measurement of this kind calls for understanding causes and effects. To measure and understand a given aspect of laboratory operations, it is mandatory to perform a detective-type analysis of root causes. For example, if timely reporting is an issue for a client, it is inadequate merely to measure how often reports are distributed on time. If a problem is identified, you must also investigate why there are delays in each step of the process, including receipt of specimens in the laboratory, test performance and report print schedule, and the work pattern of the courier who distributes the report. Each of these steps can impede the delivery of reports, ultimately influencing the client’s perception of the laboratory. * Assuring success. Strategic planning is a tool to reshape the future. The stakes are high. To be future. The stakes are high. To be successful, the laboratory must gain a sense of purpose and outcome while focusing on its customers. The laboratory must be willing to be innovative and accept occasional failures.

Your best tool is a sense of urgency just short of crisis. Don’t procrastinate in choosing your “weapons.” Show confidence and trust. Invite everyone who is involved in your laboratory, including clients, suppliers, administrators, and laboratory personnel, to participate in strategic planning. If you perform the process diligently, act as if the desired outcome has already occured, and protect your tactical plan from red tape and paralyzing organizational politics, you are likely to be successful in configuring your laboratory’s organizational future.

(1.) “Perspective on Experience,” p. 21. Boston, Boston Consulting Group, 1972.

(2.) Below, P.J.; Morrisey, G.L.; and Acomb, B.L. “The Executive Guide to Strategic Planning,” pp. 26-34. San Francisco, Josse-Bass Publishers, 1987.

General references:

Coile, R.C. Jr. “The New Hospital: Future Strategies for a Changing Industry.” Rockville, Md., Aspen Publications, 1986.

Kanter, R.M. “When Giants Learn to Dance.” New York, Simon and Schuster, 1989.

Quinn, J.B.; Mintzberg, H.; and James, R.M. “The Strategy Process: Concepts, Contexts, and Cases.” Englewood Cliffs, N.J., Prentice Hall, 1988.

COPYRIGHT 1990 Nelson Publishing

COPYRIGHT 2004 Gale Group