Commercial and hospital outreach labs all compete, primarily, in a zero-sum business game.
When a laboratory loses a customer, a competitor lab happily gains one. Winning is the heart of having a successful business. Great organizations choose to win rather than to “play.”
In my experience, however, I have come across some labs that simply participate in their market and take on new customers in a passive and seemingly serendipitous fashion. Their leaders say things like, “Clients gravitate to us because of our professional staff and quality reputation.” That’s well and good, but it’s not really a recipe for success. The most successful labs assiduously battle in their geography to strengthen and grow their company or hospital lab. They know that winning matters, and that it requires effective sales representation and a solid, yet flexible, strategy—one that is governed by the starting point, not the endpoint.
What strategy is—and isn’t
I like to define strategy simply as the art of creating power. Strategy pertains to a lab’s movement from its present position to a desirable future point. Its raison d’être is to maximize the value of what the lab offers—the capabilities that distinguish it from its competitors in a manner that clients want and appreciate. There are two components that make strategy work: analytical and behavioral (more on this later). It all begins with making and communicating some basic choices.
Strategy is the umbrella designation we have for thinking about actions in advance—that is, looking up from the short term (which is sometimes trivial) and viewing the long term—the proverbial forest rather than the trees. Strategy is more than just “a plan,” because a plan supposes a sequence of events that allows one to move (with confidence) from one thing to another. But sticking to a rigid, preordained plan is exactly what the most effective businesses don’t do because competitors can frustrate your plans due to their opposing ideas and interests. (A strategy should not be considered a mission or values statement; those things are good for any company to have, but they are by nature too general to constitute a strategy.)
When you break down the concept of what any business is, and what its strategy should be, you find yourself thinking primarily in terms of customer value. Laboratories target certain customer needs and tailor their sales and marketing activities to serve those needs better or differently than others. They convince clients that labs are not all the same. True, there are certain services that all labs provide—e.g., transporting the specimen to the lab, testing it, returning the results within a competitive timeframe, and billing. However, customer-driven labs and their customers know that the moving pieces extend far beyond that.
Strategy and choices
Strategy distills into a five-part, integrated cascade of choices (the “analytical” portion). A document should be created that addresses and answers each of the following:
- What is our winning aspiration? In other words, what is your purpose—your motivating inspiration?
- Where will we play in the opportunity spaces available to our lab? This section will delineate:
• Physician specialties
• Skilled and long-term care homes
• Hospital/other local commercial labs
• Home healthcare support
• Client and/or (primarily) third-party billing
• Market geography
- How will we win? Winning means determining where you need to have superior value-delivery for customers. However, it also means determining where you need to be at least adequate—but not necessarily the very best. How you will win equates to competitive advantage facets within a strategy, and they involve no as well as yes. Some advantages are more important and, therefore, need to be resourced more than others.
- What capabilities must be in place in order to win? This transcends numerous components and will expend significant space in your strategic document. Besides the individual lab departments and laboratory information system (LIS), examples include:
• Phlebotomy/patient service centers
• Client services
• IT functions (internal reports, on-line test requests, EMR interfaces, auto-faxing, lab portal, LIS report file drop, etc.)
• Test menu
• STAT test menu
• Reference lab
• Compliance training
• Client service protocols
• Billing protocols (including in/out network insurances)
• Specimen transport supplies
• Sales/service representation (including automobile, laptop, cell phone policies, and training
• Marketing literature
- What management systems are required? These are the systems that foster and measure the strategy. They develop and keep relevant the information and capabilities needed for strategy execution.
• Will-calls for ad hoc courier pickup
• Tracking test turnaround time outliers
• Client relationship management (CRM) for Client Services
• Accounting system
• Phone test add-ons/physician signatures
• Courier routing optimization; specimen pick-up location and documentation
• A monitoring procedure to identify issues with EMR report transmissions
• Tracking supply volumes provided to each client
• CRM tool to enter (and measure) daily sales call activities
This is certainly not a complete list—simply suggestions.
Choice cascade do’s
- Do remember that strategy is about choices geared to winning and relating the lab to its competitive environment. Choose carefully what you will and will not do.
- Do spend time considering each of the five choices. It’s easy to define two or three components—but all five questions need to be carefully answered.
- Do think of strategy as an iterative process. As you uncover certain insights at one stage, you may need to revisit previous choices.
- Do understand that individual departments may create their own strategy, but everyone must be in concert with the global strategy.
Because strategy choices play out at multiple levels, they ultimately determine what is and is not a priority (e.g., opportunity and/or threat). This is where the “behavioral” portion of strategy comes to light. It is very important to translate the broad range of concepts into statements that people in sales, client services, couriers, and other lab functions understand and use.
Unfortunately, some companies—including laboratories—do not always communicate the priorities to the front line—and it is here where strategy execution evaporates. All employees require information to understand the strategic (and possible bottom line) impact of their daily choices. Communicating strategic identity is the first step that can play an important role in a successful business.
It is not necessary to chart out “strategy maps” for all employees. However, a coherent strategy statement should specify the following three components, which can easily be digested by all employees:
Objectives. This indicates the ends that the strategy hopes to achieve; i.e., the primary goals that will motivate behavior and resource allocations in the lab. Examples can be profitability, market share, turnaround time, responsiveness, professional attitude, etc. Objectives can be quantitative and/or qualitative.
Scope. This is the “where-to-play” element of strategy. As a side comment (and coming from a former salesperson), the where-to-play decision should not be delegated to the sales department. Salespeople may lack the reference frame and (possibly) overall business acumen needed to make good scope decisions. Additionally, their attempts to build relationships and gain business because of incentive plans predispose them to say “yes” to almost any expressed customer need. This is not to say that salespeople shouldn’t make suggestions to upper management—and support their ideas with financial justification. But lab administration needs to set the initial criteria and be subsequently open-minded about broadening the scope after considering the entire strategic cascade.
Advantages. This pertains to what the lab does differently (better) than competitors. Advantage is about the means you rely on to win and the value proposition you offer to external customers. Advantage also relates to internal activities that support the external value proposition. Each department supervisor should be asked the basic question: “What do you think makes your department different from other organizations with whom we compete?” In fact, it would be prudent for each department to create its own written mantra that says “This is who we are, this is what we believe in, and this is what makes us different.” The point is, every lab is not vanilla—and managers and supervisors put their own stamp on their respective departments. It’s true that not all differences and advantages may be important to every client; but, it is this knowledge that salespeople must have in order to refute the common impression that all laboratories are simple commodities.
The value of the objectives, scope, advantages approach is that it allows employees, especially sales people, to understand management’s key choices. In turn, this—in conjunction with good sales training and coaching—should facilitate effective selling. And effective selling translates to winning. The underpinning is strategy articulation and communication. If you can’t say it—clearly and concisely—then employees will have trouble executing it—efficiently and effectively.
Important strategic choices cascade throughout a laboratory. Senior management should create a document that answers each of the five key questions explained on page 60.
Once this has been detailed in writing, it remains important to disseminate the basics to all employees so they are singing the same tune. A useful way to accomplish this is through a coherent strategy statement that specifies three components: 1) objectives; 2) scope; and 3) advantages.
Commercial and hospital outreach labs should be in business to win. It all starts with a definition of what winning looks like. To “participate” in your market contributes to mediocrity—and it’s self-defeating. With no clear strategic direction of where-to-play and how-to-win choices that associate with the aspiration, a mission or vision statement can be frustrating rather than inspiring for employees. Articulate it plainly and concisely for everybody. With a carefully prepared and designed strategy, you will be on your way to winning in the zero-sum game!
Peter Francis serves as president of Clinical Laboratory Sales Training, LLC. Peter has authored more than forty articles on the subject of laboratory sales.