Slingshots and stones: Brand as business strategy to compete among the giants
This article was written by Michael Eaton, senior vice president of Brand+Lever, a consultancy born out of BVK that helps executive teams create and align brand, business and operating strategies.
“Every single time you make a merger, somebody is losing his identity. And saying something different is just rubbish.”
If Carlos Ghosn is right, we are witness to something of a vanishing act in health care. Ghosn, Chairman and CEO of Renault and former CEO of Nissan and Chairman of Mitsubishi Motors, did a lot of deals in his days reshaping the global auto industry. But even he might take pause at the breadth and pace of proposed health care mergers in the U.S. over the last three months of 2017.
By my count, including the proposed Ascension and Providence St. Joseph Health merger, different deals combining about 250 hospitals and $80+ billion in annual revenues have been announced in Q4 2017. It is a rapid consolidation among integrated delivery systems that mirrors much of what we have seen in banking over the past twenty years. Those totals do not include CVS’ proposed acquisition of Aetna, or UnitedHealth Group’s purchase of DaVita, which, of course, are not hospital-based health system deals, but profoundly disruptive in their own way and further reinforcement of the fact that consolidation is happening fast, and increasingly on a national scale.
Functionally, the leaders of the emerging national health systems argue that they can operate more efficiently when organized on a larger scale. That may be true. They are, for sure, looking for increased power when negotiating with suppliers and with payers. Most are trying to build national brands that payers must have in their networks.
In 2016, there were 10+ for-profit and non-profit systems with at least $10 billion in annual operating revenue in the U.S. These systems, nonprofits like Ascension and Providence St. Joseph and for-profits like HCA and Community Health, make the business headlines because of their sheer size. They will continue to be in the headlines as they seek growth through acquisitions.
There is another cohort of systems that are redefining the industry, though not necessarily based on operating scale. These include the Cleveland Clinic, Banner Health, Baylor Scott and White, Advocate Health, Aurora Healthcare, and Intermountain. All want to grow operating revenue. Many already have something the biggest operating companies are trying to build—national consumer brand visibility built around unique vision, culture and clinical reputation. Their strong brands and innovative cultures allow them to compete for patients, talent and contracts against their bigger market brethren. Several (Aurora and Advocate, for example) are or will be in the merger headlines themselves as they, too, search for scale.
So, what about everyone else?
How do local and regional health care providers who lack the contracting power of a $10+ billion multi-state platform or a distinctive mega-watt brand like the Cleveland Clinic remain relevant in a wave of market consolidation? We believe the answer lies in building a strong brand around distinctive service as the core of system business strategy. It is our point of view that scaled efficiency and national visibility are important; but, that the often-tepid attraction that comes from being big and known simply does not trump the intense customer loyalty engendered by the emotion of a must-have branded experience.
Brand+Lever’s approach to thinking about brand focuses on building the operating systems to deliver distinctive service experiences that stimulate intense customer loyalty. If your service experiences do not deliver distinctive value, you risk running aground on the twin shoals of a lukewarm brand and small operating scale. Neither is a winning business proposition; together they invite Ghosn’s fate of disappearing from the market altogether.
Brand+Lever is a consultancy that helps executive teams create and align brand, business and operating strategies. Born out of BVK—a top 25 independent marketing and advertising agency—Brand+Lever was created to help health systems navigate these important questions of strategy, structure and function. To learn more about our brand as business strategy approach, please contact Mike Eaton at [email protected], or 757-784-1277.