Where Does Your Competitive Advantage Live?

November 17, 2016  |  Mike Eaton

Healthcare

In the December 2013 Harvard Business Review, author Naraj Dawar noted that “on a hot day, consumers gladly pay a 700% price premium for the convenience of buying a cold can of soda from a vending machine,” compared to a single can in a twenty-four pack off the grocer’s shelf.

The premium paid for a cold soda is not a matter of it being a better product. It is a matter of the cold soda better meeting the customer’s specific consumption purposes at the point of purchase on a hot summer day.1

Dawar’s example illustrates a shift in how health care marketers must think differently about their business, specifically, learning that competitive advantage most often lives not in what you do, but how well you respond to constantly changing customer needs.

From “What Do We Sell” to “What Matters to Our Customers”

Historically, businesses have asked the question “what else can we sell” to figure out how to drive business growth. In health care the answer to that query has conventionally focused on sourcing (more specialists), production (newer beds and equipment) and logistics (favorable insurance contracts and convenient access points).

These production-related considerations — more specialists, beds and better contracts — may fuel short-term market gains but they often create only fleeting competitive advantage. That’s because health systems that today are behind the competitive curve can tomorrow recruit new doctors, build new patient towers and lease the latest imaging equipment. As they do, the market leader’s competitive advantage erodes and near-term business growth is often erased.

The more relevant strategy question for health system leaders is “what more can we do for our customer?” This question shifts the focus away from “competitor envy” and the instinct to copy to compete. Instead, strategy drives from customer purchase criteria, focusing on what people need in the context of when and how they want it.

Responding to Customer Purchase Criteria

For 2015-2020, the Advisory Board projects 14% more inpatient and 16% more outpatient colorectal and lower GI surgeries. A health system can capture more of this business by adding more and better colorectal surgeons, GI labs and clinics. All are important considerations. But, with the saturation of surgeons and surgical suites in the market, a more compelling and cost-effective strategy might be to focus on better meeting customer purchase criteria.

If people’s purchase priorities are “time from diagnosis to return to normal activity,” then providers might invest in pre-operative, perioperative and post-operative innovations such as co-location of GI practices with primary care, same day scheduling of appointments with multiple providers and open access endoscopy (OAE) performed without a prior consultation by an endoscopist.

Succeeding with this approach requires systems to understand the drivers of choice and to position their offering in the context of what matters most to customers. BVK can help with that process, transforming relatively commoditized offerings into uniquely satisfying solutions to a patient’s need (like an ice cold can of soda dispensed from a vending machine in a park)!

1 When Marketing Is Strategy; Niraj Dawar; Harvard Business Review, December 2013 Issue

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is a Senior VP at BVK

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