RESEARCH ISSUESSHAWNEE VICKERY, Feature Editor, Eli Broad Graduate School of Management, Michigan State University World class operations: A paradigm for OM research in the strategic management of health care services
by Aleda V. Roth, Kenan-Flagler Business School
The American health care system faces one of the most significant transitions in its history. Our traditional approaches--rationing resources, controlling costs, and ensuring quality of care--have done little more than put our delivery systems in gridlock. One point is clear: successful health care operations tomorrow will not look much like today's. And the trouble with the future is that it is no longer what it used to be! The quantum changes in health care delivery systems require operations management (OM) research to shift from tactics to strategy. For semantic clarity, I define operations strategy as the time-phased portfolio of strategic structural, infrastructural, and integration choices that are deployed to build competitive capabilities and enhance clinical excellence in the provision of health care. A 21st century OM research imperative is theory-building and testing. Toward that end, the theoretical upshot is the notion of strategic operations choices and the factors that shape those choices are critical to effective and efficient health care delivery. This article presents a perspective of operations strategy research in health care. The stylized views are based upon my research on world class operations over the past decade. Triangulating case and survey research methods, I found a number of health care organizations have begun to pioneer new operational models that emphasize quality, service, flexibility, innovation, and costþsimultaneously. These pioneers, like their counterparts in other industrial sectors, aspire to world class (WC) status. A world class health care organization, relative to its primary competitors, creates dynamic processes that (a) go beyond merely meeting internal and external customer needs, wants, and expectations; (b) provide distinctive, value-added products and services to customers; and (c) build requisite clinical and competitive capabilities. A world class organization uses management approaches and strategies to develop superior core competencies that foster accelerated improvements in human assets, organization, clinical and management technology, clinical skills, and communication and materials flows. These core competencies (a) are synergistic with the requirements set by the organization's mission, suppliers, partners, and stakeholders; (b) provide a competitive position in the organization's target market; and (c) create a stock of knowledge for future innovation and success. (Roth 1993) Arguably, the paradigm of world class is a useful organizing construct for describing overall excellence in health care services. The construct forces ``out-of-the-box'' thinking. Consider the following four premises. First, the essential attributes of WC health care services parallel those found in other industries. The operational similarities among the WC groups are profound. Yet with few exceptions, the extant literature is virtually devoid of operations strategy theory in health care. Thus, the contingent influence of the theory on achieving capabilities is not well understood. In related research, my colleagues and I present a detailed list of questions pertaining to operations strategy contents, namely, structural, infrastructural and integration choices (Roth, Johnson, and Short, to appear). These questions can be applied to the organizing framework adapted for WC health care. Figure 1 highlights the strategic elements that have been shown to correlate with performance across industrial settings. New research on health care services should address the integration of (1) key OM strategy elements, for example, total quality management (TQM) initiatives, organizational/process design, human resources planning and job design, performance management including planning and control systems, and information and process technology; and (2) the idiosyncratic elements, for example, the management of professionals, product line orientation, clinical protocols, patient mix (e.g., focus on and variety of diagnostic-related groupsþDRGs), the influence of providers and payors, managed care, and "virtual" service delivery options. Second, under the rubric of world class, processes are linked to competitive capabilities that create exceptional value for customers (Chase and Hayes 1992; Heskett, Sasser, and Hart 1990; Roth 1993). Competitive capabilities represent actual marketplace strength relative to primary competitors on broad-based factors critical to success. Success factors in health care include service quality, flexibility, clinical excellence, cost, accessibility, and timeliness. Capabilities-based competition has multiple and progressively important roles in the delivery of health care products and services. Different capabilities, referred to as ``Minimum Daily Requirements,'' ``Gateways,'' and ``Golden Handcuffs'' (Roth and van der Velde 1991), respectively, are required to meet basic customer expectations, to attract new customers, and to build patient and provider loyalty. Traditional health care providers emphasize ``clinical'' quality and cost control, often with unsatisfactory results. Emerging research in health care suggests TQM leads to reduced costs and shorter lengths of stay, and these capabilities are not separable (Kaluzny and McLaughlin 1993). I found case-based evidence leading to the proposition: The Ferdows and De Meyer's (1990) cumulative theory of capability development explains stellar performance in WC health care organizations. Thus customer-perceived value is predicated upon clinical excellence and combinative delivery system capabilities. Additional research is required to rigorously test the cumulative theory in health care. In manufacturing, Jeff Miller and I found that numerical taxonomies are a neat way of pigeonholing various strategic groups that show similar and dissimilar capabilities and relating the groups to strategic operations choices and performance. Similarly, taxonomies of health care services can be constructed as a tool for consolidating competitive knowledge and inducing new hypotheses. Third, accelerated learning and on-going process innovation is required. Knowledge work may be the last bastion of competitive advantage (Harrigan and Dalmia 1991). Ironically, since health care is primarily delivered by professionals, knowledge work has always been an embedded service component. So what factors will differentiate past operations strategy from that of tomorrow? I believe they are twofold: technological progress and systems thinking. This is the essence of what has been coined ``neo-operations strategy'' (Roth and Giffi 1995). It seems logical that the metamorphosis of health care services will be accompanied by changes in capabilities built around knowledge competenciesþwherein particular elements of products and services are created by providers and/or customers using judgment augmented by information and telecommunications. Clearly technological progress will change the character of contemporary health services. Technological advancement simultaneously broadens the band-width of knowledge competencies and expands the geographic scope and access to health services. New approaches to conceptualizing and measuring knowledge work that is influenced by technological progress are required. The importance of organizational learning has been brought to the limelight of managerial attention by Peter Senge in The Fifth Discipline. Extrapolating from Senge, a fundamental reorientation of operations strategy research is necessary from a resource-based view (oriented toward structural choices) toward a knowledge-based view (oriented toward infrastructure and integration choices). Health care delivery has generally been regarded as a ``system,'' but systems thinking in theory and practice is rare. The application of systems thinking in operations strategy as a new stream of inquiry in health care is intriguing. It can potentially capture the dynamics of the competitive environment and aspects of organizational learning. Fourth, process and outcomes have been important subjects of debate between a number of competing theoretical perspectives on patient care. While the discourse on these subjects has progressed, no single perspective can claim dominance. Research on process tends to be disjointed from that on outcomes. The definition of world class suggests that combining these areas is a fertile ground for future research. The meta-process model of hospital delivery systems depicted in Figure 2 is a conceptual linchpin. To convert health services inputs into outputs, the model indicates a holistic view of the three generic processes--clinical, management, and ancillaryþrelative to inputs and outcomes. Strategic clinical processes are concerned with the treatment of patients and their encounters with providers. Management processes are defined by operations strategy contents. Ancillary processes underpin ``non-core,'' support services. Technology is viewed as a process enabler. Note that health care providers tend to focus heavily on the ``clinical'' side, creating huge gaps in service transformations. Empirical findings on the size of the gaps suggest that health care organizations are ripe for reengineering. How to best reengineer for multi-process integration and assess their joint influence on outcomes must be investigated. The ideas reported here represent the tip of the iceberg for OM theory building in health care. The paradigm of world class is a useful organizing construct that describes the essence of excellence. The construct begs for future research in health care that (1) addresses the influence of strategic operations choices; (2) considers capabilities-based competition in the creation of customer-perceived value; (3) covers technological progress and systems thinking; and (4) takes a holistic view of meta-processes and outcomes. References Chase, R. B. and R. Hayes, ``Beefing Up Operations in Service Firms,'' Sloan Management Review, Fall 1992, 15-26. Ferdows, K. and A. De Meyer, ``Lasting Improvements in Manufacturing Performance: In Search of New Theory,'' Journal of Operations Management, 9:2, 1990, 168-184. Harrigan, K.R. and G. Dalmia, ``Knowledge Workers: The Last Bastion of Competitive Advantage,'' Planning Review, 19:6, 1991, 4-9. Heskett, J.L., W. E. Sasser, and C.W. Hart, Service Breakthroughs: Changing the Rules of the Game, Macmillan, New York, 1990. Kaluzny, A. and C. P. McLaughlin, Continuous Quality Improvement in Health Care, Aspen Publ., Gaithersburg MD, 1993. Roth, A. V., ``World Class Health Care,'' Quality Management in Health Care, 1993, 1:3, 1-9. Roth, A. V. and C. Giffi, ``Winning in Global Markets: Neo-Operations Strategies in U.S. and Japanese Manufacturing,'' OM Review, Operations Management Association, 10:4, 1995, 1-36. Roth, A. V., S. P. Johnson, and N. Short, ``Strategic Deployment of Technology in Hospitals: Evidence for Reengineering,'' International Journal of Technology Management, to appear. Roth, A.V. and M. van der Velde, ``Operations as Marketing: A Competitive Service Strategy,'' Journal of Operations Management, 10:3, 303-328.
Aleda V. Roth is an Associate Professor at the Kenan-Flagler Business School of the University of North Carolina at Chapel Hill. Her research triangulates empirical, qualitative, and analytical methods in studies of operations strategy, focusing on quality management, organizational learning, business process reengineering, globalization, and technological innovation, and their linkages to performance. She has co-authored three books on world class operations: Competing In World Class Manufacturing: America's 21st Century Challenge, World Class Banking: Benchmarking the Market Leaders and The Management of Continuous Improvement: Cases in Health Administration. She serves as associate editor for Decision Sciences and Journal of Operations Management. Dr. Roth is a member of the Production and Operations Management Society Board of Directors and the U.S. Quality Council II of the Conference Board.
Dr. Shawnee Vickery |