Strategic Value Analysis In Healthcare

Weekly Strategic Value Analysis Newsletter

Fast Target Savings

Strategis^TM Value Management

ValueNet Central ^TM Value Analysis Software

About HCP

Client List

Articles and White Papers

Contact HCP

SPANNING THREE DECADES OF VALUE MANAGEMENT LEADERSHIP

January 30, 2002

  

STANDARDIZATION: A Self-Defeating Paradigm

 Robert T. Yokl-President

The HCP Group, Ltd.

A recent study by The Foster Group states that one of the biggest challenges facing healthcare MMs in the 21^st century is the standardization of the products, services and technologies they purchase.  This should be the rallying cry for MMs as they target new savings opportunities in the new millennium says The Foster Group. My question is-- if MMs follow The Foster Groups advice will they be fighting the wrong battle?

 

The Wrong Battle at the Wrong Time 

It has been the conventional wisdom that to obtain the lowest cost for a product, service or technology you must be standardized (or one size fits all) to conform to the same specification organization-wide, when in fact, this theorem is a myth!  Empirical data now makes it crystal clear that for a healthcare organization to truly have the lowest cost products, services or technologies, a customized solution is required to meet the unique functional requirements of all customers.  Standardization is the wrong battle at the wrong time to be fighting with your clinicians in the 21^st century.

 

Standardization Vs Customization 

By way of example, most healthcare organizations have standardized on disposable underpads to meet its primary functional requirement of protecting linens, thus meeting 80% of the healthcare organization’s customer’s needs, while other customers (20%) find the standardized underpad to be a functional mismatch for their needs.  This practice then creates many outliers, such as, the pharmacy buying a higher quality underpad off-contract for chemotherapy drug preparation, OB wasting the value of the underpad by using it to line shelves. The Emergency Room utilizing underpads as drawer liners, because no other product is available to meet this secondary function.  As this example demonstrates, it is a rare occurrence, if ever, that one product, service or technology can satisfy all of the functional requirements of all customers, without incurring waste, inefficiency and higher cost than necessary in a product, service or technology’s value chain.  Once healthcare organizations understand and internalize this reality, then they can embrace the concept of customization with enthusiasm, thereby, increasing your probability of success with your clinicians.

 

Customization: A Self-Fulfilling Paradigm

Customization by definition means, “to build according to individual specifications,” which in most circumstances these specifications will only meet the requirements of 80% of your customers.  For the remaining 20% of our customers, the products, services and technologies they require will need to have either higher or lower end specifications to fit their exact requirements.  Or it could even mean purchasing different products, services and technologies for the use of many customers to have an exact fit for their individual needs.   Relating this new paradigm or system thinking to our example of the disposable underpads, this would mean that 80% of our customers could and would standardize on one underpad for their exact requirements, while the pharmacy would be permitted to purchased a higher grade underpad for chemotherapy drug preparation.  The OB department and the Emergency Room would be provided with a lower cost shelf and drawer liners to meet their precise functional requirements.  The bottom line being, once the total costs are calculated for a standardized Vs customized approach to purchasing of your products, services and technologies, the customization strategy will reduce a healthcare organizations' value chain waste and inefficiency by more than 10% to 15%.

 

Finding the Best Value Should Be Our Goal 

If we truly want to drive out all of the waste and inefficiency in our products, services and technologies value chain in the 21^st century your goal should not be standardization. Instead, you should set your sights on finding the BEST VALUE products, services and technologies for your healthcare organization utilizing the concept of customization.  This can only be achieved through Functional Analysis, VA/VE Customer Mapping™ and Strategic Value Management™. 

 Copyright © 2002 The HCP Group, Ltd.

Robert T. Yokl, President, The HCP Group, Ltd., has over 35 years of experience as a consultant and manager in the field of Supply/Value Chain Management and is one of the country's leading healthcare experts in value analysis, value engineering and materials management. He is the developer and program leader of the award winning Certified Value Analysis Practitioner Training Program™. Mr. Yokl is also the developer of the healthcare industry's leading ValueNetCentral™ Value Analysis Software. Over the past two decades he has trained thousands of healthcare managers in his patented Strategic Value Analysis™ and Team-Based Project Management™ processes and has assisted scores of organizations in developing their own value management programs. He has published six books, videos and audios on supply/value chain management. His latest book being, “ Strategic Value Analysis™: The #1 Smart Strategy for Taking Cost Out of a Healthcare Organizations’ Supply/Value Chain”.