“The greatest wealth is health” (Virgil, Ancient Roman poet). There is nothing more important than taking care of ourselves and each other. However, focusing a health system on the appropriate goals in a complex political and social environment requires investment in the right combination of time, money, intellect, and creativity.
Government agencies are bringing pressure on healthcare providers, vendors, and insurance companies. For decades, our health system has been revenue driven, often with somewhat irrational pricing. Healthcare leaders must now pay closer attention to the middle line – costs – not just the top line (revenues) when working to improve the bottom line (profits).
The only financial value a healthcare facility will ever create for its stakeholders is the value it derives from its patients — its current patients and new ones to be served in the future. Healthcare organizations should view patients similarly to how commercial companies view existing and prospective customers. To remain competitive, healthcare facilities must determine how to keep patients and their families coming back to satisfy medical needs throughout their lifespan and to serve them more efficiently. To do this, they must maintain a high level of quality and patient satisfaction, while growing revenue and controlling costs.
Read moreHow do executives expect to realize their strategic objectives if all they look at is financial results like product profit margins, return on equity, earnings and interest before interest, taxes, depreciation, and amortization (EBITDA), cash flow, and other financial results? These are really not goals – they are results. They are consequences. Measurements are not about just monitoring the summary dials of a balanced scorecard. They are about moving the dials of the dashboard that actually move the scorecard dials.
Worse yet, when measures are displayed in isolation of each other rather than with a chain of cause-and-effect linkages, then one cannot analyze how much influencing measures affect influenced measures. This is more than just leading indicators and lagging indicators. Those are timing relationships. A balanced scorecard reports the causal linkages, and its key performance indicators (KPIs) should be derived from a strategy map. Any strategic measurement system that fails to start with a strategy map and/or reports measures in isolation is like a kite without a string. There is no steering or controlling.
Read moreThe old organizational model for decision making is broken. The jig is up. Making decisions relying on gut feeling, intuition, office politics, past experience and bias is giving way to using fact-based information and analytics. These allow for investigation, insights, foresight, and improvements.
Predictable skepticism of business analytics
Some readers may already be reacting to my observations and saying to themself, “I’ve heard this exaggerated story before.” Skepticism is a healthy virtue. Skepticism involves waiting for enough evidence before accepting or believing.
Read moreTelevision game and quiz shows, like Jeopardy, are now in abundance. I have an idea for a game show that probably would not achieve high viewer ratings, but it might be appealing to those interested in how truth is proven with analytics, research and fact-based data.
True or false? Good or bad?
My idea is for a game show where three competing teams of contestants are given a business problem involving choices. They are given one week to design and test their hypotheses through experiments and return to the show with their answers. A panel of CEOs would judge the winning team.
Read moreMost of us are technical. We like to be fact-driven. We embrace technologies of all flavors including computer hardware, software, mobile devices, the Internet, and social media. We tolerate opinions of others different from ours, but we prefer tangible and hard evidence that supports any one’s position or argument. The problem is organizations are comprised of people and not just computers and equipment.
We like research studies and the use of analytics to gain insights and foresights as well as to solve problems and pursue opportunities. But darn it. People get in the way.
Read moreSome organizations have strict rules to determine the acceptance for proposals to invest and spend money on equipment or projects. Sometimes the administration of these is called the capital investment justification process. Senior management may not authorize any spending unless the business proposal exceeds a certain return on investment (ROI) level – often referred to as the hurdle rate. Management wants to assure itself that any money re-invested in itself will greatly exceed the level of return that its shareholders could achieve in other investments.
Organizations that are skeptical of activity-base costing (ABC) regularly ask, “What is the ROI from ABC?” My blunt reply from what I have learned is that calculating ROI on ABC/M is not possible to do. Here is why.
Read morePerhaps you thought that Santa, Mrs. Claus, and all the Elves at North Pole Operations just magically get all the toys made and delivered on Christmas eve each year? Nothing could be further from the truth. North Pole Operations uses our framework – the Profitability Analytics Framework (PAF) by the Profitability Analytics Center of Excellence (PACE) - to plan and execute the big Christmas eve delivery every year.
No organization can escape the global pressures to better execute their executive team’s strategy and improve productivity - not even Santa Claus and his team. Here is how they do it.
Read moreYou have an opportunity to change the world; but I am worried about you. Understandably, you are probably not interested in a finger-wagging lecture from an old fuddy-duddy and grandfather like me. But, that is not my intent, so please hear me out.
Here’s my main concern: It’s possible that you are overly obsessed with social media. There is more to life than Facebook, video games, You Tube, Internet surfing and endless texting. Sure, each past generation has had its share of new gadgets and technologies to become immersed in – but none compare to what has become available to your generation.
Don’t get me wrong; the Internet and smart phones are great. But, they can also be time-consuming distractions that keep you from focusing on more important things – like career-building and learning activities that prepare you for the future.
Read moreA managerial movement is now in motion and picking up steam. It is the application of business analytics for organizations to gain insights to determine good decisions and the best actions to take. This topic was once the domain of “quants” and statistical geeks developing models in their cubicles. Today applying analytical methods is on the verge of becoming mainstream.
One way to draw my conclusion about this emerging movement is that there is much chatter and debate about the topic. Articles in Accounting, Finance, and IT magazines and websites about analytics of all flavors, such as correlation and segmentation analysis, are increasingly prominent. Debate is always healthy. Some view applying analytics as a fad or fashion or way overvalued. Others claim that an organization’s achievement of competencies with analytics will provide a competitive edge.
Predictive analytics is one type of analytical method that is getting much attention. This is because senior executives appear to be shifting away from a command-and-control style of management – reacting after the fact to results – to a much more anticipatory style of managing. With predictive analytics executives, managers and employee teams can see the future coming at them, such as the volume and mix of demands to be placed on them. As a result, they can adjust their resource capacity levels and types,
Read morePeople think by comparisons. So let me give you an analogy. I am a big fan of movies – old black and white ones, new ones with special effects, and most types in between. I especially like musicals. One of my favorite musical films is West Side Story, released in 1961. And this December 2021 Stephen Spielberg has directed an update of the movie.
The movie is a retelling of Shakespeare’s tragic romance Romeo and Juliet. What does a Broadway musical and its subsequent film version have to do with profitability analytics? Plenty. Here is the background.
Please oblige me if you are so young that you are unaware of this film or have dismissed it as a silly folly about two tough 1950s New York City street gangs – the working-class white Jets and the Puerto Rican Sharks – dancing and singing. West Side Story has parallels to what it takes to complete the full vision of a successful implementation of profitability analytics methods.
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