Sam's Big Idea
Wednesday, July 27, 2011
Recently, I made a trip home to see my dad. I’d been trying to get there all summer and looked up to realize that youth football and the school year were right around the corner. I had a three day window where I could make the trip happen, so I quickly cleared my calendar and booked a flight.
Just as I was about to call Dad to let him know I was coming, I got the following brief email from him.
Tue Wed Thu
Those were not heat indexes, he pointed out, but the actual temperature forecast.
Needless to say, leaving Colorado for Arkansas in July is rarely a smart move. Doing it in the middle of a massive heat wave is just stupid, which my wife and kids pointed out several times.
You could have flown him here instead.
It was said with a hint of pity, concerned about what it could mean that I could not figure out something even that simple.
Off I went on a trip I termed my ‘Colorado Weather Appreciation Journey. ’It was hot. And humid. After 20 years living at a mile high, I have turned into a heat and humidity wuss. Gladly.
After the daily 5:30am run to the coffee shop to get the low down on Washington, the lack fishing (even the fish stay inside when it is that hot), and how the Razorback football is going to do this fall, there is just not a lot to do in that heat. So we killed one day by driving to northwest Arkansas to have dinner with one of my brothers and his family. It was a lot cooler in the hills. It was only 100.
If you have never been to northwest Arkansas, I can tell you it is a beautiful place. The Boston Mountains, hills really, are spectacular, especially in the fall, and there are some little lakes tucked here and there that are great treasures.
It is also the home of Wal-Mart and Sam Walton is revered in this corner of the state more than that Clinton fellow. Wal-Mart stores and trucks are everywhere and while there are people who don’t like the king of everyday low pricing, the people of Arkansas generally swell with pride at one of their own who has grown to be bigger than France.
It was ironic being in Sam’s country because I had just read a great piece on Wal-Mart in a new strategy book I had picked up. The lesson from that piece has application for those who are attempting to remake the healthcare delivery system in their market and is worth exploring here, especially since I am writing this from the comfort of an air conditioned room.
Prior to Wal-Mart bursting onto the scene, conventional wisdom in the retail world was that it took a population of 100,000 people to make a discount store work. A big box store of this ilk carried a lot of inventory and occupied a lot of real estate, so a big population was required. Wal-Mart changed all of that. Even my dinky little hometown has a Wal-Mart.
Much has been written about how Wal-Mart has made this work. Here are just a few of the big points.
But there in that small town strategy was the nugget that surfaced in the book I was reading.
Wal-Mart was able to able to succeed not by ignoring the conventional wisdom of needing 100,000 for a store to make a go of it, but by redefining the concept of ‘a store.’
In the conventional world, each store was something of a stand-alone outpost. The marketing, distribution and management costs for a particular market were generally borne by one store, so it had to do a lot of volume. Thus the 100,000 threshold.
Wal-Mart, with all of its systems and processes and technology, was able to take five or ten stores in a given region and make them function, effectively, as one big store. With their logistics system, one truck could deliver to all five to ten stores every day. That is what big stores could afford, but not little stores. Wal-Mart gave the local store, scads of them in a region, the benefits of a large store.
We know that Wal-Mart’s success is the cumulative result of a lot of things working together. But more than that, all of the parts work toward the same end – the idea that properly managed, a ‘network of stores’ can have the advantage of a big, central store AND the advantage of being dispersed and close to the customer in multiple mini-markets.
So here we come to healthcare organizations all over the country who are trying to create a new delivery model for a new set of industry rules. We are investing in technology, hospitals are buying physician practices, we are hiring people called ‘infomaticists,’ we are building new governance structures, and we are experimenting with new ways to pay everyone. We are thinking about populations and disease states and quality measures. We are trying things like medical homes and using gaming technology to get people to exercise and eat healthy.
What in the world can we take from the Wal-Mart story?
In almost every situation that I can imagine, new delivery models will have some, if not a lot, of Wal-Mart’s distributed approach to a regional market. By that I mean the points of care will be spread out and not in one location. Said another way, delivery systems will look like networks more than campuses.
That seems like a passé point, a total yawner for many. Haven’t we had ‘integrated delivery networks’ in our lingo since Hillary was driving this bus? Haven’t we had ‘provider networks’ forever now?
Planting nodes on the network is the easy part. A lot of retail companies have proven able to buy dirt, build a building, and claim to have a ‘network of stores. ’But few have been willing or able to do the hard work of wiring those together in a way so they actually have the customer outcomes and financial performance that lets the ‘network’ function like one big store.
Here’s betting that the ratio of those who get it right versus those who try will be about the same for healthcare that is it for retailing.
This has a high failure rate because there are a million things that you have to do to make it all work. Most organizations struggle with that level of strategic consistency. Wal-Mart has been at this for years.
Yet, there was a seed in the Wal-Mart story that I believe was the real secret, the reason they were willing to invest in those million things and keep them all pointing the same direction. It began with Mr. Walton himself. For Sam, everything was about the stores. He was a retailer at heart and loved being with customers. The stores, and not Bentonville, were where things happened. He built that culture deeply from the beginning and it is evidenced today by the fleet of planes that leave northwest Arkansas every Monday morning taking executives and buyers and product managers ‘out there’ to visit the stores.
Sam had the fortune to start his company from scratch with this idea at the center. Initially, he had no corporate headquarters. When HQ started to emerge, he called the shots and told everyone to get into the field all week and then they would meet on Saturday morning.
However, most of our evolving delivery models are centered around big organizations, generally hospital systems, that already have a big and powerful center. Most are not really networks, but closely resemble that old discount store that needed to bring 100,000 ‘in to it’ in order to survive. Most have a culture that is not ‘out there,’ but rather ‘in here.’
When I think about our list of a million things that have to be put in place for the care delivery network to really work, I have to wonder if we have the kind of conviction that Sam had deep in his bones to force every decision to be about the nodes on the network and not the central hub. I wonder if people who have spent their entire careers in the central hub can even articulate what it takes to make a network model happen, much less do the heavy lifting to get it there.
If we are to change how healthcare is delivered, if we are to move from fixing sick people to keeping people well, if we are to successfully take on the financial risks that are moving to providers, then the leaders of these organizations have to make a full, uncompromised commitment to becoming a true network organization.
And unfortunately, you can’t buy that at Wal-Mart.
Tim Coan, CEO
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