Mapping a Profitable Growth Strategy
During Changing Times
A leader in healthcare insurance needed a lasting strategy to address a rapidly changing business environment. Assessing threats and capabilities in a detailed fashion allowed the company to take advantage of an otherwise challenging competitive position.
Our client — one of the nation’s largest health care insurers — was seeing real threats to its business model and profitability from changing industry dynamics. Industry consolidation was limiting their ability to grow through acquisitions, care costs were increasing premiums across the board, and rising consumer expectations and product commoditization were eroding customer retention. They needed a long-term strategy that was coherent and actionable, and that would allow them to continue being an industry leader with sustained growth.
Understanding the real issues
Changing industry dynamics tend to make it harder for companies to differentiate real and perceived threats. The first step in the process of drafting the strategy for our client was to perform a detailed assessment of the health industry. To better understand the drivers of change, we divided the industry into four sectors: core health insurance, specialty benefits, health care, and health improvement.
We then conducted an environmental assessment, pulling data from industry publications, competitor reports, and client intelligence. Drawing from the expertise of the Bridge team and the client team, we developed market observations on each industry sector.
Measuring competitive advantage
Healthcare insurance operations are complex, and its stakeholders often act in silos. We set out to understand the client’s competitive advantage by evaluating assets and capabilities across each functional group. This process revealed strengths that the insurer could leverage for future growth, as well as improvement opportunities worthy of additional investment and effort.
Addressing uncertainty with scenario planning
Needless to say, the health insurance industry is evolving rapidly. This is only complicated by the fact that government regulation moves at an unpredictable pace across many aspects of the business. It was important for our client to understand the implications that different scenarios would have on the company’s operations and competitive advantage. To address this need, we completed a scenario planning exercise and cross-industry comparison.
We sketched three possible future states — driven by most favorable, least favorable, or incremental change conditions — and assessed how each would impact critical health industry stakeholders. In the cross-industry comparison, we reviewed a set of industries that had faced challenges similar to those in the health industry and summarized the lessons learned by industry leaders.
Making sense of a sea of knowledge
The environmental assessment, study of capabilities and scenario planning exercises yielded a treasure trove of information on the changes that our client was facing, and on the levers it could use to successfully grow over the next seven years. We synthesized the knowledge obtained at each step, and developed a comprehensive set of strategic initiatives that would fuel growth and allow the client to meet its goals and shareholder commitments.
Strategic initiatives were crafted both to address issues that threatened the healthcare insurance industry and to meet the demands of the market. Industry strategies addressed key issues using levers that ranged from product design to lobbying and political action. Market strategies presented business growth paths and profit improvement opportunities that would enable the client to maximize its market presence and competitive distinction.
Tangible benefits of our approach to strategic planning
The strategy creation process revealed that the client was in a strong competitive position and could meet or exceed stated growth targets with operational improvement and limited additional acquisition. Our client is currently in the implementation phase of the strategy, constructing programs to realize market share growth, increase profitability, and address industry issues.