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Howard Shiffman, Senior Associate OPEN MINDS April 29, 2014.

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Presentation on theme: "Howard Shiffman, Senior Associate OPEN MINDS April 29, 2014."— Presentation transcript:

1 Howard Shiffman, Senior Associate OPEN MINDS April 29, 2014

2 I. Why New Service Lines? II. Service Line & Portfolio Analysis III. Metrics-Based Evaluation Of New Business Opportunities IV. New Service Line Development Process V. Discussion 2 OPEN MINDS © All rights reserved.

3 3 Develop Key Performance Indicators Develop Detailed Implementation Action Plan Develop Budget and Financing Plan Develop Operational Plans – Marketing and Business Development, Human Resources and Information Technology Identify Options for Achieving Objectives - Strategies, Tactics, Markets and Services Gather Internal Information/Internal Analysis – Service Portfolio Analysis Gather External Information/External Analysis – Trends and Competitors Review/Establish Mission/Vision/Objectives OPEN MINDS © All rights reserved.

4 Why New Service Lines? 4 OPEN MINDS © All rights reserved.

5 Two key reasons: Diversification – more than one source of revenue or more than one market Addressing the revenue effects of the product life cycle As the environment and markets change, the demand for a particular service also changes and usually diminishes Remember? Telegraphs Kerosene lamps Mimeograph machines 8-track tapes White Out Remember? Telegraphs Kerosene lamps Mimeograph machines 8-track tapes White Out 5 OPEN MINDS © All rights reserved.

6 A risk-reduction strategy that involves spreading assets across a mix of service lines, consumer groups, and payers A strategy in which an organization introduces itself to products / target markets not previously in its realm of experience Decision driven in part by portfolio analysis 6 OPEN MINDS © All rights reserved.

7 A product is developed and comes to market. Introduction Consumers and payers learn about it and more people buy it. It becomes more competitive through modification, price adjustments, wider distribution and other initiatives. Growth The product generates profits with less tinkering. But problems can arise, such as the arrival of competing products in the marketplace. Maturity Sales decrease because of market saturation, obsolescence or other factors. Decline 7 OPEN MINDS © All rights reserved.

8 Reformulation or product line extension of current services Development of new services 8 OPEN MINDS © All rights reserved.

9 Product diversification - creating different product variants New product uses - applying the core product to different uses Adding depth to an existing product line by introducing new products in the same product category 9 OPEN MINDS © All rights reserved.

10 Market intelligence – macro-market monitoring, competitor analysis, etc. Monitoring and analyzing customer (consumer, payer, referrer, etc.) needs Staff experience and ideas Your strategic planning process 10 OPEN MINDS © All rights reserved.

11 New Customers Current Services Current Customers New Services Greatest Risk Least Risk Moderate Risk 11 OPEN MINDS © All rights reserved.

12 Service Line & Portfolio Analysis 12 OPEN MINDS © All rights reserved.

13 Used to describe and analyze mix of services A strategic tool for resource allocation decision- making (money and people!) We wouldn t need to be strategic about our planning if we had unlimited resources. We could just plan. Goal is optimal use of resources to achieve strategic objectives 13 OPEN MINDS © All rights reserved.

14 Aids in deciding which services to: Phase out or eliminate Make investments in Optimize and improve Uses visual models to analyze service lines 14 OPEN MINDS © All rights reserved.

15 Function dealing with planning for products or services at all stages of the product lifecycle – from concept to retirement Value maximization – optimize ROI on investments Balance – high vs. low risk; multiple markets Business strategy alignment – alignment of service line investment with long-term organizational strategy Pipeline balance -- balance between resources needed and resources available Sufficiency of current and future revenue Value maximization – optimize ROI on investments Balance – high vs. low risk; multiple markets Business strategy alignment – alignment of service line investment with long-term organizational strategy Pipeline balance -- balance between resources needed and resources available Sufficiency of current and future revenue 15 OPEN MINDS © All rights reserved.

16 Bubble diagrams Mission / profitability matrix Growth / share matrix Position / industry attractiveness matrix Risk / reward matrix Other metrics for comparing service lines Service mix analysis Business unit profitability comparison Unit cost comparison 16 OPEN MINDS © All rights reserved.

17 Source: Naughton-Travers, Joseph. August OPEN MINDS © All rights reserved.

18 Source: Naughton-Travers, Joseph. August OPEN MINDS © All rights reserved.

19 Source: Naughton-Travers, Joseph. August OPEN MINDS © All rights reserved.

20 Source: Naughton-Travers, Joseph. August OPEN MINDS © All rights reserved.

21 Service #1Service #2Service #3Service #4Service #5Service #6Service #7 Location #1 10%20%10%5% 40%10% Location #2 0% 15%10%20%50%5% Location #3 0% 20%40% 0% Location #4 10%0% 5%20%55%10% Overall10%5%10% 5%50%10% % Of Revenues By Service Line & Business Location 21 OPEN MINDS © All rights reserved.

22 Service #1Service #2Service #3Service #4Service #5Service #6Service #7 Location #1 $10,000($10,000)$5,000$15,000$10,000$15,000$17,000 Location #2 $15,000($25,000) ($5,000)($25,000)($5,000)($45,000) Location #3 $17,000($35,000)$10,000 $15,000$10,000 Location #4 $20,000($20,000)$10,000 ($5,000) $15,000 $10,000 Overall $52,000($90,000)$0$30,000$10,000$35,000($8,000) Profitability By Service Line & Business Location 22 OPEN MINDS © All rights reserved.

23 Service #1Service #2 Location #1 $75.12$ Location #2 $72.03$ Location #3 $61.02$ Overall $67.43$ Unit Cost By Service Line & Business Location 23 OPEN MINDS © All rights reserved.

24 New markets for balance of portfolio New services for current or new markets for revenue sufficiency or positioning Closure or phase-out of current services 24 OPEN MINDS © All rights reserved.

25 Metrics-Based Evaluation Of New Business Opportunities 25 OPEN MINDS © All rights reserved.

26 Problem is often there are more ideas for new service lines than time or money to evaluate and implement Recommend metrics-based ranking model to evaluate new service line ideas – with the goal of reducing the number that move to service line feasibility analysis and development process 26 OPEN MINDS © All rights reserved.

27 1 Develop an itemized list of business development opportunities for consideration. 2 Develop a list of factors or metrics to be used in evaluating new business opportunities. 3 Develop a scoring scale for each metric. 4 Assign weights to each metric – reflecting organizational priorities. 5 Research and score each business opportunity, using the key metrics and weighting of metrics to rank the business opportunities. 6 Qualitative research and discussion of each of the top-rated opportunities for final selection for formal feasibility analysis 27 OPEN MINDS © All rights reserved.

28 New services for new markets New services for current customers New markets for current services New payer for current services Service line extensions 28 OPEN MINDS © All rights reserved.

29 29 OPEN MINDS © All rights reserved.

30 Current market potential Degree of competition Revenue growth opportunities Capital and cash flow requirements Operational at a profit margin in the short- term Other? 30 OPEN MINDS © All rights reserved.

31 31 OPEN MINDS © All rights reserved.

32 Each metric needs a scoring measure Maximum (positive) score Minimum (negative) score For example, maximum score of 5 and minimum score of 1 32 OPEN MINDS © All rights reserved.

33 Each score weighted to reflect relative importance of that metric in decision making about new service line investment 33 OPEN MINDS © All rights reserved.

34 34 OPEN MINDS © All rights reserved.

35 Conduct necessary research to evaluate each business opportunity against each metric Industry knowledge of team Secondary market research sources KOL interviews 35 OPEN MINDS © All rights reserved.

36 36 OPEN MINDS © All rights reserved.

37 Review the highly- rated short list Additional qualitative research Team discussion Final selection for formal feasibility analysis 37 OPEN MINDS © All rights reserved.

38 New Service Line Development Process 38 OPEN MINDS © All rights reserved.

39 Phase I: Feasibility analysis phase Define the new service line Analyze market and competition for the new service line Financial feasibility analysis Phase II: Design and development phase Service line design Service line launch preparation Service line launch management Service line launch and pilot test 39 OPEN MINDS © All rights reserved.

40 Step 1: Service Line Definition Step 2: Analyze Market and Competition Step 3: Financial Feasibility Analysis 40 OPEN MINDS © All rights reserved.

41 Develop an operational description of the new service line Identify the target markets – payers, consumers, and referral sources – for the new service line Create a proposed pricing or payment structure for the new service line Identify the sales/distribution channels for the new service line, with a description of how sales would be made Review step 1 information – make a go/no go decision 41 OPEN MINDS © All rights reserved.

42 For each service line, describe: Operational description Target markets and customers Pricing or payment structure Cost data and operational parameters 42 OPEN MINDS © All rights reserved.

43 Define the specific characteristics of the market (payers, consumers, and referral sources) with metrics Develop a formal analysis of opportunities and threats in creating the new service line Profile each competitor currently offering the service line (or a replacement service line) and their service line offering (customers, cost, features, benefits, USP, etc.) Review step 2 information – make a go/no go decision 43 OPEN MINDS © All rights reserved.

44 Outline the proposed design of the new service line Identify specific programmatic core offerings – processes, protocols, etc. Determine the basic organizational structure of the new service line (staffing, reporting relationships, etc.) Conduct financial analysis Conduct target costing and determine market-based price points for the new service Establish tentative price range based on desired positioning and competitive landscape Preliminary breakeven analysis for new service Review step 3 information – make a go/no go decision 44 OPEN MINDS © All rights reserved.

45 Target Market Position and Market Price Customer Needs (Service, Features, Pricing) Competitor Analysis (Service, Features, Positioning) Target Cost 45 OPEN MINDS © All rights reserved.

46 Customer needs must be the primary driver of what service is offered Customer needs and perceived benefits dictate service features Understand customer value proposition Customer perceptions and value of service features dictate pricing 46 OPEN MINDS © All rights reserved.

47 Understand the competitive environment What does the competition charge – and what is their rate structure? What does the competition offer/not offer? How does the competition position itself in the market space? How can/should your positioning differ? 47 OPEN MINDS © All rights reserved.

48 Based on evaluation of customer needs and your differentiation, confirm your positioning Different enough to warrant increased price? Set your proposed market price based on target market analysis Reengineer your budget based on target price Price point drives budget and allowable costs – not the other way around 48 OPEN MINDS © All rights reserved.

49 An analytical technique for studying relationships between fixed cost, variable cost and profits Visual interrelationship of sales price, sales volume, fixed costs, variable costs and total costs Breakeven point represents volume of sales at which total costs equal total revenues (when profits equal zero) Understanding of the capital/cash requirements for market entry 49 OPEN MINDS © All rights reserved.

50 Break- Even Point LossProfit Variable Cost Fixed Costs Income Costs P 50 OPEN MINDS © All rights reserved.

51 With service line design completed, along with target costing analysis and break even analysis, can make go or no go decision for service line 51 OPEN MINDS © All rights reserved.

52 Step 1: Service line design Step 2: Service line launch preparation Step 3: Service line launch management Step 4: Service line launch and pilot test 52 OPEN MINDS © All rights reserved.

53 Write a comprehensive service description for market Develop proposed Unique Selling Proposition (USP) and market positioning statement Define and map operational flow Identify roles and responsibilities for service delivery – by departments and all staff positions Define how new service line delivery and operational departments will interface with one another and in existing organization Finalize pricing and pricing structure Review and validate proposed costs in feasibility analysis Conduct modeling to determine ROI and confirm breakeven point, investment capital requirements and cash flow requirements Review step 1 information – make a go/no go decision 53 OPEN MINDS © All rights reserved.

54 Develop operations roadmap Develop implementation plan Develop productivity standards Create service line flowcharts Write detailed operations manuals Conduct final regulatory check Establish success standards Define activity-based and performance-based metrics Create performance dashboard for new service line launch and new service line operations Review Step 2 information – make a go/no go decision 54 OPEN MINDS © All rights reserved.

55 Construct test or pilot program model for new service line Anticipate fail points and develop corrective action plans Develop marketing and promotional planHire and train key staffDevelop launch project and tracking plan Review Step 3 information – make a go/no go decision 55 OPEN MINDS © All rights reserved.

56 Implement new service line launch plan Monitor the implementation via performance metrics and performance dashboard Create modifications to new service based on performance of pilot during launch phase Reassess service line viability and determine next steps – second pilot, full launch or cancel 56 OPEN MINDS © All rights reserved.

57 Discussion 57 OPEN MINDS © All rights reserved.

58 Has your organization made efforts to look at their present service lines? Has your organization eliminated any historical programs due to positioning for the new marketplace? What are the barriers to this process of evaluating and changing your services? Has your organization considered services for: transition services for young adults, co- occurring programs, acute care diversion from hospitalization or trauma oriented services? 58 OPEN MINDS © All rights reserved.

59 Planning & Innovation Institute June 3-5, New Orleans, Louisiana 2014 California Planning & Performance Management Institute August 20-21, San Diego, California 2014 Executive Leadership Retreat September 9-12, Gettysburg, Pennsylvania 2014 Technology & Informatics Institute November 5-6, Washington, D.C.

60 | York Street, Gettysburg, Pennsylvania The market intelligence to navigate. The management expertise to succeed.


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