Bill Klaproth (host): This is a special podcast produced onsite at SHSMD Connections 2023 annual conference in Chicago, as we talk with keynote speakers and session leaders direct from the show floor. I'm your host Bill Klaproth. And with me is David Grandy, National Vice President of Innovation at Kaiser Permanente. And we're going to talk about his SHSMD session, Advancing Your Strategic Plan, Actionable Insights to Create Value. David welcome.

David Grandy: Thanks Bill. Great to be here.

Bill Klaproth (host): Yeah, it's great to have you. So let me start with this. What is strategy? And can you share some of the challenges that organizations face when developing strategy?

David Grandy: Funny that we even have to answer that question isn't it in some respects. Yeah, strategy. If we look back to the origins of the word strategy, it literally was used in a military context to mean the art of leading people, getting people to actually do something, to take action. And ultimately it was about winning. And I think this is a notion that has been lost to a degree in modern times, particularly in the health industry. We don't think about, we've got an opponent, a competitor. And we need to do some things to actually win. So I think one of the challenges that organizations have is we get mired in tools and techniques. There are matrices and two by twos and different forms of analysis and so forth. And we mistake that for the actual work of strategy.

Bill Klaproth (host): So do we also fall into

the

trap of everybody's doing strategy, we need one and we don't really know what to put into it or how to execute it.

David Grandy: Yeah, I think both of those things are true. The execution side, I tend to find most organizations do reasonably well. We're good at planning. We understand how to set goals and milestones and how to work the plans.

Bill Klaproth (host): Right.

David Grandy: It's the front end of the equation, the actual formation of strategy that I think we, we often miss.

Bill Klaproth (host): Okay, so let's stay on that then. Let's talk about the effective formation of strategy. What do we need to know about that?

David Grandy: Yeah, well, so I've worked as a strategist for a long time and having gone through a process myself and with many organizations, I've been really curious about this question, where does strategy actually come from? And what I've come to believe in recent years, is that strategy is really about value creation and value capture. And there are really only a small set of ways, some specific plays that many organizations use to create value and they do it typically for two or three different types of constituents only. They create value for the people they serve, in our industry for patients, members and consumers.

Bill Klaproth (host): Yep.

David Grandy: They create value for their workforce and they create value for suppliers or people that they partner with.

Bill Klaproth (host): Okay, let me ask you this then. What is the difference between value creation and value capture?

David Grandy: Yeah. So value creation is exactly as it sounds. It's how we do things that are of material benefit to make experiences and services and products better for the people that we serve. So we're actually bringing something to life that makes them more willing to purchase or engage with our service.

Bill Klaproth (host): How are we adding value to the potential consumer.

David Grandy: That's exactly right.

Bill Klaproth (host): Okay. And how about value capture? What is that then?

David Grandy: Yeah, value capture is performance. It's what many organizations focus on. It is how do we actually operationalize what we do to either increase the price of what we offer. So make people more willing to pay more for what it is that we do. Or alternatively to reduce costs and in the middle of price and cost of course is margin, which every healthcare organization today is familiar with.

Bill Klaproth (host): Right. So you said earlier, you're obviously very passionate about strategy. You're like a strategy historian. I love it. Well, you said, so it's the art of leading people. And it's basically trying to beat your opponent. And we lose sight of that when we come up with strategy. So knowing about value creation and value capture, you also said there's three kind of silos of people you serve, community, the workforce and the supplier. So what goes into the making an effective strategy then?

David Grandy: Yeah. Well, if you go back again to that foundational definition.

Bill Klaproth (host): What is strategy?

David Grandy: Yeah, exactly. Exactly. Ultimately strategy is about doing something. And in order to do something, you've got to not only identify the goal, the ambition, the aspiration, which I think organizations do pretty well, but we also mistake that for strategy, we say, hey, we want to be the leader in value-based care, or we want to double our market share, or we want to increase patient satisfaction by X percent. Those are goals. Certainly they direct people to do some things, but the real question of strategy that we have to answer is how. What are the critical difficulties that we as an organization must overcome in order to actually achieve that ambition, that goal? This is the part of the conversation that I think we often miss.

Bill Klaproth (host): I was just going to say, is that where we go wrong?

David Grandy: It is.

Bill Klaproth (host): Okay, so help us. How do we fix this then?

David Grandy: Yeah. Well, I think the first step is awareness, right. That many organizations jump right into the process of planning and don't take a step back to formulate true strategy to say where is there opportunity, where do we have an asset that we can leverage competitively against the market or some problem? How then would we solve critical difficulties that we could imagine as we begin to leverage those assets? And then what does it actually take to move forward?

Bill Klaproth (host): Okay. So can you give us an example? Say I'm a healthcare marketer and I am tasked with increasing service line volume. Okay. And I love, we need a strategy for that. So take us through that if you would, can you just give us kind of a Cliff notes? Okay. We know the goal. You said most organizations do pretty good at identifying a goal. The how is where we go wrong. So can you take us through that?

David Grandy: Let's use an out of industry example.

Bill Klaproth (host): Okay.

David Grandy: That's a bit more generic.

Bill Klaproth (host): Okay. Perfect.

David Grandy: People could get their heads around.

Bill Klaproth (host): I love it.

David Grandy: So if you're Tesla, say a decade ago. And you decide that you want to go into the electric vehicle market.

Bill Klaproth (host): Yeah.

David Grandy: That's fine. That's a good goal. That's a nice ambition to have. The question is what are the problems or the foundational problem that you actually have to solve? And when you think about it, most people start with, well, we need to know something about lithium batteries. Yes, that's true, but at the time there were plenty of engineers and this was the technology that existed in the world. And we generally knew it. Well, maybe we need to solve the problem of how to design the car itself in a materially different way. Of course, amazing auto designers and are reasonably well understood process for doing that. The critical difficulty that Tesla had to solve, was recharging. And to do that, they needed to build all kinds of infrastructure so that when somebody purchased that car and got to the 200 mile range, they were able to recharge and go farther. If you can't solve that problem, it doesn't matter how well, you know, battery engineering or design, automobile design. That's exactly right.

Bill Klaproth (host): Right.

David Grandy: So I would argue Tesla is not an auto company. They're actually a battery infrastructure company. And you see now, all of the Tesla recharging stations that anyone else who's gone into, the EV market typically uses. They use those batteries to not only power competitor's cars, they use them to power solar in houses, even the federal government purchases, battery power from Tesla.

Bill Klaproth (host): Right.

David Grandy: That fundamentally was their asymmetric advantage over everyone else.

Bill Klaproth (host): Right. So, you start with the foundational problem that you have to solve.

David Grandy: That's right. Or the critical difficulties.

Bill Klaproth (host): Okay. So a healthcare marketer might go, okay, we want to increase service line volume of colonoscopies. Why are people not getting colonoscopies? What is the problem? Until we solve that problem. We're not going to be able to increase our volume.

David Grandy: That's exactly right. So is that a problem of awareness? Is it a problem of human psychology? Oh, I just, I don't really want to do that because I've heard those awful stories. I don't want the prep kit. Is it a problem of talent? We don't have the surgeons to perform the colonoscopy. Is it a problem of capacity? Understanding the critical difficulty and then understanding how we might solve those difficulties in unique or clever ways that actually differentiate us from the hospital across the street or from any competitor in our space. That foundationally is the work. And so you can use that mental model to start backing into a very simple framework. I like to make things simple. I have kind of a simple mind when it comes to. You know, we try and over-complicate strategy and really it is actually fairly simple. We say, you start with the ends. Right. What is the goal you want to achieve? What are the ways that you're going to get there? The critical problems to solve, the means, which are the resources, the talent, the money, the focus, the organizational commitment. And what are the key assumptions that you're making about how you'll go forward and do all of that. So ends, ways, means and assumptions.

Bill Klaproth (host): Okay.

David Grandy: It's a basic framework within which we can start saying, how do we develop some kind of competitive advantage?

Bill Klaproth (host): So I love how you say sometimes I think we may make strategy more complicated than it is, and I think that's a really good point. So ends, ways, means, and then key assumptions. That's really good. Is there any other common pitfalls or mistakes to avoid when you coming up with strategy?

David Grandy: Well, I think one common mistake is we don't invest the time in truly understanding the people we serve. And remember I said, there's really only three groups that are our consumers, our patients, our members, our customers. There's our workforce. And there's our suppliers. We don't invest the time in really understanding deeply latent needs that they might have. Pain points as they interface with us, work arounds that are maybe invisible to us; that if we just solved in some again, clever way, we would actually create outsized value for them. So in our organization, we invest a tremendous amount of time, actually going out and meeting with members as an example. We go to their homes. We shadow them to appointments. We watch the way that they interface or interact with our digital assets. And we start to form an opinion, a point of view around needs that they have, that may not be obvious. It's sort of classic Christianson jobs to be done.

Bill Klaproth (host): So that sounds like value creation. You're understanding what they need. You're solving their problem. Thereby you're creating value.

David Grandy: That's exactly right.

Bill Klaproth (host): Wow. I love that. So, when we think about long-term strategy and near-term action, how do we balance that? What do we need to know about that?

David Grandy: Yeah. Well, I think the first thing is we can't be deterred by an ambitious, difficult to achieve strategy. I think sometimes, we get into the process of strategy formation and people say, let's pick off the low-hanging fruit.

Bill Klaproth (host): Right.

David Grandy: Low hanging fruit is often rotten, it turns out. So it may not be the best way forward. So the first is, to simply say, it's okay to have ambition. We want a five or seven year view of where things need to go. We know the world will change in ways that we can't possibly anticipate over that time. So it's less about saying that is the point on the horizon that we must achieve, and more to say it allows us to take a first step. What is the simple thing, the low resource intense thing? What is the thing that if we put in the market quickly, we can learn something about, that will tell us what is the next step that we should take in service of that broader view? I think we can do both. We can walk and chew gum at the same time.

Bill Klaproth (host): Right. So for someone who is listening to this thinking, okay, I need to build a strategy for X. What are your initial tips or key takeaways or thoughts for that person?

David Grandy: First understand your constituents. Who is it that you're serving? Invest time in truly understanding needs that they have, that aren't being met. Second, understand what assets you have, physical assets, digital assets, human assets, that set you apart from the competition. Think about what are the critical difficulties now that you have to solve to meet that specific need? Hey, I've got an idea about how we could solve this thing that they need and use something that we have that nobody else has. What specifically are the problems with doing that? And what assumptions are you making and use those things as a way of forming your strategy.

Bill Klaproth (host): And then keep it simple. Like you said, ends, ways. What are the means? And then what are the key assumptions? Oh, this has been fascinating. I love talking to you about this, David, is there anything else you want to add or anything else we should know about this?

David Grandy: No, I think that's it. You got it. You can now go formulate your own strategy.

Bill Klaproth (host): You are. Wow. I love this. I just got the David Grandy certificate of strategy. I love it. Well, David, thank you very much. This has really been informative. We appreciate it.

David Grandy: Been a pleasure Bill. Thank you.

Bill Klaproth (host): Yeah, you bet. Once again, that's David Grandy. And to sign up for the SHSMD Connections virtual conference on October 20th, 2023, plus on demand through the end of the year; and the virtual conference will feature access to 50 plus sessions recorded from the September in-person conference, which we're at right now, plus all new live sessions, just go to SHSMD.org/annual to learn more and to get registered. And please join us at SHSMD Connections 2024 next October in Denver, Colorado. And if you've found this podcast helpful, please share it on all of your social channels and to access our full podcast library of over 100 podcasts, please visit shsmd.org/podcasts. And of course, thank you for listening.