Strategic Planning
Strategic Planning: A Guide to Success
Calvin S. Lau, DDS
Copyright 2001 Journal of the California Dental Association.
 |
One of the key business concepts applicable to the contemporary dental practice is strategic planning. Just as a dentist diagnoses and treatment plans patients, so too should a business diagnose and treatment plan its future. Strategic planning offers a systematic approach for analyzing a current situation and creating a work plan toward the future goal.
|
Faster, better, cheaper. That seems to be the credo of business today. This credo started with the National Aeronautics and Space Administration many years ago.1 But can a contemporary dental practice maintain its competitive advantage by following such a credo?
It was a freezing morning on Jan. 28, 1986, when the space shuttle Challenger lifted off with disastrous results.2 It was the 25th shuttle launch. All previous launches had been successful. Time and cost were now on the public stage with the addition of public members to the normal military crew contingent. NASA was convinced that faster, better, and cheaper would lead to its continued success. Indeed everything was faster and cheaper, but was it better? All seven astronauts were lost when a catastrophic failure occurred in an O-ring just 73 seconds into the launch. That tragedy set NASA back several years. As of this writing, NASA has reached its 101st launch and redirected its efforts to the International Space Station, a more valuable and tangible goal. Some have suggested that NASA philosophically change to faster, better, cheaper, and smarter.3
Dental practices can learn from this piece of history, but the contemporary interpretation must change. It is hard to argue with faster and better. These translate into the speed and quality that characterize much of American and global society. But if cheaper means competing solely on price, this can lead to a downward spiral from which recovery is difficult if not impossible. Being smarter, though, means adding more value to the care and services delivered. Putting quality first will also bring a more universal foundation to dentistry.
A better credo for dentistry? Better, faster, more value.
Creating Value
The worth of any enterprise in a free market is the value that the community perceives. The community in dentistry’s case needs to include not just society in general, but also the specific players. The dentist serves not only the public but also other, more specific, constituencies. Those constituencies include staff, patients, laboratories, and suppliers. Of what value is dentistry to those it serves?
The underlying goal of most businesses is to increase shareholder value. Taking a bottom-line approach might be interpreted as making more money. That is only the end result. Certainly a successful dental practice must make a profit if it is to survive, stay in business, and continue to serve society. The broader interpretation is to create more value for all constituencies and allow for everyone to win.4 What this means is that there is no fixed pie to divide amongst the players. Instead there is an ever-expanding pie from which all can profit and derive more value.
Value creation takes the self-centered approach of owner profitability to a higher level and mutually benefits all the constituencies the dentist serves. It is with the realization that value is at least a two-way proposition that the dentist can truly find continuing prosperity. To sustain profitability and a competitive advantage over the long term, the prosperity must be shared amongst those the dentist serves -- namely patients and staff internally, but also suppliers and laboratories externally.
It may be possible to be successful through a trial-and-error approach, but once again business has developed a more systematic method to reach that ever-shifting goal of success. That approach needs to have enough specificity and flexibility to accommodate change. This is the concept of a business plan and developing a marketing strategy.5
Strategic Planning
What if a dentist started each work day without a schedule? How efficient and profitable would a dental practice be if it relied on walk-in patients who had an unpredictable mix of dental needs? Some structure and organization are needed to keep a dental office functioning smoothly.
Most of a dentist’s time in a practice is devoted to patient care delivered through dental services and treatment. Compensation for providing services and treatment largely depends on performing clinical dentistry. Practicing dentists take this for granted. After all, the main way to generate dental office revenue is to provide treatment for patients. The treatment needs are established by making a diagnosis based primarily on patient history, radiographic evidence, and clinical examination. The process of diagnosis and treatment planning is very familiar to dentists. It helps to systematically set a foundation for patient care and practice productivity.
Diagnosis and treatment planning are analogous to the business concept of strategic planning. Without a treatment plan, the dentist is left to deal with too much uncertainty in conducting a dental practice. Unless the mix of care is devoted to a very narrow range of basic services like extractions and simple dental restorations, it is difficult to keep a dental office functioning efficiently, which is the basis for two other articles in this issue. Those articles will start with a broad view of operations management. This deals with allocating resources -- people, facility, materials, and equipment -- and one article discusses applying operations management to a dental practice’s functional center, the appointment schedule.
Just as the daily operations depend on a productive appointment schedule, so does the long-term success of a dental practice benefit from having a strategy6 and using strategic planning.
Strategic planning is an ongoing process that can build success in a systematic and measurable fashion.7 It is cyclical and driven by information and quantifiable data. Numbers become one of the measures for comparing where a dental practice is starting and where it intends to be. Strategic planning can be very qualitative and requires judgment, just as a treatment plan requires judgment. The dentist moderates that judgment based on personal knowledge, skills, and willingness. So too should a dentist moderate a strategic plan.
The process takes into account the vision that leadership provides.8 Vision is the general concept that characterizes what a dental practice stands for and expresses a very broad sense of what the dental practice wants to become. In most dental practices, the leadership rests with the owner. In California, the owner must be a dentist. This creates a situation in most dental practices where the dentist must play two key roles, owner and main producer. Finding time to do both well is a challenge that may lead the dentist to default to decisions that fail to benefit the practice for the long term.
How can a dentist find time to strategically plan when the pressures of productivity and generating income seem so directly tied to having a busy clinical operation? The short-term focus of the dentist’s spending time doing just clinical dentistry sometimes becomes the default long-term focus as well.
It is helpful to look at strategy and planning separately. Strategy is a way of thinking organizationally, using and leveraging competencies, and increasing value. Planning is also a process, but one that tries to foresee likely scenarios and systematically accomplish a desired outcome. It is in this sense that strategic planning can benefit the dental office. Identifying and implementing the mission, objectives, and goals are the heart of strategic planning.
Applying Strategic Planning
Taking a business slant on the dental world, what better place to start than where it counts so highly? The bottom line. How much money does a dentist want to earn each year? What will be the profit?
One way to determine this is to begin with the intended profit and work all the way back to the required actions identified in small measurable quantities. The dentist can choose a number and convert that into daily performance or even hourly production by converting the intended profit by the variables that affect the bottom line. The main yearly variables to factor in would be:
* Percent overhead
* Collection rate compared to production rate, and
* Number of days the office will be open.
This type of estimation can be broken down to the hourly productivity a dental practice must achieve to reach that monetary amount. In other words, a dentist can look at past performance and use that as a basis for forecasting future earnings. This is also a reality check. If the dental practice has not consistently been performing at the desired level, then doing the same thing in the next annual period will probably lead to the same results unless some significant changes occur. It makes more sense to determine what should be done in the future by design, rather than by happenstance. That is the value of strategic planning.
Implementation
It is very tempting to say that a dentist is capable of successfully implementing strategic planning in the dental office. Sometimes with years of practical experience a dentist is able to consistently produce a profit and add value. Yet it took more than experience for that same individual to become a dentist. It took education and formal training. This is where is the importance of an outside consultant can play a pivotal role in facilitating a dentist’s achieving desired outcomes on a consistent basis. If the dentist lacks the business tools and understanding to implement strategic planning, hiring the expertise will accelerate the process and avoid fundamental errors that may not be intuitively obvious.
The decision about whether to hire a consultant or to try to perform the task with in-house resources will typically rest with the dentist. There is no best approach adaptable to all dental practices. To formulate the appropriate strategic plan, a valid assessment of the practice must occur. The key is the diagnosis, whether it is a dental ailment or a business situation.
With that caveat stated, the dentist wanting to do this process in-house should enlist all available resources for developing a strategic plan.
The Team Approach
The majority of dentists still work in a solo practice. That doesn’t mean that this will always remain the situation. In fact, the demographic trends that the ADA measures in its Survey of Dental Practice9 clearly point to a shift from solo practice to dental practices having two or more dentists.
Whether in solo practice or in a group, the vast majority of dentists have staff to keep the dental office functioning in the clinical and administrative areas. Delegation of duties is taken for granted too. Within the licensed and unlicensed categories for dental allied health personnel, there are dental hygienists, dental assistants, and laboratory technicians. Most dental offices also employ administrative staff to deal with appointment scheduling, billing and collections, inventory ordering and management, and myriad other essential tasks to support the delivery of dental care and services.
Just as a dentist utilizes a team for the day-to-day operations of the dental practice, so too can the dentist involve the dental office staff in the strategic planning process. In fact, without the active involvement by team members, the culture of the dental office enterprise tends to take a top-down approach. While there is still a place for an authoritarian approach, when it comes to planning the direction of an enterprise that relies so heavily on delegation of duties, it makes better sense to involve this constituency and gain the support of the people who will implement the system and profit from its success.
Vision
In today’s business culture, the planning cycle often starts with leadership determining the vision for the organization. From this vision, the team -- employees representing the various components of an organization -- develops a mission with general goals and measurable objectives. This is the framework that can be likened to establishing a treatment plan. This is literally starting with the end in mind and working the business systems back from that point. Some differentiate the strategic planning process from long-range planning by the envisioning perspective that strategic planning enables, which opens up more creativity and dreaming than forward-moving long-range planning tends to entail. Vision implies thinking outside the box. That is, rather than being limited by what the current circumstances seem to dictate, the process enables nonlinear ideas to develop. Strategic planning provides a framework with which to tap the human creative potential.
Carrying the analogy of strategic planning and treatment planning further, the dentist will gather information to form the database for making judgments, recommendations, and decisions. In strategic planning terms, this is the classic SWOT analysis, which stands for strengths, weaknesses, opportunities, and threats. That is essentially the equivalent of establishing the current condition and making an assessment about the risks, benefits, and alternatives. If this sounds like the dental equivalent of informed consent, that is no mistake.
All of this gathered information forms the basis for the treatment plan. In business terms, that is the strategy or strategies that the dental office will use to reach its objectives. Just as the dental treatment plan is written down, or at least electronically recorded, so too should the strategic plan of a business be documented. In order to be useful, the strategic plan needs to have qualitative and quantitative measures for assessing the intended actions and potential outcomes. Additionally, the process needs to be iterative via a periodic cycle in order to validate the judgments and assumptions made in formulating the strategic plan. Having ways to compare performance by using specific measures can be likened to the recall appointment. How did the practice or patient do over time after completing the strategic plan or treatment plan?
Key Element -- the Recall
The analogy of a treatment plan and a strategic plan holds true all the way through the cycle. A key element of most dental practices is the recall system for monitoring patient health and progress. Typically, the periodontal needs of a patient coincide with the timing for such a periodic evaluation. So too does a strategic plan need continuous monitoring.
The recall affords an opportunity for course correction based on the most current condition. The strategic plan also needs such an iterative process as well. The end is just another beginning in the continuous process of strategic planning.
Refinements
Further refinements of strategic planning could also look at the mix of services that the dentist has historically provided and whether that is in alignment with what the dentist would prefer, what patients want, and the current trends in dental therapy. Another aspect to consider is the quality and quantity of new patients coming into the practice. If the dentist is providing successful care, then the current patient base should not need retreatment at frequent intervals. This leads to the conclusion that new patients or a broader mix of services, including new technology, will be important aspects of a dental practice’s not only surviving, but thriving in the new century.
One final lesson from NASA. The NASA Strategic Plan 200010 states: "If a high-performance organization is to achieve its strategic objectives, it cannot simply practice good management; it must manage strategically. Ordinary good management entails responding to constituencies and customers, minimizing costs, seeking efficiencies, and investing in resources for maximum returns. By integrating these general management practices with management of our strategic processes, we seek to manage strategically. Managing strategically means that all parts of the organization proceed together coherently, comprehensively, and expeditiously toward the achievement of a single set of strategic goals. This requires that we leverage our limited resources, standardize processes where it makes sense to do so; streamline processes for timely results; and ensure rapid, reliable, and open exchanges of information."
Conclusion
One of the key business concepts applicable to the contemporary dental practice is strategic planning. Just as a dentist diagnoses and treatment plans patients, so too should a business diagnose and treatment plan its future. The recommended process is strategic planning. It offers a systematic approach for analyzing the current situation and leads to objective-based results that are measurable and realistic.
The rewards are many. Engaging the dental team in this process provides a sense of ownership and control that traditional authoritarian approaches often miss. While the dentist still remains the key person in providing leadership, the management of the multiple levels and aspects of the dental office is shared amongst the people whose destiny is dependent on successful performance. Dentists should enter the 21st century with the flexibility and control that business requires. They should start with a strategic plan.
Author
Calvin S. Lau, DDS, is in private practice and a clinical professor in the Department of Restorative Dentistry at the University of Southern California School of Dentistry. He is also a student in the Executive MBA Program, Marshall School of Business, USC. His expected date of graduation is May 2001.
References
1. The faster, better, cheaper philosophy was implemented by NASA after the Cold War ended, but engineers have used this approach for years. http://www.medserv.dk/comp/2000/03/20/story04.htm
2. NASA, STS-51L Challenger Mission Profile. http://science.ksc.nasa.gov/shuttle/missions/51-l/mission-51-l.html
3. Spaceviews, March 2000. http://www.spaceviews.com/2000/03/19b.html
4. Schnaars SP, Marketing strategy: Customers and Competition. Free Press (Simon & Schuster), 1998, pp 186-206.
5. Corey ER, Marketing strategy -- an overview, Harvard Business School note 9-500-005, 1999.
6. Porter ME, What is strategy? Harvard Business Review Nov-Dec 61-78, 1996.
7. Merchant KA, Modern Management Control Systems: Text and Cases, Prentice-Hall, 1998, pp 334-5.
8. Kotter JP, What leaders really do. Harvard Business Review May-June 103-11, 1990.
9. ADA, 1998 Survey of Dental Practice -- Dentists in Solo and Nonsolo Practice
10. NASA, Strategic Plan 2000, 46, 2000. http://www.hq.nasa.gov/office/codez/plans/pl2000.pdf
To request a printed copy of this article, please contact/Calvin S. Lau, DDS, 1127 Wilshire Blvd., Suite 1608, Los Angeles, CA 90017-4057 or at cslau@hsc.usc.edu.
