Internal Consultants and the Strategy Process

Internal Consultants and the Strategy Process

A Presentation for AIMCEva Eagle, Director of Special Projects

Kaiser Foundation Health Plan, California DivisionMay, 2001

Kaiser Permanente

Kaiser Permanente: Size & Geographic Scope

4

Kaiser Permanente and Related Organizations

Individuals Employers Government

Kaiser Foundation Health Plan, Inc

Kaiser Foundation Hospital

Permanente Medical Group

owned

contracted contracted

salaried

Kaiser Permanente

IBM, etcUS Govt

This is not an organization chart--dotted arrows represent contractual relationships only; large solid arrows represent customer payments.

5

Kaiser Permanente - Features

Key Role of Doctors -- Partnership Between Medical Group and Health PlanGroup PracticeIntegrated Facilities and ServicesPrepaymentEmphasis on Preventive Medicine and EducationHigh QualityPopulation-Based MedicineNot-for-Profit

INTERNAL STRATEGY CONSULTING -TWO INDUSTRY SURVEYS

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Skills and Focus of Strategic Planners

1.0

2.3

3.0

3.0

3.0

3.3

3.7

4.3

4.3

4.3

4.5

4.7

4.8

4.8

0.0 1.0 2.0 3.0 4.0 5.0

1=Not Important, 5=Very Important

Game Theory

Hoshin Planning

Scenario Planning

Porters Model

Reengineering

TQM Tools

Risk Analysis

*SWOT and Gap Analysis

Benchmarking (Int/Ext)

Core Competence

Portfolio Analysis

Stakeholder Analysis

Industry Analysis

Competitor Analysis

A wide variety of techniques are used in strategic planning.

Source: APQC, The Changing Role of Strategic Planners*Also Core Competence and Resource Capabilities Analysis

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2.6

3.0

3.6

3.6

4.0

4.2

0.0 1.0 2.0 3.0 4.0 5.01=Not Important, 5=Very Important

Consultants

InternalBenchmarking

Articles

Conferences

ExternalBenchmarking

Sr. ManagementDirectives

Source: APQC, The Changing Role of Strategic Planners

Strategic planners are expected to “bring the outside in,” but their work is also strongly determined by senior management directives.


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3.2

3.8

3.8

3.8

4.2

4.4

4.6

4.8

0.0 1.0 2.0 3.0 4.0 5.0


IT

Controller

HR

Market Research

R&D

Budgeting

Capital Budgeting

Resource Allocation

Strategic Planners Need Strong Links To Other Functional Areas.



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4.64.8

4.04.6

4.24.8

4.03.2

3.63.3

0.0 1.0 2.0 3.0 4.0 5.0

Level of Significance

Process Owner

Coordinator

Facilitator

Analyst

Decision-Maker


Strategic planners at the Business Unit level have a greater focus on analysis and decision making than corporate planners. However, the skill sets required are more similar than divergent.

Although the focus differs between corporate and BU level strategic planners, both groups rank the coordination, facilitation, and process development of strategic planning as a high priority

BU strategic planners place somewhat more emphasis on analysis and decision making within the strategic planning process, whereas corporate planners place more emphasis on coordination and facilitation.

SBU Level Corporate Level



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Insurance

Red Company Red Company

Chemicals

Orange Company Orange Company

Integrated Health System

Yellow Company Yellow Company

Hospital and Physician Network

Green Company Green Company

Pharmaceuticals

Blue Company Blue Company

Computer Graphics

Purple Company Purple Company

Manufacturing

Pink Company Pink Company

Insurance

Black Company Black Company

Chemicals/Petroleum

Gray Company Gray Company

Chemical Manufacturing

Light Blue Company Light Blue Company

Utilities: Energy

Dark Red Company Dark Red Company

Chemicals

White Company White Company

KP Benchmarking Project--Strategic Planning ModelsKP staff interviewed 12 companies for our Strategic Planning Benchmark project. These companies vary in size, structure and industry.

12

0

5

10

15

20

25

30

35

40

45

Red C

ompany

Orange

Company

Yellow C

ompany

Green Compan

yBlue C

ompan

y

Purple

Company

Pink Com

pany

Black Company

Gray C

ompany

Light Blue C

ompany

Dark R

ed Compan

y

White

Com

pany

Cor

p/B

U S

trat

egic

Pla

nnin

g St

aff

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Total E

mployees

Corp Strategic Planning Staff BU Strategic Planning Staff Total Employees

Total Strategic Planning Staffing vs Total Employees

* BU Strategic Planning Staff is estimated according to # of SBUs and FTEs

Although larger companies devote more resources to Strategic Planning, the amount varies among these companies. Some of the variation is explained by the tenure of senior leadership and their ability to use intuition to make strategic decisions

Company Data and Business Model Analysis

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0

5

10

15

20

25

30

35

40

45

Red C

ompany

Orange

Company

Yellow C

ompany

Green Compan

yBlue C

ompan

y

Purple

Company

Pink Com

pany

Black Company

Gray C

ompany

Light Blue C

ompany

Dark R

ed Compan

y

White

Com

pany

Cor

p/B

U S

trat

egic

Pla

nnin

g St

aff

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

$40.0

$45.0

Sales/Revenue ($B

illions)

Corp Strategic Planning Staff BU Strategic Planning Staff Sales/Revenue

Total Strategic Planning Staffing vs Sales/Revenue


Higher Sales/Revenue has a greater correlation with increased Strategic Planning staff. Some of the difference is explained by the degree of formalization surrounding the planning process and the BU planning structure


14

0

5

10

15

20

25

30

35

40

45

Red C

ompany

Orange

Company

Yellow C

ompany

Green Compan

yBlue C

ompan

y

Purple

Company

Pink Com

panyBlack

CompanyGray

Com

pany

Light Blue C

ompany

Dark R

ed Compan

y

White

Com

pany

Cor

p/B

U S

trat

egic

Pla

nnin

g St

aff

0

50

100

150

200

250

Age (Y

ears)

Corp Strategic Planning Staff BU Strategic Planning Staff Age (Years)

Total Strategic Planning Staffing vs Age of Company


An inverse relationship exists between the age of the company and the total number of Strategic Planning staff


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Among our benchmark companies, four basic models emerged for Strategic Planning.

1. Distinct Corporate Planning Group: Dedicated and Centralized Staff for each level

2. Combined Corporate and BU Planning Group: Dedicated and Centralized Staff

3. No Strategy Group: Single Dedicated Facilitator with Decentralized Staff

4. Complete Decentralized Planning: No Dedicated Staff and Completely Decentralized

Four Models for Strategic Planning Structures


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Business Unit Heads

Business Unit Heads

Strategy Consulting Team

Strategy Consulting Team

BU AnalysisBU Analysis

Executive TeamExecutive Team VP StratVP Strat

CEOCEO

Corporate Plans

Corporate Plans


Business Unit Heads

Business Unit Heads

Strategy Consulting TeamStrategy Consulting Team



CEOCEO

Capital Investment ManagementFinancial and Competitive AnalysisDetailed Analysis at all levels

Benefits:

Drawbacks:Speed“Paralysis by Analysis”Inconsistent Communication among Planning Groups


Competitive and Market AnalysisMore Flexible and ResponsiveMore Project/Issue based

Benefits:

Drawbacks:Inconsistent Communication between BU Heads and Planning GroupLess Detailed Analysis

Total # of Companies:2 of 12


Distinct Corporate Planning Group

Combined Corporate and BU Planning Group

Four basic models have emerged for Strategic Planning


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CEOCEO

Business Unit Heads

Business Unit Heads

BU AnalysisBU AnalysisBU AnalysisBU Analysis

Business Unit Heads = Strategic Planning Team

Business Unit Heads = Strategic Planning Team


Executive TeamExecutive Team

CEOCEO


Flexibility/SpeedBottom Line Accountability

Benefits:

Drawbacks:Less Detailed AnalysisInternal FocusLess Alignment of Strategies

Organization-wide InvolvementSenior Leadership AccountabilityDegree of Ownership

Benefits:

Drawbacks:Fewer Analytical ResourcesLess Forward-Looking Perspective



Complete Decentralized Planning

No Strategy Group: Single Facilitator

Four basic models have emerged for Strategic Planning


REFLECTIONS ON INTERNAL STRATEGY CONSULTING

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Factors That Shape Internal Strategy Consulting

Stability and Change in the IndustryLeadership StyleStrategic Constraints

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Shaping Factors: Stability and Change

Broad Industry TrendsCompany PerformanceContext for Change

21

Shaping Factors: Leadership Style

Intuitive v. DeliberativeInterest Based v. Task BasedLong Term v. Short Term View

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Shaping Factors: Strategic Constraints

Annual Contract Cycle v. Product Life Cycle

Visibility of Strategic Milestones

Capital Intensiveness and Planning TimeframesImpact of RegulationCatastrophic Events

EXTERNAL CONSULTANTS: CHALLENGE AND OPPORTUNITY

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Internal v. External Consulting

External consultants should be used when:External perspective is valued

An expertise does not exist internally

The need is so large or the scope so short in duration that outsourcing is required

Not every project is appropriate for internal consulting staff.

25

Best Practices In Working With External Consultants

Facilitate their use when neededBecome the client or control pointIf you can’t manage, then partnerWhen necessary, replace them

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Best Practices: Facilitate Their Use When Needed

Be the first to admit they are neededResourcesSkillsCredibilityPolitical neutrality

Suggest good firms Learn about each firm’s strengths and weaknessesOffer to help make it work

Recognize when external consultants are needed and help your organization meet its needs.

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Best Practices: Become the Client

Put them to work for YOUHire externals to extend your own reach: skills, numbers

Or offer to help manage themBe the first point of contactSeek a role in choosing firmReview all agreementsInsure short, targeted engagementsReview all deliverablesCreate a discipline about scope creep

……Or at least the client’s agent..

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Best Practices: If You Can’t Manage, Then Partner

Demonstrate your eagerness to learnJoin their teamsEstablish yourself as a valued partnerAsk for visibility Require externals to transfer knowledge, skills, and electronic tools or documents to your staff

Sometimes directing the external consultants is not an option. In that case, secure a partnership role.

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Best Practices: Reclaiming Your Territory

Learn

Track costs carefully and share them--compare these to your own costs

Infiltrate the project until it’s yours

Demonstrate results AND savings

Eventually you should be able to take over from the external consultants, either at the end of an engagement or, if the arrangement is open-ended, at whatever time you can make them superfluous.

Strategy Consulting in the New Economy

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The New Economy: Best IC Practices

Best Practice for Internal Consultants:Educate yourself--then your leadershipTrust your skillsAssess the impact on your business--

– repeatedly!Have an approach in your pocket

Present it to panicked leadership to show they can move forward with youKeep showing it to “avoiding” leadership and ask influentials to talk with them

If things get bad enough, go to another organization where you can have an influence

Leadership reactions may vary between ignoring major change and deciding that they need outside help to deal with change. This is true for the “new economy” or any other potentially disruptive change in your industry.

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Eva Eagle: Managing Director of Special Projects

Eva Eagle is the Managing Director of Special Projects in the Strategic Planning and Consulting Department for the California Division. She is currently working on special assignment to the Kaiser Permanente Partnership Group to coordinate KP’s e-strategy initiatives. During the past decade in the health care industry, Eva has demonstrated her skills in strategic and business planning, project management, market analysis, service planning, and decision support. During two decades as a consultant, she has developed skills in both quantitative and qualitative analysis.

Prior to taking this position, Eva held positions in KP as the Director of Planning and Analysis, Director of Strategic Development, Business Plan Coordinator, and Planning Coordinator. She has worked for the full range of clients within KP, from specific markets to Program Offices. These projects have included the competitive positioning assessment for the Northern California Region, development of two Regional business plans, strategic planning for KFH/HP, organizational redesign, development of a methodology for quantifying community benefit activities, and development of commoncopay structures for the California regions.

Before coming to Kaiser Permanente, Eva was a project manager for MPR Associates in Berkeley, California, a consulting firm specializing in research on education and employment, Eva has also worked as a researcher with UC’s Survey Research Center,a statistical consultant at UC Berkeley, a lecturer at UC Berkeley, and a school teacher.

Eva holds a Ph.D. in political science from the University of California at Berkeley, with emphasis in research methods, public opinion research, and organization theory

Documents

Internal Consultants and the Strategy Process