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Traditional Manufacturing Consulting Firms should explore the Blue Ocean Healthcare Services Market

Recent advances in technology is revolutionizing industrial productivity, lowering cost structure and presenting new opportunities to provide the world market with innovative products. Traditional trade barriers between nations are vanishing; with the proliferation of internet and subsequent communication technologies, market information is available world-wide in real-time. Although these wonderful features of the world economy have been harnessed by corporations around the globe, there are hidden detriments as well. These rapid changes have commoditized traditional marketplaces faster than ever before, forcing companies to become entangled in price wars to stay competitive, resulting in ever-shrinking profit margins [6]. In order to succeed in the future, companies should focus on BLUE OCEAN strategies by creating and competing in “uncontested market space” and “making competition irrelevant” instead of fighting for market share in highly competitive RED OCEANS [6]. One critical element in a BLUE OCEAN is to align corporate functions and activities in order to achieve differentiation and low cost simultaneously [6]. Technology innovation, although advantageous, is not the defining characteristics of a BLUE OCEAN firm; nor is the myth that incumbents are at a disadvantage in creating blue markets. A large research and development (R&D) budget is not the prerequisite for creating blue markets: the key is proper managerial action and strategy, which can create long lasting brand value [6]. BLUE OCEAN strategy adopters benefit from economies of scale and have “first to market” advantage which makes would-be competitors entry difficult [6]. In summary, to be successful and profitable, corporations competing in traditional RED OCEAN markets should shift their focus on identifying strategies for creating, capturing and protecting BLUE OCEAN products and/or services.

In the mid-1970’s, the Japanese automaker Toyota created a BLUE OCEAN in America with its small and reliable line of automobiles. Toyota introduced and successfully implemented the tenants of Lean Manufacturing (often simply stated as: "Lean") which resulted in its affordable and reliable line of vehicles [4]. Lean Manufacturing is a production practice which considers the expenditure of resources for anything other than the creation of customer value to be wasteful; thus, a target for elimination [3]. The main objectives are to design out overburden (muri), inconsistency (mura) and eliminate waste (muda) [3]. These concepts, which were successfully implemented in the manufacturing industry, can also be applied to the service sector. The healthcare (service) industry differs in many ways from the manufacturing (product) industry; however, if thinking simply from a process perspective, many similarities exist. Similar to building a car, the task of providing healthcare to patients requires workers to execute multiple simple and complex processes in a defined sequence to provide value to the customer (i.e. patient). Waste, in terms of money, time, supplies and inventory, should be eliminated in these value additive healthcare services. Traditional manufacturing consulting firms should exploit the BLUE OCEAN opportunities within the service industry and expanded their product offerings in the form of healthcare. Firms should collaborate with healthcare organizations to implement business improvement, productivity and downtime reduction solutions. These solutions can minimize process variation and eliminate wasteful activities which lead to increased capacity, throughput and result in improved patient care and satisfaction. And most importantly, reduce the ballooning healthcare costs.

Application to healthcare has been limited and focused mainly on operational aspects using original Lean concepts. A more integrative approach would be to pay more attention to socio-technical (interaction between people and technology) dynamics of Lean implementation efforts. Every car produced on an assembly line has the same specifications, so standardized time (or “takt”) and resources for production of a car can be determined [3]. Unlike vehicle manufacturing, each patient is different in terms of needs and condition; a patient with nominal fever is not the same as the patient requiring an urgent surgery. Another industry difference is in demand and inventory storage. The demand for vehicles can be estimated based upon production capability, seasonally adjusted annual rate (SAAR) and dealer demand forecast [5]. Unlike vehicle manufacturing, it is difficult to estimate the number of people who will become ill or have accidents and require hospitalization. If vehicles are overproduced they can be stored for future sales; in healthcare, it is impossible to use up excess capacity if no patient demand exists.

In summary, Lean concepts have the potential to greatly improve healthcare and present a huge BLUE OCEAN market for consulting businesses. At the same time, methodological and practical considerations exist which need to be factored into any decision. If all aspects of implementation are not considered or understood, Lean can and will fail, adding to current costs and making it difficult to improve upon existing healthcare services.

References
1. Lean Manufacturing, Wikipedia, Accessed: 3-Oct-2010. URL: http://en.wikipedia.org/wiki/Lean_manufacturing
2. Toyota Production System, 3-Oct-2010,URL: http://en.wikipedia.org/wiki/Toyota_Production_System
3. Toyota Production System: Beyond Large-Scale Production, Taiichi Ohono, Diamond Inc. Tokyo Press, Japan
4. The Toyota Way, Jeffrey K. Liker, McGraw-Hill Press, 1998
5. How Toyota Became #1, David Magee, Penguin Group, 2007
6. Blue Ocean Strategy, W. Chan Kim & Renee Mauborgne, Harvard Business Review, 2004

Original Source: “Blue Ocean Strategy Concept Paper”, Deshpande A., Evans A. & Roberts M.

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