Last month we introduced the concept of Strategic Management. 

We described it as future-focused, and hopefully provided some ideas that prove fruitful in the management of your practices and organizations. As Covey described, we must all be proactive in our endeavors, and developing the right strategy for our organizations assure that we will remain viable long into the future.

This month we will attempt to provide some insight into the specific processes involved in strategic management. And it is a process…..not a one-time solution. This process requires several things, the first of which is to develop an understanding of the external environment in which we operate. There are many environmental issues and influences we face and they evolve quickly. They include, but are not limited to:

1. Politics and legislative changes- The Obama Health Plan is on all our minds. How do we address the plan once/if it is implemented?

2. A rapidly changing economy- I do not need to say much about that…..we all feel it, and hope to see it change this year!

3. Demographic changes- the population is clearly aging, and learning to meet the wants and needs of that population is key to our success.

4. Social issues- a continually growing population that is more diverse than ever before. 

5. Technology- there is so much new technology that we can never be expected to bring everything in. It is important to be selective in purchasing the right technology for our operation, whether we are large or small.

6. Ever-increasing competitive changes- in health care, and in particular eye care, these are self-evident to us all. Corporate providers, changing roles of the three Os, and more and more new practices opening every day! 

With all of these things facing us, how can we ever expect to cope? We must continually scan the environment. Just like a captain of a ship at sea, we must keep our eye on the horizon and see what is coming. That process is called an environmental analysis. In this month’s article, we will specifically look at the external component of strategic management. What external forces have an influence on our success or failure? (Swayne, et.al (2008) indicates that there are a number of goals for environmental analysis. They include:

1. To identify and analyze current important issues and changes that will affect the organization.

2. To detect and analyze early or weak signals of emerging issues and changes that will affect the organization.

3. To speculate on the likely future issues and changes that will have significant impact on the organization.

4. To classify and order issues and changes generated by outside organizations.

5. To provide organized information for the development of the organization’s internal analysis, mission, vision, values, goals, and strategy.

6. To foster further strategic thinking throughout the organization. 

There are limitations. First, we can never really tell what may happen in the future, and cannot see all the changes that may come. Often we do not fully understand the impact of changes, or misinterpret them. And often, our own stubbornness may get in the way. Those who do not change with the times are destined to fail. With that said, analyzing the external environment will allow for us to be prepared to meet future needs. It is up to us what we do with the information.

What makes up the external environment?
The external environment is made up of three components according to Swayne, et.al (2008). They are the general environment, the health care environment and the service area. 

The General Environment
This segment is made up of the government, businesses, education, churches, individuals and consumers, and generally anyone or anything else that interacts with the organization outside of health care. Specific competition within the service area we will discuss separately. 

The organization must be a good partner within the general environment. Consider that organizations interact with others and play a role in the success or failure of each other. You must pay your bills on time to your suppliers, and you expect those you serve to do the same. Along the same lines, do you contribute to charitable organizations? Churches and service clubs are great organizations, and through your contributions of both time and talent, you provide support to the community. These activities may not pay you monetary dividend, but do provide excellent sources of good will. 

The Health Care Environment
This segment includes many facets, and is specific to the health of our service area/community. A few are regulatory agencies that we all must deal with, such as our state boards, accrediting agencies, etc. Also included are primary and secondary providers, hospitals, drug companies, and any other health-related organizations, particularly those we interact with on a referral basis. Lastly, but most important to us, are patients. We must constantly strive to provide excellent service to the patients we serve, and recognize that we may significantly impact their lives and the lives of their families. These people come to us in time of need, and we should be focused on solving their health care issues first and foremost, which separates health care from the general business environment. 

The Service Area
This generally includes our competition, government services that may compete, other businesses, and individual consumers. Most important for us to consider is the consumer (our patients), and our direct competition. In the terms most used by general business, we can look upon the service area as the “target market”. Interestingly, many small health care organizations of the past, particularly private practice physicians, simply hung out their shingle and patients found them. Today, the story demands we have a clear understanding of the service area and how we fit. 

Components of Environmental Analysis

• Scanning- as mentioned earlier, the captain at sea must constantly view the horizon. We must do likewise. By keeping our eyes and ears peeled, we can often pick up information that may affect our organizations either positively or negatively. We can take that information and use it to our benefit.

• Monitoring- Once we see something that may affect us during the scanning process, we can then monitor that data. Sometimes we may get bad information, and it will eventually be discredited, but that is fine. We were prepared either way to meet the challenge. 

• Forecasting- Through scanning and monitoring, we can develop forecasts that allow us to make predications. These predictions allow us to do a number of things, like adding additional staff, or decreasing our inventory. Again, we can’t always accurately predict the future, but current and historical data allows us to at least make an educated assumption. I realize how to spell a s s u m e, but an educated assumption is far better than playing defense once someone else beats us to the starting line.

• Assessing- Lastly, once the scanning, monitoring and forecasting phases are complete, we can assess our situation. How significant are the issues we face? Through the assessment phase, we can identify issues that will affect our mission, vision, values, and overall strategic plan, and design a strategy to move the organization in a positive direction.

The Environmental Analysis Tool Box
There are a number of tools we can use to effectively evaluate and analyze the external environment. The first of those is issue identification and classification. Is the issue significant? How heavy would it weigh upon the organization? If the issue is not significant, either positive or negative, we should not concern ourselves too much, but keep on scanning. The second would be discussing issues with stakeholders…those we do business with. Patients, suppliers, etc. are valuable sounding boards for issues. Another technique involves seeking expert advice. Consultants and other experts can guide you. Professional associations are places that provide us with opportunities to discuss issues with experts and our peers who have similar concerns. They can be of tremendous benefit. There are others, but we will leave you with those three for purposes of brevity. 

Conclusion
The External Environment in which we operate is extremely important to the success of our organizations. Of specific importance to those of us in eyecare today is the aging population and how we react to their wants and needs. How do we meet the needs of this population? There are many changes that will be brought to health care providers in the coming months, and staying on top of those changes is necessary for long-term success. By continually analyzing the external environment we provide our organizations with the best opportunity for success. Next month we will evaluate our competition, and how we can maintain our competitive advantage, or gain one!

References on request

Warren G. McDonald, PhD
Professor of Health Administration
Reeves School of Business / Methodist University