Introduction
Global Healthcare Exchange, LLC (GHX) is an international healthcare company that specializes in cloud-based supply chain technologies connecting suppliers and providers. By moving some of their business processes online, healthcare manufactures and distributors can reduce the cost of delivering healthcare. The founding of GHX is an example of a strategic approach to managing innovations. In the early 2000s, many businesses discovered a new market: Internet healthcare services. GHX formed as a company focusing on customer value, and not market value. It was fresh and different at the time, which resulted in a massive success as venture capitalists invested in GHX. The company managed to attract capital even at the time of global economic declines by combining healthcare and technology as well as shifting its focus towards customer satisfaction.
Problem Statement
Innovation is not a single event, but rather an extensive, complex process (Innovation as a process, Slide 27). It requires strategy, organization, and proactive links (they enable the company to cross boundaries both inside and outside with customers, suppliers, sources of knowledge) to work together (Innovation as a process, Slide 12). GHX had a strategic advantage as it presented a new idea of an open and neutral supply chain market with high-quality, low-cost options for their clients. The company explored where it could be innovative and chose to establish its competency as a customer-centered business. The market was useful for analysis of trends and shifts in healthcare, but it did not provide revenue or sales for the business as customers did. In addition to a good product offering, GHX linked with external agencies to form beneficial relationships. An alliance with Neoforma and merges with HealthNexis and Medibuy expanded the company’s participation and equity ownership.
Leveraging the skills of people outside the company (through proactive links), GHX failed to assess and utilize the potential of their employees. The company combined different structures and organizational models. It was founded by the largest names in the industry (Johnson & Johnson, Baxter International, Abbott Laboratories, etc.) that had their own established ways of doing business, but GHX was still an Internet start-up that required dynamic organizational capabilities. The company needed to form a shared culture and mission among employees, but also to be able to review its structure and adapt to the changing environment of online business.
Implementing an innovative and effective structure was crucial for the company to maximize its functional capabilities and create a favorable climate to increase overall performance (Leadership and organization of innovation, Slide 18). GHX did not know how to successfully preserve the advantages of being founded by well-established companies while creating a new, highly adaptable organizational model. Employees were not yet resistant to constant stress that was a part of the start-up’s daily operations. There was not any integrated communication system among employees that would clearly define their roles and tasks. Therefore, the focus of this case analysis is going to be the implementation of an innovative organization within GHX.
Analysis of Issues
The resource-based view (RBV) of strategy establishes that the business’ competitive advantage is primarily dependent on its valuable and rare resources (Identifying strategic capabilities, Slide 6). The resource base of every company should include core competencies dynamic capabilities, operational capabilities, and resources (Identifying strategic capabilities, Slide 18). When it comes to organizational characteristics, resources are employees (talent) as well as a combination of frameworks and systematic structures connecting employees, their tasks, roles, and the enterprise’s global vision. GHX struggled primarily with developing operational, dynamic, and core potential.
Core competencies of the organization were rooted in its employee satisfaction. GHX was founded by competitors, so the employees (that were “borrowed” temporarily) from different companies did not have any shared goals, mission, and vision. Apart from lacking an established corporate culture, the company did not ever intend to go public. Thus, it could not give employees what other dot-com businesses offered in terms of payment: stock.
The fast-growing organization like GHX had to improve and adapt fairly quickly in order to maximize its dynamic capabilities (Identifying strategic capabilities, Slide 6) that could be used to satisfy customer and market demands. Customer satisfaction was at risk as GHX could not offer a practical transaction system. The market demanded new innovative technologies as well, including a wide range of services and products at a relatively low cost in order to create a competitive value proposition. GHX was different because it was an online platform of exchange between providers and suppliers (there was novelty in process), but it did not offer any additional technological innovations regarding their products (no novelty in product/service offering) (Table 1.1 “Strategic Advances through Innovation”).
No apparent structure and the founders’ lack of experience with small teams made it difficult for GHX to achieve its full organizational potential. The company struggled to develop high performing teams out of random groups of people lacking a common purpose or goal (Leadership and Organization of Innovation, Slide 11). Facilitation of new ideas and innovation had to come not only from the company’s key individuals (the founders) but from high-performing leaders as well (Leadership and organization of innovation, Slide 4).
Recommended Action
GHX needed to thoroughly analyze its key issues and come up with innovative decisions. The need for innovation originated from the company’s lack of technological advances that would satisfy customer needs (no automation in transactions and data analysis), efficient business environment (no shared culture and goals among employees), as well as the abundance of competition in the industry (Innovation and Technology Management, Slide 4). The organization could implement several types of innovation: from incremental to radical.
Incremental innovation includes improvement to traditional components (Innovation and Technology Management, Slide 5). GHX executives identified the most successful attributes of the organizational structures in their companies (focus on financial stability, professional responsibilities, etc.) and mapped those attributes to their resources (small teams of employees, already established corporate networks, experienced and well-respected executives). The company developed the LLC Agreement that established the vision, goals, and rules. It gave employees an idea of why GHX stands out, united them around the same mission and turned them into a real ‘team’. Financial stability in the form of a base salary and additional bonuses secured employee satisfaction during an unstable period, when the dot-com empire was starting to collapse.
GHX was able to add new components for existing systems while shifting its focus from the market to the customers. Online transactions became possible, which enabled suppliers to do business on the platform. Some crucial changes were made to the company’s organization. The board of directors and the executive team (key individuals of GHX) developed an open network of frequent communication in real time through monthly meetings where each member of the board represented the interests of a key constituency. Furthermore, GHX could establish the roles of each category of employees: project team, management, and executives. The project team would be responsible for identifying core challenges, value, and prioritizing ideas. Management would launch, integrate, and scale products while executives would communicate innovation strategy, operating models, and performance standards.
GHX could benefit a lot from utilizing enterprise applications. The company’s business value goals (collaborative supply, rapid demand fulfillment, etc.) and customer value goals could be achieved through the use of Supply Chain Management (SCM). Their integrated solution included using shared market data and collaborative fulfillment to create effective distributional channels and partnerships. By developing a virtual company that uses IT to link people, organizations, assets, and ideas (Information Systems as Technological Innovation, Slide 23), GHX was able to gather information and leverage it to ensure that they purchase the exact services that meet their requirements and satisfy their customers (strategic sourcing and procurement).
Enterprise Resource Planning (ERP) could provide cross-functional information for making better choices (Information Systems as Technological Innovation, Slide 18) and fight the abundance of potential competitors. For instance, GHX could use automating technologies to analyze the competition and get relevant insights on their competitors’ business models and capabilities. The company could utilize those same technologies to innovate its product offerings by developing new market niches (Information Systems as Technological Innovation, Slide 8) for data automation that would cut costs and improve the quality of services of healthcare distributors and suppliers (GHX’s customer base). Thus, Artificial Intelligence (automation) and ERP can serve as extremely significant radical innovations that help the organization remain agile and innovative.
Through integrating strategy, innovative organization, and proactive linkages, GHX established itself as an innovative business that could generate new managerial frameworks and unique product offerings. By combining those elements, the company developed a sustainable innovation climate that allowed it to present new technologies to the market, including data automation services and an eCommerce platform. Dynamic capabilities ensure that GHX will be able to sense market trends and customer needs and create products with massive scalability and expanded reliability. Future prospects of the organization could include more Artificial Intelligence integration, data automation and management, as well as analytical business intelligence customized for each individual client.