Dollarize to Save Big
Savings Beyond Price -Weekly eNewsletter – June 10, 2009
Robert T. Yokl
President & Chief Value Strategist
Dollarize to Save Big
Greetings,
One of the techniques that we teach in our advance value analysis training programs is to “dollarize to save big” so that you can, for the first time, negotiate out unwanted and unneeded functions and features on your customer’s requested new (or existing) products, services and technologies. This is a powerful tactic that you need to understand and then consistently employ in all of your commodity negotiations with your customers.
Here’s an example of what I’m talking about! There was a recent study conducted by J.D Power asking potential car buyers what functions and features they desired in their cars. This was done without showing them the price of these options. Naturally, one of the highest rated features (second on this list) was a navigation system, but when these same buyers were shown the cost of the navigation system ($1,500) their ranking for this option dropped from second to 10th on their wish list.
Why did this happen? Because when you dollarize the functions or features for any commodity purchase you give your customers a REALITY CHECK to make sure that they absolutely, positively need it. In most cases, they won’t select a high price option if they can’t value justify it in their own mind.
Here’s another example? If you would dollarize how many ports you clinicians need in your IV sets ($1.00 each), you will find most clinicians won’t select more ports then they actually need to get their job done. On the other hand, if you ask these same clinicians how many ports they require in their IV set without dollarizing, every one of them will select the maximum amount available. It’s just human nature to ask for more then you really need to give yourself a safety zone to work in.
So, if you want to dramatically reduce the total cost of everything you are buying don’t forget to “dollarize to save big” when you are negotiating with your customers on the things that they say are really important to them. You will be pleasantly surprised at the savings results!
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
1-800-220-4274
P.S. Is it time to think about advanced training for your value analysis team/committee? With many hospitals about to start a new Fiscal Year with more challenging savings goals than ever before, you may want to give your teams an added advantage with advanced value analysis training.
How to Create, Manage and Maintain High Performance Value Analysis Teams
Healthcare Supply Chain Best Practices
How to Create, Manage and Maintain High
Performance Value Analysis Teams
Take Your Value Analysis Savings and Quality Improvement Program to a Whole New Level of Higher Performance and Quality Results
Webinar Objectives:
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Evolution of Supply Value Analysis Committees and Teams?
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Where They Came From
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Where They Are Going
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What Works
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What Doesn’t Work
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What Are the Results You Can Expect With A High Performing Value Analysis Team(s)?
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Teams Vs. Committees, Which Works Best?
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What Are the Key Components to a Successful Value Analysis Team?
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Structure
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Strategic Vision
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Management Backing
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Fueling the Savings Fire
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Team Dynamic
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Solid Leadership Model
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Repeatable System
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Strong Reporting
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How Do You Set Up a Win-Win Value Analysis Program/System?
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Convincing Senior Management that this is the Right Way to Go
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Creating A Value Analysis Strategic Plan
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Gaining Peer Participation and Buy-In
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Making it Happen!
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How Do You Manage Team Members with Competing Priorities?
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Lean Management
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TQM
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Six Sigma
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Service Excellence
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Managing Their Departments and Jobs
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Other Special Projects
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How Do You Break Through the Barriers that Hold Value Analysis Teams True Performance Back?
Thursday, June 17th – 1:00pm Eastern
All Registered Attendee’s Will Receive a Copy of the Webinar Slides and Audio Replay at No Cost to You!
PLUS...You Will Also Receive a Copy of SVAH’s Value Analysis Strategic Planning e-Workbook
Strategic Supply Chain Webinar Series Leader – Robert T. Yokl, President/Chief Value Strategist and Robert W. Yokl, VP of Operations, Strategic Value Analysis in Healthcare
Remember…The Webinar May Be FREE But The Information is Priceless
Good Buying Decisions
Savings Beyond Price -Weekly eNewsletter – March 26, 2009
President & Chief Value Strategist
Good Buying Decisions
Greetings,
We would all like to think that when our value analysis teams make high-quality buying decisions they are logical, unemotional and are anchored in fact. The scientific truth is that most of our VA teams’ buying decisions are filled with emotion and lack rational deliberation. These poor decisions are caused by impatience and the absences of a systematic repeatable decision-making process.
To truly make good buying decisions on every new product, service or technology that you buy, your value analysis teams require the proper framework, wide-ranging information sources, and clear alternatives to compare and contrast the many choices that should be available to them in making good decisions.
It’s all about choices! Good decisions are based on choosing the best alternative from multiple options that your VA team has brainstormed, investigated and cost-justified not just selecting the first-best idea that someone has suggested. They need, at minimum, a second and then a third best-idea in order to avoid making the wrong decision.
For example, if a clinician recommends to your VA team a new cath care kit be purchased since it’s less expensive than your current kit that’s not a good enough reason to buy it, until you have investigated at least two additional kits to ensure you are making the right buying decision.
Good decisions, believe it or not, don’t come naturally. If they did, we would never make a bad decision. If left to chance, our natural human tendencies (haste, empathy, illogical thinking, and emotions) will lead us to bad decisions every time. That’s why good decisions by your VA team(s) should be built on facts, not opinions, should be comprised of multiple choices and use of scientific logic to determine the proper outcomes so you can avoid your team member’s natural tendency to rush to judgment.
Is this the way your VA team(s) is making their decisions today?
avings one penny at a time.
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
1-800-220-4274
P.S. If you haven’t downloaded our new webinar “Game Changer: Recession 2009” then you will be missing my predictions that can smooth the way for your supply chain survival plan this year.
Why Do You Need a Team Mission Statement?
We are in the process of assisting a client who is forming three new value analysis teams that will be meeting for the first time in January. However, before these three teams get down to their hard work of saving money, we will insist that they spend quality time developing and agreeing on their team’s mission statements. Why is this important?
After 22 years of forming, training and coaching teams we have found that if a team is to reach their savings goals they need to have a common understanding of the team’s purpose, which gives a team a firm foundation for savings money. Right out of the gate it also helps them define success and establish boundaries for what is and is not included in their team work. The best way to do so is to have your team develop their own customized mission statement.
Your mission statement should describe the purpose of the team, distinguish your team from other work teams, let your team understand what work falls within their scope and is clear, understandable and brief. Here’s an example of a value analysis team’s mission statement to give you an idea of what your team’s mission statement should look like:
“ This Value Analysis Team is a Dynamic Interdisciplinary Group Dedicated to Reducing the Total Supply Cost (all Supplies and Purchase Services) of our Hospital While Maintaining Quality Provisions of Service to all Customers”
Notice that this mission statement is clear, understandable, brief and easily remembered. It doesn’t need to be long or complex to make it a good mission statement. It simply needs to be is clear statement of purpose that every team member agrees to.
The best advice I can give you on teaming is don’t start or re-invent any team without giving it purpose, boundaries and focus on what it is supposed to do vs. what it isn’t supposed to do. This way you won’t need to keep answering the question for your team members “why are we here”.
The Case for “Know-Nothing” Value Teams`
When we orientate our client’s executive management teams for the first time on how our Team-Based Project Management™ Team model works they can’t believe we espouse the concept of “Know-Nothing” value teams. Or, to put it another way, we recommend assigning value analysis projects to value team members from outside the area of their expertise to obtain the maximum results. These executives predictable first reaction to this new and different idea is that it doesn’t make any sense.
On the contrary, we have found over the last 12 years that if you want different results than you have been achieving on your value analysis projects then you need to embrace a disconnected value team model to obtain new, better and more lasting results. Here are six reasons why this new, different and client tested model works every time:
1. Unbiased Analysis
All value team members have built-in biases about the project, services and technologies they use. Therefore, to insure an objective, data-driven and arms-length view of the issues it is critical that a project manager be assigned who doesn’t bring any baggage with them that will negatively affect their projects efforts.
2. Eliminates Preconceived Solutions
We call this rush to judgment: a project manager deciding prematurely what the solution should be for their value analysis study. Having a project manager for outside the home of the project, service or technology under investigation virtually eliminates the problem.
3. Reduces Turf Protection
If you own (i.e. use, recommend or are an advocate of) the product, service or technology under investigation and are assigned a project on your turf, you will have a natural tendency to protect your turf from any change whatsoever. However, if you have NO ownership you are free from organizational and cultural pressure to give an independent solution to the case at hand.
4. Stretches Project Managers
You have heard the expression that a person “phoned in their report” with little or no effort on their part since they didn’t take the project seriously or thought they knew ALL the answers and the right solution to the problem. This doesn’t happen when a project manager “knows nothing” about a project and is then forced, by their ignorance, to thoroughly investigate the subject at hand. The big benefit is that you won’t have predefined solutions to your value analysis studies before they even get started and the quality of your VA studies will improve exponentially.
5. Increases Team Knowledge
You will quickly notice that when you employ the “Know-Nothing” principles to your value team model it will straight away promote a cross-pollination of new and better ideas and knowledge heretofore missing from your value methodology. It will also surface new relevant facts and a candor that will lead to much better outcomes.
6. Keep Ideas Fresh
Most fresh ideas come from without, not within an organization, department or unit. Once you understand and incorporate this paradigm shift into your value analysis methodology you will be quickly rewarded with more original ideas and genuine breakthroughs in your service quality and total cost reductions than ever before.
Change management is ALL about setting the stage for change, not forcing change to happen. The “Know-Nothing” concept is one technique that we have employed for 12 years with our client’s value teams that made change happen naturally, organically and logically. I firmly believe that you too can make use of this concept to make a big leap forward in your value teams’ performance.
Boost Your Value Teams Productivity by 87% or More!!
Are you ready to build high-performance teams that keep your project managers on track, on budget, and on target to achieve even better and faster results?
If your answer to this question is a NO, you can stop reading this column…now. However, if your answer is YES, keep reading since I’m going to share with you one little known secret of high performance value teams. A secret that will enable you to virtually guarantee successful savings implementation every time, minimize communication gaps, and optimize your team’s time, money and resources.
The secret is for you to invest in project management software that will: (i) expand your ability to manage and control all of your value analysis projects in real-time, (ii) give a tangible structure to your value analysis studies vs. winging it, (iii) expertly apply value analysis concepts to your projects, and (iv) document all projects and savings.
Just the other day I was talking to one of our IDN clients about what’s new in his supply chain world. He told me that he is now is employing project management software to manage all of his savings projects and this has boosted his project manager’s productivity by double digits.
More importantly, this supply chain professional now has piece of mind that his projects are on track, on budget and on target. Before buying the project management software he wasn’t really sure what the factual status of his projects were at any given time. All he had to base his decisions on were verbal project updates along the way.
That’s all changed now he says with just one click of his mouse he can see for himself all of his projects status reports without any filters, miscommunications or misunderstandings that have often crept into his status reports in bygone days. He now believes that only with project management software can healthcare organizations meet their strategic savings objectives each and every year. It just makes sense to do so!
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
800-220-4274
P..S. Discover the power our Supply Chain Pilot™ can give you in the management and control of ALL of your supply chain and value analysis projects. It just makes sense to do so!
P.P.S. Don’t forget to check out my new blog article, “Stepping Up to the Supply Chain Leadership Challenge”. This blog is all about the supply chain heroes who are making a difference at their healthcare organizations every day.
The #1 Way to Create Winning Value Teams
In my last week’s blog article I talked about incentivizing your value team(s) to save, which is one of the key ingredients in creating winning value teams. This week I’m going to tell you how gift cards can be great rewards to motivate your value team(s) to go the extra mile for savings.
Incentivizing your value team(s) boils down to this essential unassailable fact “Everyone wants TO WIN. And if you create a good COMPETION, everyone will try hard to be in the winners’ CIRCLE.” says Henry Canaday. That’s why it is vital that you reward your value team(s) for their achievements in order to create excitement and ultimately better performance.
Gift cards make the perfect reward because your team members can choose from thousands of gifts, trips and entertainment venues vs. being forced to take what your management thinks they want. For instance, one IDN we worked with thought the perfect reward for performance would be an all expenses paid trip to attend a national material management conference. I know this wouldn’t be my idyllic reward – how about you?
That’s not all! You need a “point system”* to enable you to grant these gift card rewards along the way. Some of the criteria for awarding gifts cards to your team members could be attendance, completing projects on time and on budget, exceeding project goals, exceeding team goals, etc. The point here is that you will need a system (preferably on-line in real-time) to motivate your team members to exceed your expectations — not just meet them.
We Americans thrive on competition, big challenges and contests (that’s why there are so many successful reality competition shows on TV these days). So why not use this quirk of human nature to our advantage to motivate your value teams to be better than good? All it takes to do so is a contest that motivates, invigorates, excites and ultimately creates better performance for your value team(s) for the valued work that they do for your healthcare organization.
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*We have been installing “point system” incentive systems for 10 years now for our clients, so if you want to learn more about our IncentiveSave™ Dashboard to manage ALL of the elements of your Lean, Six Sigma or value analysis incentive programs please e-mail me at Bobpres@strategicva.com for more and bigger savings – now!
5 Quick Tactics for Results-Oriented Savings
In preparation for our August 28th “Offset Price Increases in Tough Times” Webinar I started thinking about five quick techniques for results-oriented savings that I could share with the attendees of this session. Now that I have these five quick techniques formulated, I thought I would list them here in my blog to give you a preview of some of the things we will be talking about in this month’s Supply Chain Best Practices series:
- Join a Regional GPO
What goes around comes around, sometimes in a big way! That’s how I feel about the hundreds of regional GPOs that are either popping up or being re-energized around the country.
If you don’t belong to a regional GPO, you are missing the opportunity to drive another 3% to 5% off your bottom line.
- Sign Multi-Year Contracts
This tactic of signing multi-year contracts (3 to 5 years vs. one year) is a little like being a broker in the futures market! That is, you are betting that the future prices you will be paying for the commodities and services that you buy will be higher than today’s prices in the future. I believe this is a “no-brainer” tactic you should implement tomorrow with the next contract that comes across you desk nothing goes down – just up!
- Perform Contract Value Analysis
The amount of fat in our purchase services contracts from my experience is enormous. Meaning, we are paying for things in our purchase service contracts that our customer’s don’t need, want or will never use. That’s why you need to perform contract value analysis on every purchase service contract that is up for renewal.
- Re-invent Your Value Analysis Teams
If you have read my August 17, 2008 Savings Beyond Price™ column on how different levels of value analysis processes create different results, then you know that 98% of healthcare organizations can greatly improve their value analysis process. In doing so, you can quickly save 4%, 7% or even 12% of your annual supply spend.
- Incentivize to Save
Very few healthcare organizations have incentivized their value analysis teams to save money, but the ones who have done so have demonstrated a ROI of 27.5x based on their original investment. Isn’t that a good enough reason for you to incentivize your value analysis teams to save too?
As I said, this is just a preview of the information we will be talking about at our August 28th webinar. If you have missed any of these 60-minute Supply Chain Best Practices webinars, you missed hearing million dollar savings ideas that we share each month with our attendees. Why not invest 60-minutes this month to save hundreds of thousands, or maybe millions of dollars with just one idea you get from this series? It will cost you nothing to do so, but the information you will receive I promise you will be priceless!
