Competition, integration, and diversification: seven hospitals of Growthville, U.S.A.

Summing up across the three phases of this case, the pattern of evolution was (1) emergence of a market orientation by hospitals as the industry moved away from regulation; (2) steady expansion of what the hospitals considered to be their business, to include nonacute hospital and medical services as well as insurance, with vertical integration and concentric diversification serving as the vehicles for accomplishing this expansion; (3) remarkable change with respect to who was competing with whom, stemming from restructuring of hospital relationships away from open competition among many toward domination by a few; (4) a shift in the market from one of consumer choices among physicians and hospitals toward one of competitive choice among health plans; and (5) the emergence of negotiated pricing within the context of the new oligopoly, stemming from the heightened and organized power of corporate purchasers. Finally, we return to a concept presented in the introduction to this case: strategic alignment. The case has described the substantial realignment of our study hospitals to their new and changing environment. And it has highlighted their managers' use of boundary scanning, competitor analysis, and strategy to achieve this realignment. James Thompson's word for this process is "co-alignment," referring to "the most critical managerial function, and the skill closest to creativity." This case has illustrated this management skill, defined as "the discernment of hitherto unnoticed relationships in the complex environment, calculating their cause-effect relationships, and translating them into appropriate programs of action". This is both a summary of the performances of our case study managers and a powerful prescription for those who might face similar circumstances and challenges.