Magazine article Drug Topics

Business Strategist Places High Value on Health Image

Magazine article Drug Topics

Business Strategist Places High Value on Health Image

Article excerpt

The success of drug chains over the next decade won't come from improving on what they've been doing in the past 20 years; it will come from breaking new ground in areas where they enjoy the most appeal, according to Michael Treacy, a corporate strategist and consultant. In the case of pharmacy chains, that probably means playing "a more significant role in health care," he told members of the National Association of Chain Drug Stores at their annual meeting late last month in Palm Beach, Fla. The key is delivering "compelling value" on a consistent basis to consumers, providers, insurers, and others, Treacy declared.

Through his advisory work with more than 100 companies, he has developed a corporate growth strategy based on the concept of "value leadership." Treacy, formerly with MIT's Sloan School of Management and now head of his own consultant firm (Treacy & Co., Boston), believes that market leadership depends on creating new sources of value by focusing on one of three disciplines-operational procedures, product superiority, or customer intimacy-while at least meeting industry standards in the other two.

He said that the principles of value leadership are "very straightforward." First, offer "distinctly better value in the marketplace" however you choose, redesigning your whole operation, if necessary, to deliver that value in the most effective way possible. Second, hit the thresholds everywhere else in your business, "so you're not creating a deficit in those other dimensions." Third, recognize that offering better value year after year is "the only basis for sustained advantage."

Treacy said that if he were managing a drug chain today, he would consider the following strategic options for carving a signature or image in the marketplace:

* Become the most efficient pharmacy possible by keeping costs under control and using state-of-the-art technology. This is the "traditional option" many chains have been following.

* Become 'a destination location" for OTCs, health and beauty care items, greeting cards, and other products with "juicy margin structures." He warned drug chains not to drift too far away, however.

"For some chain stores, particularly those of a regional or local character, the danger is that in order to compensate for decreasing margins in the back of the store, you fill the front of the store with a whole series of categories that have simply no relevance to your image in the marketplace. …

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