Getting Big Results from a Small Business Unit
September 29, 2013 Editor 0
Earlier this year Sun Yat-sen University, a well-regarded institution in Guangzhou in the Guangdong province of China, announced that the university and affiliated hospitals were entering into a novel collaboration with Johns Hopkins Medicine. The agreement would see Hopkins faculty working bilaterally with Sun Yat-sen’s medical faculty both in China and at Hopkins in order to help the university become a world-class biomedical research institute. The deal has significant implications for U.S. hospitals because, facing declining revenues, international collaborations like these offer a new path for growth.
It was the 30th major, revenue-producing, international healthcare collaboration for Johns Hopkins Medicine, with several more currently under negotiation — when the rest of the world combined has perhaps a few dozen similar partnerships. One reason Hopkins is outpacing others is because it created an agile satellite unit – Johns Hopkins Medicine International (JHI) – within the much larger parent organization solely dedicated to these projects.
JHI’s activities illustrate how large healthcare organizations, often bound by size, complexity and conservatism, may need to turn to satellite units if they are going to tap into the innovation and flexibility needed to explore new opportunities for growth. But to be effective, such units have to cultivate key differences from their parent organizations, while at the same time maintaining close ties to the mother ship and adhering to its main tenets.
The Sun Yat-sen project offers a good example of how JHI took advantage of its smaller size, specialization and agility to identify, structure and close an ambitious, unusual and potentially highly rewarding deal that might well have eluded the main organization. It’s well known how difficult it is for large U.S. companies to do business in China profitably, if at all, and even many of our fellow private academic institutions have struggled in their efforts to establish partnerships in China. Our success depends on a set of capabilities any healthcare organization will need in venturing into similar international deals. They must:
Seek out novel relationships and challenges. Large U.S. healthcare organizations like JHM tend to enter into types of partnerships that don’t require them to operate in a substantially new way such as with other large domestic healthcare institutions, or with local hospitals. Our unit, however, is set up to be more attuned to different types of opportunities. We have staff on the ground throughout Asia and the rest of the world to network and look for potential collaborations like the one in Guangzhou, which, being far from Beijing and Shanghai, fell under everyone else’s radar. The proposition for this collaboration would have had most executives at large medical institutions scratching their heads — there are no clear models for how to help another university develop its research expertise. We didn’t have a model to work with either, of course, but we were willing to innovate and develop one from scratch to make the collaboration work. We routinely partner with private investors, ministries of health, non-healthcare corporations, and other players who aren’t part of typical healthcare deals with U.S. academic medical centers.
Maintain unusual expertise. JHM’s strong reputation in patient care, research and education provides us with an invaluable brand halo that opens doors and motivates partnerships, and defines our mission. But striking international deals calls for a range of other competencies that our parent organization and others like it would have trouble assembling and deploying. These include being familiar with the variation from country to country of social norms, healthcare traditions, religious influences, negotiating tactics, contract law, effective local sales and marketing strategies, media coverage, and political influence. How many healthcare organizations are equally comfortable dealing with government officials in Asia and royal family members in the Persian Gulf? Or are capable of predicting how the next election in a small, developing nation is likely to affect hospital revenues there? Our teams deal with these sorts of offbeat challenges every day, and if we don’t have a resident expert we know how to get one. Critically, for every region we have a dedicated manager capable of championing a project there.
Embrace risk. Hopkins’ reputation is its greatest asset. But it also leads to an organizational culture that tends to shy away from doing anything that risks denting that reputation in any way. A sound policy, to be sure, but one that can sometimes pull the organization away from potentially rewarding opportunities. Our unit also places a high priority on protecting our parent organization’s reputation. But because of our experience and focus, we’re better able to understand and manage the risks associated with international collaborations that JHM itself might be. For example, we allow some of the hospitals that collaborate with us in other countries to identify themselves as Johns Hopkins Medicine International “Affiliates,” but only when we’re intimately involved in setting up, monitoring and maintaining patient care and safety processes and standards. The joint research coming out of our Guangzhou collaboration will bear the Hopkins name, but only in those cases in which Hopkins researchers have played a meaningful role. We also structure our deals in phases, typically starting with pilot projects and moving gradually into more extensive and challenging levels, so that if we have misjudged the risk in a project we’ll catch it early and be able to step away before any real damage is done.
Move with agility. John Hopkins Medicine is a massive, complex organization that prefers to move into partnerships with great deliberation, because a large number of decision-makers have to buy in, and because there’s more risk in acting quickly. But when a health ministry or a group of private investors in a small country give a big health care project a green light for funding, they’re not going to wait around for two years for a potential partner to sign on. So we’ve developed business processes that enabled rapidly pulling together a team to efficiently evaluate the Sun Yat-sen opportunity, perform due diligence, structure the deal, line up the resources needed to live up to our end of it, set up contracts, and present JHM — which still has to approve all our deals — with a solid, complete package that can be decided on relatively quickly, all within six months. It helps, of course, that we’ve earned the trust of JHM decision-makers over the years, that I myself am a senior vice-president of JHM in addition to my role leading the international innovation unit, and that we consult with key JHM executives every step of the way so that there are no surprises.
The result of these competencies is that our satellite unit has been able to help the mother ship extend its health care mission globally. That’s a huge payoff to the entire organization–even before factoring in the substantial revenues that have come along with these projects.Leading Health Care Innovation
From the Editors of Harvard Business Review and the New England Journal of Medicine
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