“Public-private partnerships” — how many times have you heard that term applied to virtually any sort of arrangement between the private sector and their public counterparts? Don’t get me wrong — I am very supportive of true partnerships in both spirit and practice. I just struggle with some of the things that are passed off to the community and our industry as a true “partnership,” but are far from that once the layers are peeled back and evaluated.
In my last column, I spoke about the forms of strategy – what qualified and what didn’t. We explored the evolution of what is commonly known today as the art of “strategic planning,” and the importance of having a plan to benchmark, measure and hopefully propel your EMS organization forward to meet its goals.
This column will drill deeper into a key strategic tool many companies utilize in order to gain a competitive advantage over their competition: strategic partnerships. In EMS, these are often referred to as the “public-private” partnership. In the strictest sense, partnerships of any kind are strategies that stress cooperative mutual gain rather than strict competition.
Every successful company must employ a strategy to outperform its competitors. Michael Porter listed three major generic strategies: overall cost leadership, differentiation and focus. In other words, can you perform the same service or better at a lower price? Can you position your product or services as better or preferred in comparison to the competition? Can you be relentless in your identification and execution of the things that really matter?
In 1987, Richard Neilson, of the Boston College School of Management, wrote that partnerships or cooperative mutual gain strategies have four major approaches to achieve cost leadership, differentiation and focus.
- Trading different resources
- Pooling similar resources and risks
- Expanding total demand
- Increasing the number of mutual gain players
Trading different resources
Trading different (and complementary) resources is a powerful and increasingly popular method that gains results or mutual gain for both entities. It can save a company from the high costs of having to develop its own version of the resource. Even if a company could achieve the same quality of potential partners, it could be that the company’s reputation is the crucial determining factor for success. Exchanging resources can even give trading partners an advantage in dealing with larger organizations that have much greater resources.
Further, it can help avoid the kind of destructive rivalry in which competing companies spend so much on research and development. Trading resources can also help a company better understand their own and their partners’ strengths and weaknesses. By trading resources, companies are forced to adhere to a certain level of trust, which helps them overcome paranoid thoughts of unbalanced partnerships or unfulfilled contracts.
As a recent example, a fire district I’m familiar with recently partnered with a private agency at a time when they considered beginning their own rival transport service. The ambulance service instead funded the necessary start-up capital, provided dispatch and patient billing services, and paid a flat staffing fee in order to enable the fire district to provide ambulance staffing. The vehicle was then private-labeled and housed in the district and staffed by firefighters, who used local knowledge and relationships to secure two additional non-emergency contracts previously not available to either of the partners. Any additional profitability after a very modest return on the costs of capital was to split equally between the public and private agency.
This is an excellent example of two potential “competitors” that have been forced to develop a level of trust and openness by pooling their resources, sharing strengths, and covering the other’s weaknesses. While I would still call this partnership a work in progress, it is an encouraging sign of developing models for cooperative and additive strategies.
Pooling similar resources
Pooling similar resources and risks allows companies to often lower costs by sharing space, facilities, R&D, marketing, etc. And in some cases, even joint ownership (this strategy is particularly popular in foreign markets where local regulations can require local ownership as well as knowledge of local regulations and business practices).
Pooling strategies are especially popular for smaller companies seeking to combine resources in order to compete with larger companies. As in trading resources, avoiding destructive competition is often a factor for companies. Companies also find that pooling sources allows them to take on otherwise expensive and risky propositions that would be too daunting individually.
Expanding total demand
Expanding total demand is unlike trading and pooling resources that seek to benefit the competing forms in that this strategy seeks to increase total demand, in either the market or industry. This is particularly true in marketing and advertising strategies that seek to increase awareness and consumption, but not specifically a certain brand or company.
Increasing the number of mutual gain players
Increasing the number of mutual gain players is a strategy that seeks to add more firms to any of these mutual gain endeavors. All the participating companies can benefit from yet another partner, trading different resources or pooling similar resources, since this reduces costs for everyone. The more firms contributing toward expanding primary demand, the better the sales for everyone in the industry.
In an expanding market, increasing the number of partnering organizations can be good for two reasons. For one, if the market is expanding, more available resources may be needed to keep pace with the growth. Second, adding additional partners may be needed to compete with organizations seeking to enter the market or otherwise exclude competition on other markets they are in.
Mutual gain and mutual barriers
As a rule, generic mutual gain strategies are more additive that competing ones. Then why do we not utilize more of them? Well, trust comes to mind as a huge barrier in our industry. Union leaders, owners and generations of leadership have ingrained the idea of exclusively possessing unique and unmatched skills over the competition. Partnerships that require a suspension of this mistrust often suffer as a result, ultimately falling short of realizing their potential.
Another challenge is that of funding sources and the value that recipients place on them. This is achieved by looking at cost versus profit, or subsidy versus fee, for service and drawing value judgments. It can be challenging for some individuals to come to grips with someone “profiting” in EMS, even if greater cost savings or quality was achieved as a result. Those who do “profit” often zealously protect that information or refuse to consider sharing rewards or risks — again, a less than ideal environment for true partnership.
While some will criticize the EMS private sector for profiting from provided services, the reality is that all providers — public, private, profit and not-for profit — must have a funding stream or “margin” in order to meet the service demands placed upon them. Bottom line — we are all “not-for-loss” providers and we must still be able to reinvest in our people and our infrastructures. Shareholders rightfully expect us to provide the very best medical care at the lowest possible cost to the consumer.
The costly and labor-intensive nature of EMS readiness combined with the need to capitalize vehicles, equipment, training and technology places enormous financial strain upon both public and private providers. More and more demands are being placed upon our respective entities without the funding necessary to sustain it.
I believe EMS can be most effectively provided by a collaborative approach of public-private partnerships. Just as we have this public-private debate in virtually every segment of our society between the role of government and the role of the private sector, we have to look beyond self interests and emotional arguments. As a citizen and caregiver, I respect the things that government can provide to EMS systems. I have also seen what a coordinated private sector response can do to augment those services and it can be equally impressive. In just the last six months, I have personally been involved in some interesting and innovative “pilot projects” on a smaller scale, centered on this idea of emerging public-private partnerships that truly share information and strategies, as well as financial risk and reward. There are a number of newly emerging partnerships, as well as a few established ones, out in the scene, such as in San Diego, Calif.
In the end, EMS providers, both public and private, can look to utilize more generic mutual gain strategies. In an increasingly volatile environment, it would be wise for us as an industry, which has long held to more competitive outlooks, to at least look at mutual gain strategies as a viable solution for the long-term.
