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Dominoes Pizza has taught us an important marketing lesson and along the way given us a better product.  Perhaps there is a message for the healthcare industry somewhere in this remarkable and successful turnaround.

Dominoes launched a nationwide television campaign 15 months ago that was more than just a little different. They began by admitting that their product was not that good.  To add some historical context, it had not been good for a very long time.  In the 1980s, working late at Hermann Affiliated Hospitals in Houston, we would frequently order a midnight pizza.  The standing joke was that when the pizza was delivered in 30 minutes or less, you threw out the pizza and ate the box. It had more taste. It was no surprise that when the company asked what was wrong with their product consumers repeatedly said the crust tasted like cardboard. The negative feedback from customers was brutal.  Their advertising campaign moved from pointing out that their product was not that good, to announcing they were making significant improvements to their crust, cheese and sauce. They began using better toppings, like real chicken, not a compressed version of various and questionable chicken parts.  Then the company ran ads asking customers to tell them how they were doing. 

Sales soared. This week Dominoes delivered another quarter of rising profits and revenues.  The company’s stock price has risen more than 150 percent since the company launched this risky campaign.  The public seems to like their candor and the product improvements. Moreover, the reservoir of goodwill that Dominoes is building will be invaluable as long as they do not forget these tough lessons learned.

Dominoes Pizza has proven that if you really want to stand out in the marketplace, you must be willing to take risks.  Smart risks, but risks nonetheless.  Harvard marketing professor Youngme Moon would agree.  With the Dominoes success in mind, hospital CEOs should watch this video promoting her book “Different” and think about your organization and how coming reforms will force healthcare organizations to re-examine their model and how they position themselves.

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Healthcare is facing some of the toughest economic and regulatory challenges in its relatively short history as an industry.  From the planned and very visible reductions in reimbursement contained in the Patient Protection and Affordable Care Act as well as additional cuts that are in the pipeline but are currently not so visible, to the looming deficit and long-term debt crisis, we face a future that, in the most understated of words, will be transformational. 

The professional lives of healthcare leaders and the environment in which they work will be radically different.  They will be forced to change.  Change, not adapt.  It is going to be the type of transformational change that will require a reconstruction of the entire business model. This change will mark an end of the big box hospitals of staggering size with a maze of hallways and poor signage will have to give way to a strategic focus on population groups while operating smaller, cost efficient facilities. The new economic model will be based on keeping people out of hospitals and providers will be paid not for how much they do, but for the quality of care and outcomes they achieve as well as customer/patient satisfaction. 

Over the next 20 years the hospital industry will need to move from the wholesale marketing model that focuses on physicians, their patients and their poor health, to a retail model where there is real competition and where success will be based solely on performance.

It is easy to be critical.  Let’s face it, hospital executives and industry thought leaders are in a tough bind.  It is hard to lead change when you are constrained by an existing business structure that is hopelessly complex, from a patchwork of payment systems to federal, state and local regulations that limit the ability of mainstream hospitals and entrepreneurs from leading the transformation.

Given that hospital executives are, for a variety of good reasons and some that are not so good, loathe to publicly confess their problems as Dominoes did, they may miss a marketing opportunity to drive the real structural change that the costly and uneven healthcare provider segment needs. 

The GOP budget plan to privatize Medicare may save the federal government a lot of money and temporarily drive the bond market vigilantes away from the front door, but it will not solve the bigger problem.  You cannot target one group and one program like Medicare and not expect a massive political push back as well as political consequences.

This approach will fail not because it reflects a political calculation to shrink the size of government, but the politicians have no real broad strategy to change and improve healthcare in America.  Their current effort amounts to fiddling around the margins.  Meanwhile, as the political debate gathers steam, the American public believes, alternatively, that either we have the greatest “system” in the world or that it is too expensive with questionable quality and hurts the nation’s ability to compete globally.

Why don’t we at least think about the Dominoes approach?

© 2011 John Gregory Self