Date: September 14, 2016
Subject: Strategic Management Principles
By the time you are sworn into office, Presidents Bush and Obama will have left the office with more than 60% of the public thinking the country is on the wrong track. Coincidentally, the partisanship in Washington is at all-time highs and there is little follow-through on the heavy lifting needed to get things done.
To turn the tide, the next President needs to stake out a focused strategy that feels right for most people and one that is supported by an achievable implementation plan.
In trying to identify the proper focus for the new Administration, it doesn’t take a genius to realize that U.S. citizens want to be better off, healthier and safer than they are today. These basic desires apply to the rich and poor, the healthy and the sick and Republicans and Democrats.
Tying these simple concepts into strategic objectives can take many paths, but a simple and clear way to lay out the overall strategic imperatives for the new Administration is as follows:
The strategic plan to implement these objectives should be within the purview of the government’s scope of responsibilities, achievable and impactful when implemented. And to the horror of the political operatives, it should not purport to fulfill all or most of the promises made on the campaign trial.
The Economy First.
The first major strategic objective of the new President should relate to the economic well-being of the country, which also is the engine that helps to solve many social issues. Historically, the federal government has sought full employment and stable prices. Today, the focus needs to be on job creation in the face of an aging population while, at the same time, taming a growing national debt.
Economic growth is a fickle endeavor. It depends on investment, which, in turn, depends on human emotions such as fear and greed. These emotions can be contagious so that positive or negative events often tend to elicit herd behavior.
Today, U.S.-based companies are sitting on $1.5 trillion in cash that is not being invested in job producing projects. In fact, about $500 billion of this cash will be used to buy back company shares, which produces no value to society.
The President’s tool kit for addressing the economy is limited mainly to fiscal policy, through which the government determines the appropriate level of taxes and spending.
While various approaches to fiscal policy are advocated with great fervor, there is no unambiguous support for economic stimulus programs or tax cuts standing on their own.
What is more important for eliciting increased investment is for the President and Administration to instill confidence in the markets. The single biggest factor that can install confidence is control over the federal deficit by showing declines each year in the annual budget deficit, ultimately leading to a balanced budget.
To be effective, this general strategy needs to be coupled with a series of targeted programs at problem areas such as job retraining, infrastructure deployment, and tax incentives. For example, the President could pursue a 0% capital gain tax for all standalone investments in the first 18 months of his or her term that produces jobs. Alternatively, the President could advocate the doubling of the salary of all new hires in the next twelve months for purposes of calculating the hiring company’s federal income tax deductions.
Finally, the federal government represents about 20% of the economy and needs to operate more efficiently. The next President should establish a new permanent position of Chief Operating Officer as a non-political appointee with dotted line responsibilities for overseeing all of the implementation (as opposed to policy) responsibilities in the federal government. For example, this person would be responsible for ensuring that overall objectives, priorities, hiring practices, training, reviews, correction actions, reporting, etc. are in place in each organization to ensure efficient operations.
In looking at the numbers, the next best place for the next President to have a large, meaningful, and long-term impact is the healthcare industry. Significant improvements are achievable considering that the citizens of most other advanced countries have better health and lower healthcare expenses per capita than in the United States.
To come up with a plan to improve the health of people and reduce the costs of healthcare, a basic understanding of the industry is required.
In broad terms, the cost of healthcare in the United States in 2014 was approximately $3.0 trillion (or $9,500/person), including:
When looking for causation for these healthcare expenditures, there are many large targets. For example, asthma affects 26 million people and causes two million emergency visits and 11 million missed school days per year. Alzheimer’s affects over 5 million people and is a debilitating illness leading to increasing care and early death. Diabetes affects 26 million people and causes 37 million medical visits per year. Epilepsy causes seizures and lost productivity to over three million people. Heart disease inflicts 27 million people and causes 12 million annual medical visits. Cancer afflicts 15 million people with 1.6 million new cases per year.
Taken together, chronic diseases cause 7 of every 10 deaths in America. Moreover, about 25% of people with chronic diseases have some type of activity limitation such as needing help with dressing or bathing or being restricted from work or attending school.
By any measure, chronic diseases take a heavy toll on the nation’s health and wealth. For example, heart disease and stroke are estimated to cost over $430 billion per year. Diabetes costs are estimated to be about $175 billion per year. Alzheimer’s is estimated to add about $150 billion per year. And cancer adds over $200 billion per year. In total, over 50% of the $3 trillion spent on health care each year is attributable to chronic diseases.
When the issue is looked at in this light, two questions come to mind: 1) how can these diseases be better managed (or prevented) and 2) what is holding up progress?
In terms of the hold up for cures, drug discovery and implementation is not an efficient process.
1) There are no recognized champions or leaders in industry or the government who are laying out a strategic vision for an overall approach to each chronic illness. That is, no one “owns” the relevant problems nor is there a coordinated plan of attack.
2) The resources devoted to specific illnesses generally are not coordinated nor prioritized along the path of the strategic vision (or any specific path).
3) Faculty at medical centers and research institutions around the country are expected to publish in scholarly journals, not to participate in industry-wide joint planning or development on a particular approach or objective.
4) There are no recurring report cards for the costs of care by disease, particularly categorized by stage of illness, age of patient, etc.
5) There are no recurring report cards for the performance outcomes of treatments, including how performance relates to the cost of treatment.
6) There are no recognized benchmarks or objectives for consumer education, prevention, treatment, care or the cost of treating the various illnesses.
7) There is no clear objective or objectives for management of the disease whether the statistic relates to the overall incidence, the 5 or 10-year survival rates, etc.
Even if the industry were more efficient, the process for approving drugs at the FDA is fraught with long delays and the imposition of excessive costs. For example, the average drug takes 12-15 years to achieve FDA approval at a cost well over $1 billion.
Despite the dismal record of drug discovery over the last 50 years especially when compared to other endeavors, there are encouraging signs. First, some organizations have stepped up into leadership positions such as the Michael J. Fox Foundation for Parkinson’s disease and The Basser Center at Penn’s Abramson Cancer Center for hereditary breast cancer.
Second, technology has moved forward so that “Big Data” capabilities enable the crunching of tremendous amounts of information on people regarding their genes, the environment, exercise, diet, drugs, etc. to more quickly identify causation and cures.
Given the present circumstances, the next President can take three actions to dramatically affect the direction of healthcare in the United States.
First, the priorities for healthcare must be clearly set on the proper targets. For example, a “moon shot” on cancer is not the way to go. Nor is a generic approach on Precision Medicine Initiatives.
Rather, specific types of cancer or specific illnesses such as Alzheimer’s disease is the proper way to set priorities and organize resources. Additionally, Precision Medicine Initiatives should be pursued in the context of a market need as opposed to a solution in search of a problem.
Second, the new Administration in concert with industry and academia should establish separate organizations to develop and lead the overall plan of care for each major chronic illness, including the associated drug discovery efforts. This organization would be responsible for the overall approach to treating each specific disease, including tracking the resources spent on pursuing cures and what additional avenues should be pursued, among other things.
For example, the President could establish a new Cabinet level position along with several Undersecretaries, each of whom would be responsible for healthcare improvement on a specific major chronic illness. These Undersecretaries would be responsible for the overall plan to address the disease whether it be reporting, training, diet, estimating funds necessary for research, identifying specific paths for a cure, etc. The Undersecretaries in turn could establish a virtual organization of government employees, members from private industry and academia to provide guidance and drive focus and resources on the best approaches to care.
Third, the FDA’s drug approval process should be examined and modified as appropriate for each chronic illness. Today, new treatments for various illnesses get fit into the same approval straight-jacket. Rather, under the new approach, the leader assigned to each of the top chronic illnesses would determine the proper role for the FDA in each research initiative. For example, while final FDA approval would be required for new treatments, the leader would determine the appropriate scope of FDA involvement in pre-clinical research and/or the early stages of clinical trials, if any.
In short, the next President can and should set priorities, organize resources and modify regulatory procedures in the healthcare industry to have a major and lasting impact on the nation’s health and its cost for healthcare.
Conversely, there is no need for the President to get bogged down in the issue of health care insurance. From a policy standpoint, the issues here revolve around who can and cannot afford insurance, the subsidies paid by government for insurance, and how the subsidies will get funded. The best way for the federal government to address these issues over the long-term is to get healthcare costs down and get personal income up, as outlined above.
The National Defense Third.
The third major strategic objective for the next President should relate to the national defense. This area requires the greatest change in organizational structure and culture and therefore requires the most personal involvement by the President.
As background, the military budget of the United States military was roughly $600 billion in 2015. This includes war spending, weapons spending, Department of Defense and other Pentagon-related spending and international military assistance.
Total military spending also includes about $16 billion in military expenses for the Department of Homeland Security (DHS), which was established in 2002. This department also gets funds that are not designated as military spending, including funding for law enforcement, border control, and other pseudo-military expenses. The non-military Department of Homeland Security funding was about an additional $43 billion in fiscal year 2015.
The Department of Homeland Security has about of 230,000 employees and 22 departments including TSA, Customs and Border Protection, Immigration and Customs Enforcement, U.S. Citizenship and Immigration Services, FEMA, the Coast Guard and the Secret Service.
Political candidates often promote and protect military budgets. However, much of the military spending emanates from programs when nation-states represented the biggest threats to the United States. Today, terrorism, in coordination with rogue nations (such as Iran and North Korea), is the biggest threat.
To be effective, the government would need very different organizations, resources, objectives and plans for dealing with nation-states versus terrorism. The mentality and culture of the counter-terrorism community should be one of aggressive and proactive behavior, whereas the approach for nation-states should be measured and defensive in nature.
Additionally, the consultation and coordination with other countries would be different for addressing nation-states and terrorism. Counter-terrorism requires a real-time coordination at an operational level with many countries, including Russia and China. To be effective, the relationships and coordination of counter-terrorism groups between countries should be very different from the relationships between the diplomats of those countries.
For addressing the nation’s defense against nation-states, the long-standing apparatus of the State Department and the Department of Defense is more than sufficient for the task. However, given today’s realities, the objective for the military to be able to conduct two wars simultaneously is no longer a strategic necessity. With this change in objectives, military spending as presently constituted would be substantially above what is needed to defend the country against nation-states and should be cut accordingly.
By the same token, the counter-terrorism budget is significantly understated and the function is buried within DHS. The next President should break out counter-terrorism and make it a Cabinet-level responsibility, including handling all policy matters for addressing rogue nations in the fight against terrorism.
Under such an approach, the warnings of the next 9/11 attempt would be much more likely to be identified – and acted upon — before terror strikes. For example, the daily terrorist briefing reports should be going to someone who is inclined to act upon them – quickly.
Summary and Conclusion.
In short, the next President should not try to be all things to all people. Nor should he or she promote a seemingly endless laundry list of “to do’s” in the State of the Union address as a sop to the political operatives.
Rather, the next President should lay out a short list of overarching strategic imperatives and establish the plans, organizational structures and resources needed to drive the implementation of those imperatives.
After that, the President’s role would be to make the approach feel right for everybody and to hold government executives accountable for making it happen.
If the President were to follow these simple basic leadership and management principles, the nation as a whole would be wealthier, healthier and safer. That outcome would coincide with most people thinking the country is on the right track, once again. There would no need for the President to curry favor from the political operatives and partisanship would be left for the losers.
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