Service Journal: Question 14 of 15

Describe a successful process innovation that occurred in your focal service organization. How did customers likely respond to the innovation? How did competitors respond to the innovation?

Most hospitals cannot perform all of the diagnostic testing submitted by doctors. Worse than that is the cost associated with doing small volume tests. Often times the hospital laboratory is seen as a cost center. This has been the force of consolidation of tests to be performed in bulk at reference labs outside of the hospital. This passes logistics costs to the patient and drives up the cost of healthcare. IHC has built an internal reference lab at their largest hospital. Acting as a reference lab this facility recieves specimens from smaller IHC facilities and other local hospitals, clinics, and reference labs thus increasing test volumes. Now competitors are customers as testing costs have dropped as IHC can leverage its volume of scale. This relieved the smaller hospitals and clinics of testing demands for non-stat assays. Thus they could reduce laboratory hours, equipement, reagents, and consumables to meet the lower demand. Now the lab is no longer such a burden.


Identify 2-3 specific barriers to entry that give your focal service organization the greatest advantage? (e.g., opportunity to obtain sustainable advantage and/or what makes it difficult for others to enter the market).

1) Human capital locked up in professional staff. This is a finite resource in order to entise Doctors and other staff to leave would require a huge financial burden. It also takes 8-15 years to produce more doctors, nd 4-6 years to produce more nurses, this gives IHC a lag time if universities were to increase educational seats for these professions to lock up future talent.

2) Capital equipment costs is another major barrier.

3) Land or location in proximity to the public is locked up in the city. It would be difficult to compete for IHC customers on the basis of time equity of customers.