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Debottlenecking your contracting strategy

David Hodes, Founder

You want to deliver superior project outcomes, on time or early, on budget or below—with all the scope the project called for. You have to rely on outside organisations to provide products and services. What’s your ideal contracting strategy?

[ Listen to audio version, read by David Hodes]

Your investment and costs are your suppliers’ revenues and profits. Every dollar they make is a dollar you spend. How do you spend it wisely?

Essentially, you have two basic choices—time and materials or a fixed price. The first is based on a schedule of rates for the resources and materials you will consume. The second is a lump sum for a defined scope of work. Let’s take a closer look at these two scenarios and their tradeoffs.

Scenario 1 — time and materials: I use an engineer who charges out at $200 per hour; he submits timesheets for the number of hours worked; he is paid $200 for every hour worked. The owner party usually defines the scope of work and estimates how long it will take. A time and materials contract holds the buyer accountable for the payment of all the hours worked and materials consumed.

Scenario 2 — fixed price: I have defined the scope of work I want—for example, replacing an important piece of equipment in my plant. I go to my supplier, detail precisely what is needed and ask them to give me a fixed price to do the work. It’s then up to the supplier to estimate the time and materials required for the job and bid accordingly.

Given that you can’t buy from the same supplier for the same scope of work on two fundamentally different contracting arrangements, which strategy should you adopt? How do we solve the dilemma? What issues arise when adopting one scenario versus the other? What should go into your thinking?

What risks are you really taking?

We’ve already stated we want to deliver superior project outcomes. But from a contracting standpoint, what necessary conditions must we satisfy to do so consistently? On the one hand, we must effectively mitigate business risks; on the other, we need to optimise business benefits.

These two ideas do not contradict each other but simply look at the two sides of the coin of superior performance.

Projects, by their nature, are risky endeavours. Many things can go wrong, and we need to mitigate risks. There is, of course, an assumption that we have the capability to develop and manage effective risk plans and that we would never undertake a project that could destroy the organisation in its entirety. It would be better, in that case, to stop and think again.

On the flip side, we achieve superior project performance when we deliver the optimal business benefit from the investment we make in time and money. We don’t do projects for the sake of doing projects; we do them because we are looking for a business outcome. Delivering consistently superior project outcomes thus depends on optimising what the project does for the business.

“Do we really know what goes on in the mind of the supplier?”

Let’s look first at the risk management branch of the argument. Conventional wisdom tells us we can effectively mitigate business risks by establishing a contract based on a fixed-price arrangement. In this way, we have passed the risk on to the supplier, and it is up to them, based on their expertise and appetite for risk, to determine what price they charge for the scope of work we are asking them to perform. We further assume that if we put a competitive tender for the work in place, we will prevent the successful supplier from overpricing their risk into their bid to us.

But, do we really know what goes on in the mind of the supplier? How well do we understand their business conditions? Are they desperate for work and ready to underbid just to keep work coming in the door? Do they suspect we are pretty hopeless at clearly defining scope so that they feel confident raising subsequent variation orders will recover a lowball bid made to knock out the competition?

Why do we assume they are better at managing the risk of the project than we are? What is the effect on us to have a substandard supplier winning the contract on costs when we will wear the long-term consequence of their shoddy work? Procurement might feel they’ve done a great job getting the lowest price, but Operations suffer the enduring consequence.

And, let’s take a closer look at the inevitable arguments that will arise from changes in scope. How good will we be in the heat of project execution in determining the validity of a variation order? What will happen to the project manager as they see their project costs increasing, knowing they will have to explain away these variations all the way to the top. What will it do to the quality of the relationship between the owner and vendor parties if every day brings a new battle as to whether or not an additional payment should be approved? What will happen to the speed of project execution if the supplier becomes wary of doing anything not preapproved before the work contained in the change order can be started?

To create a win-win, innovate your contracting strategy

Now let’s look at the branch of the argument that calls for optimisation of the business benefits. Can this need best be served by engaging in a time and materials contract? Let’s assume, and it’s a big assumption, that we have the means to manage execution risk effectively. It’s an innovation, a way of planning and performing work that is better than any that has come before. It’s a gamechanger in terms of theory, method and tools. Grounded in robust reasoning and backed by a comprehensive and diverse swag of empirical evidence proving that it works.

Let’s also assume that we can convince our suppliers to use this innovation for the planning and performance of their work. This ask is no simple matter; as the saying goes, to change the way they work, they will have to change the way they work. Whatever methods and tools they are habituated into using, they will have to abandon. In contrast to the fixed-price contract, we will demand they be far more tactically flexible to meet the work when and where it arises, according to what is best for the project—not necessarily what is best for their pocketbook.

We will have to respond to their legitimate anxiety that if we can get through the work quicker, without compromising safety or quality, they will, on the face of it, earn less overall. On the other hand, we will need to build trust with our suppliers not to drag their feet as a means of increasing their billable claims. We ourselves will have to live with the idea that we will not always have productive work for everyone to do. Nevertheless, we will pay them for availability, realising the benefit to us of them being precisely where we need them when we need them there. We will be delivering the project and its associated benefits sooner, dwarfing the excess costs.

The way of squaring the circle of our investments and costs being the revenue and profits of our suppliers is to look at the whole project system from above and include in it the complete value chain. Everyone wins when the owner wins big. As my first boss taught me—it’s easy to be generous out of profits. If you know the value of a day on your project regarding investment, costs and margin, you can escape the myopia of focusing only on screwing your suppliers down on cost.

The truth is that such innovation exists in the form of the Theory of Constraints and its associated methods of Critical Chain Project Management and Drum Buffer Rope production management.

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What’s next?

The change from standard thinking to Theory of Constraints (TOC) is both profound and exhilarating. To make it both fun and memorable, we use a business simulation we call The Right Stuff Workshop.

We’d love to run it with you. To learn more:

  • download the brochure (no email required)
  • schedule a call

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The healthcare professional: the hidden constraint in patient flow

Ensemble Administrator

Healthcare professionals are central to the patient’s progress from awareness of a therapy to successful long-term use. They identify risk, interpret evidence, diagnose conditions, discuss options, perform procedures, provide training and monitor outcomes.

Yet many medical device development programs treat healthcare professionals primarily as users to be trained or customers to be persuaded.

HCP-Centered Design takes a wider view. It examines the work healthcare professionals must perform, the system in which they perform it and the constraints that limit their ability to move suitable patients through the care pathway.

“If patient flow depends on a healthcare professional, that professional’s available capacity may determine how many patients ultimately receive the therapy.”

Healthcare professionals govern critical transitions

A medical device patient journey commonly depends on several healthcare professionals:

  • A primary care professional recognizes a problem or makes a referral.
  • A specialist assesses the patient and manages the disease pathway.
  • Diagnostic professionals generate and interpret evidence.
  • A managing physician supports authorization or reimbursement.
  • An interventional specialist confirms eligibility and performs a procedure.
  • Nurses, educators or allied health professionals help the patient adapt.
  • Follow-up teams monitor efficacy and coordinate adjustments.

Each professional governs a transition in the flow of patients.

If one transition lacks sufficient capacity, information or clarity, the whole pathway slows. More marketing, sales activity or production capacity will not compensate for a shortage of specialist time or a burdensome diagnostic process.

This is why HCP-Centered Design is not simply about making an interface easier to use. It is about enabling the system of care to perform.

The HCP works within a system

A healthcare professional’s work depends on information and actions supplied by others. They may rely on referrals, patient histories, pathology, imaging, electronic records, clinical guidelines and the availability of equipment or trained colleagues.

After reaching a decision, they may need to explain it, document it, arrange authorization, coordinate treatment and prepare the next person in the pathway.

A technically strong solution can still create difficulty if it:

  • Requires information that is hard to obtain
  • Interrupts established clinical workflows
  • Produces outputs that are difficult to interpret
  • Adds documentation without removing other work
  • Fails to connect with existing systems
  • Demands training that cannot be sustained
  • Transfers work or risk to another professional
  • Provides a result without clarifying the next action

The relevant design question is not merely, “Can the HCP use this product?”

It is, “Does this solution improve the HCP’s ability to complete important clinical work within the conditions in which care is actually delivered?”

Identify the real healthcare professional personas

“HCP” is not one persona.

A general practitioner, specialist, interventional physician, nurse, technician and clinical administrator encounter different stages of the pathway. Each has different responsibilities, authority, expertise and exposure to risk.

Even within a profession, context matters. An experienced specialist in a major hospital may approach the same task differently from a professional who encounters the condition infrequently or works without immediate specialist support.

Useful HCP personas distinguish factors that influence work:

  • Clinical responsibility and decision authority
  • Frequency of encountering the condition
  • Experience with the procedure or technology
  • Access to information and specialist support
  • Available time
  • Confidence in interpreting results
  • Responsibility for follow-up
  • Exposure to clinical, legal or financial risk

These personas clarify who performs each job and what support each person requires.

Map the HCP journey

The HCP journey often begins before the visible clinical procedure.

It may include receiving a referral, gathering information, forming an initial view, ordering investigations, interpreting results, deciding whether the patient is eligible, discussing treatment, obtaining authorization, preparing for the procedure, delivering care and arranging follow-up.

At each stage, ask:

  • What is the HCP trying to accomplish?
  • What information is required?
  • Where does the information come from?
  • What decision must be made?
  • What could cause delay or rework?
  • Who depends on this action?
  • What must happen before the patient can progress?

The resulting journey map should distinguish processing time from waiting time. A decision may require only minutes of specialist attention while patients wait weeks to access that attention.

This reveals the practical relationship between HCP capacity and patient flow.

Find the HCP constraint

The Theory of Constraints directs attention to the factor limiting the performance of the entire system.

In some pathways, the constraint may be the number of qualified interventional specialists. In others, it may be diagnostic capacity, physician confidence, authorization effort, operating room access or the time required to train patients.

The constraint may also be hidden inside the HCP’s working day.

A specialist supporting a therapy must still manage other clinical duties, administration, meetings, documentation and urgent cases. The question is not simply how many specialists exist. It is how much of their usable capacity is available for the activities upon which patient flow depends.

“The scarcest resource may not be the healthcare professional. It may be the few hours of focused capacity available for the critical work.”

Improvement away from this constraint can make performance worse. Sending more referrals to an already overloaded specialist increases the queue. Adding information may increase cognitive burden. Creating another approval may consume the capacity required to treat patients.

HCP-Centered Design seeks to protect and expand the capacity that governs flow.

Go to the clinical Gemba

Policies and procedures describe how clinical work should happen. Observation reveals how it actually happens.

Healthcare professionals routinely compensate for missing information, awkward interfaces and unreliable handovers. These workarounds may become so familiar that nobody reports them as problems.

Gemba research should examine:

  • How the HCP prepares
  • Which tools and information sources are used
  • What interrupts the work
  • Where the HCP waits or repeats activity
  • How uncertainty is communicated
  • What must be documented
  • How work passes to the next person
  • How the HCP recognizes that the job is complete

The purpose is not to judge the healthcare professional. It is to understand the system surrounding the work.

“A workaround is often evidence that the system has failed to support the person doing the work.”

Define the HCP’s job to be done

Healthcare professionals do not simply use devices. They use them to make progress in clinical work.

An HCP may need to identify risk, reach a confident diagnosis, select an intervention, perform a procedure safely, explain options, monitor progress or recognize deterioration.

A structured job map divides this work into eight stages:

  1. Define the intended clinical outcome.
  2. Locate the necessary information and resources.
  3. Prepare the patient, equipment and environment.
  4. Confirm readiness and choose between alternatives.
  5. Execute the clinical activity.
  6. Monitor its progress and results.
  7. Modify the approach when circumstances change.
  8. Conclude, document and prepare for subsequent care.

This wider view prevents the product team from concentrating exclusively on the procedure.

The greatest value may come from reducing preparation, improving decision confidence, clarifying an exception, simplifying documentation or improving the handover to follow-up care.

Convert experience into measurable outcomes

Comments such as “the interface is difficult” or “we need better information” indicate dissatisfaction, but do not provide sufficient direction for design.

They should be translated into measurable outcome statements, such as:

“Minimize the time required to identify which clinical information is missing before making a treatment decision.”

Or:

“Reduce the likelihood that a clinically significant change goes unrecognized between scheduled reviews.”

A broader population of healthcare professionals can then assess the importance of each outcome and their satisfaction with their current ability to achieve it.

Highly important and poorly satisfied outcomes provide a rational basis for prioritizing innovation.

“Adoption follows when a solution makes important clinical work safer, clearer or easier to complete.”

Apply FOCUS to HCP capacity

The five-step FOCUS process creates a practical improvement cycle.

Find the constraint. Determine which HCP activity or resource currently limits patient flow.

Optimise for it. Protect the constraint from avoidable work, missing information, interruptions and rework.

Collaborate around it. Align upstream and downstream teams so patients, information and resources arrive when required.

Uplift it. Add capacity, redesign responsibilities, improve technology or remove restrictive policies.

Start Again. Identify the new constraint once flow improves.

This approach allows the organization to distinguish activity from value. It also turns HCP engagement into an ongoing management discipline.

Connect HCP evidence with enterprise execution

HCP-Centered Design must connect clinical reality with patient needs, technology, regulation and business strategy.

A Value Management Office can help coordinate these perspectives across the product lifecycle. Its role is to ensure that projects, resources and stage-gate decisions remain connected to patient flow and business value.

The organization should be able to show:

  • Which HCP groups influence the pathway
  • What each group is trying to accomplish
  • How the work happens in practice
  • Which outcomes remain poorly served
  • Where HCP capacity constrains patient flow
  • How the proposed solution changes the wider care system
  • How improvement will be measured

The goal is not simply a device that healthcare professionals can operate. It is a solution they can confidently incorporate into care and a delivery system capable of getting that solution to more patients.


What’s next?

Use the HCP-Centered Design assessment to determine how well your organization understands clinical work, HCP capacity and the constraints governing patient flow.

The resulting evidence should guide product design, process improvement and investment toward better products, delivered faster, with more lives changed for good.

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Patient flow: the missing system in Patient Centered Design

Ensemble Administrator

Medical device companies devote enormous skill and investment to developing safe, effective products. Yet a technically successful device changes no lives while suitable patients remain unable to reach it.

Between a patient becoming aware of a therapy and receiving its intended benefit lies a pathway of referrals, consultations, diagnostics, approvals, procedures, training and follow-up. Every step consumes time. Between the steps, patients wait. At some points, they become confused, discouraged, ineligible or lost to the process.

Patient Centered Design must therefore address more than the design of the device. It must improve the performance of the entire system through which patients reach, receive and live successfully with the solution.

“A life-changing therapy changes no lives while patients remain trapped in the pathway leading to it.”

The patient journey is a flow system

A typical medical device journey may include:

  1. The patient becomes aware of a possible therapy.
  2. A primary care professional or specialist assesses the patient.
  3. Diagnostic work determines whether the therapy is appropriate.
  4. The patient secures authorization or reimbursement.
  5. An interventional specialist confirms and plans the procedure.
  6. The patient receives the device or therapy.
  7. The patient learns how to live with the solution.
  8. Follow-up identifies any necessary adjustments.
  9. Periodic reviews monitor longer-term efficacy.

Companies often manage these stages as separate functions. Marketing works on awareness. Medical affairs supports clinicians. Market access addresses reimbursement. Sales works with specialists. Clinical teams gather evidence. Training teams support adoption.

The patient, however, experiences one journey.

From the patient’s perspective, a delay between two organizational functions remains a delay. A repeated test remains repeated work. An unclear handover creates uncertainty regardless of which department owns it.

Patient Centered Design begins when the organization sees and manages this journey as a connected system.

Processing time tells only part of the story

Every step contains some necessary processing time. A consultation takes time. A diagnostic test takes time. An authorization must be assessed. A procedure must be performed.

The patient’s total lead time, however, also includes the waiting between these activities.

A consultation may take 30 minutes, but the patient could wait six weeks for it. A diagnostic test may take an hour, followed by another delay before a specialist reviews the result. Prior authorization may require little actual work while adding weeks to the pathway.

This distinction matters because organizations often improve processing time while leaving the larger queues untouched. Saving five minutes during an appointment produces little benefit if the patient waits months to reach it.

Patient Centered Design therefore asks:

  • How long does each activity take?
  • How long do patients wait between activities?
  • How many suitable patients enter each stage?
  • How many progress to the next stage?
  • Where and why do patients leave the pathway?
  • How much total time passes before the patient receives the solution?

The answers reveal the true performance of the patient system.

Find the constraint

Theory of Constraints teaches that the performance of any system is limited by a constraint. Improving a part of the system that is not constraining flow may create more activity without increasing results.

If diagnostic capacity is the constraint, generating more awareness may simply produce a longer queue for diagnosis. If specialist capacity is the constraint, accelerating authorization may move patients more quickly into another wait. If training after first use is inadequate, increasing procedures may produce poor experiences and avoidable follow-up demand.

“More activity at a non-constraint creates work in process. More capability at the constraint improves the system.”

The constraint is not always a physical resource. It may be a policy, an eligibility rule, missing evidence, a fragmented handover, an information delay or the cognitive burden placed on the patient.

The most important question is therefore not, “How do we improve every step?”

It is, “What currently limits the flow of suitable patients to successful use of the therapy?”

Understand why patients remain in or leave the flow

Numbers show where patients are lost. Patient research helps explain why.

Two patients with the same diagnosis may respond very differently. One may actively seek new treatment options. Another may delay action until symptoms become severe. A third may want help but lack confidence in navigating the healthcare system.

Meaningful patient segmentation considers characteristics that influence behavior:

  • The importance the person gives their health
  • Their confidence in dealing with healthcare professionals
  • Whether they act independently or need encouragement
  • Their comfort with technology
  • The pressures of work, family and daily life
  • Their ability to understand and act on clinical information
  • Their willingness and ability to pay
  • The outcomes they most want to achieve

These differences affect whether patients enter the pathway, remain engaged and successfully adopt the solution.

Go to the patient’s Gemba

The Gemba is the place where work actually happens. For patients, this includes the home, clinic, hospital and all the places where they manage their condition between formal encounters.

Interviews alone may miss important evidence. People normalize inconvenience, forget workarounds and simplify their past decisions. Observation allows the development team to see what patients actually do.

Good research combines three activities.

Observe. Watch how patients obtain information, prepare, use the solution and respond when something goes wrong.

Immerse. Understand the physical, emotional and practical conditions surrounding the experience.

Engage. Ask open questions that allow patients to describe their goals, fears and frustrations in their own language.

The purpose is to discover the patient’s reality before asking them to evaluate the organization’s preferred answer.

Understand the patient’s job to be done

Patients rarely want a medical device for its own sake. They want the progress it may enable.

They may want to recognize deterioration earlier, preserve independence, reduce pain, avoid repeated visits, return to work or prevent a disease from controlling daily life.

A useful job map examines eight recurring stages:

  1. Define what must be achieved.
  2. Locate the required information and resources.
  3. Prepare for the activity.
  4. Confirm readiness and choose between alternatives.
  5. Execute the activity.
  6. Monitor whether it is working.
  7. Modify the approach when circumstances change.
  8. Conclude or prepare for what follows.

This reveals opportunities beyond the immediate use of the device. The most valuable improvement may involve helping patients prepare, confirm readiness, recognize an exception or understand what happens next.

Turn patient experiences into evidence

Stories create understanding, but investment decisions require structured evidence.

Patient observations and comments should be converted into outcome statements that identify:

  • The desired direction of improvement
  • A measure of success
  • The object being controlled
  • The circumstances in which it matters

For example:

“Minimize the time required to recognize that my condition has changed sufficiently to require clinical help.”

Patients can then assess the importance of each outcome and their satisfaction with their current ability to achieve it.

Highly important and poorly satisfied outcomes represent genuine opportunities. This prevents teams from prioritizing attractive features that do not materially improve the patient’s life or progress through the pathway.

“Innovation becomes valuable when it improves an outcome that matters and remains poorly served.”

Apply the five-step FOCUS process

The Patient Centered Design pathway can be improved through a repeating discipline:

Find the constraint. Identify what currently limits patient flow or successful use.

Optimise for it. Make the best possible use of existing constraint capacity.

Collaborate around it. Align functions and partners so their actions support the constraint.

Uplift it. Add capability, remove restrictive policies or redesign the pathway.

Start Again. Once the constraint moves, identify and address the next limiting factor.

This prevents improvement from becoming a collection of disconnected initiatives. It directs scarce resources toward the factor that most strongly governs the result.

Patient Centered Design is an operating system

Patient insight should influence more than early product design. It should shape clinical evidence, regulatory strategy, reimbursement, manufacturing, education, market development and post-market support.

The organization should be able to show:

  • Which patients it intends to serve
  • What those patients are trying to accomplish
  • How the complete patient pathway operates
  • Where patients wait or leave the flow
  • Which outcomes remain poorly served
  • What currently constrains successful patient access
  • How the proposed solution improves the whole system

The goal is not simply to place the patient at the center of a diagram. It is to organize the enterprise around delivering better products faster, so that more lives can be changed for good.


What’s next?

Use the Patient Centered Design assessment to determine how well your organization understands its patient journeys, priority outcomes and constraints to patient flow.

The result should be more than another collection of patient opinions. It should provide evidence that directs strategy, investment and execution toward the changes that matter most.

READ MORE

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    We alternate our own actionable articles with three relevant links from other authorities.


    We’ll only use your email address for this newsletter. No sales calls

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