With an uncertain economy; limited capital funds for new construction, renovations or new equipment; a changing reimbursement climate and minimal operating margins hospital buyers must mitigate risk when buying new products, services or solutions.
Buyer’s risk has two components: the probability that something will go wrong and the negative consequences if it does.
Every buying decision employs some level of risk. Because people make buying decisions each individual involved in a purchase decision must carefully weigh their personal and professional risks when making a recommendation for a specific solution and provider. It’s human nature to mitigate risk. No one wants to be part of a poor buying decision and no one wants to be a casualty because of it.
Top sales professionals encourage “risk discussions” to remove the angst from each buying influences mind to move the deal forward instead of becoming impaled or stalled.
Types of Risk
The most common types of buyers risk within a hospital are as follows:
- Financial Risk: Money is always tight for any new purchase. The more an item costs the higher the associated procurement risk. High project costs also have more people involved in the decision, longer purchase cycles and increased amounts of documentation required to support the purchase. In the back of every buyers mind is how can we get this cheaper? Another financial concern is understanding upfront all of the costs to be incurred so that additional funds do not need to be requested. Failure to do so can be political suicide for the buyer.
- Unfamiliarity Risk: Risk increases proportionally if buyers are making a purchase for the “first time” and are in uncharted waters. It’s also prevalent when buyers are unfamiliar with you, your product or your company. People gravitate toward safe purchases with established providers and solutions they are comfortable with.
- Personal Risk: This is important to everyone involved in the process and it occurs when the buying influence contemplates what could go wrong if they recommend your product, service or solution. When people focus on the negative aspects of a pending decision they begin by asking themselves “What unpleasant consequences could occur? What is the backlash if the product or project fails to live up to the staff’s expectations and they are stuck with it! How will it affect their personal business status and self esteem”? Once they have evaluated the negative consequences they can then focus on the positive benefits. “How will this decision impact their personal growth? Does it give me recognition? Does it provide a future reward? Does it solve a critical problem? Can it help me achieve my long –term goals and objectives”?
- Operational Risk: These are concerns over the disruption of supplies or the breakdown of routine operational workflow during implementation. This could be supply delivery and backlog issues or impeded workflows due to access issues especially during renovation or new construction. If work is disrupted, costs increase and worker irritation ensues. In the back of everyone’s mind is “How will this new product or project change my day?” Will the impact be positive or negative?
- Resource Allocation Risk: “How much time will it take for everyone to learn the new process or technology or work in the new environment? My team is already stretched to the max. How will they react? Who will be early adopters? Who will fight the change? How will we manage the change and measure competency while still performing normal day to day tasks?
- Performance Risk: New technology is great when it works but what are the chances of a product recall or early obsolescence? At least two major medical manufacturers have removed new surgical products from their portfolio after release because of unforeseen problems. A recall costs time and money and sometimes the product needs to be replaced with a new vendor. “Is my risk here high, medium or low”?
- Physical Risk: “Is the product safe? What are the potential risks to the patient or staff? Does the product have all of the required approvals by the FDA, ECRI etc”?
- Time Risk: “How much time do I need to allocate to investigate this purchase? What questions should I ask? Who should I ask? Do I have the time, energy and resources required to conduct this investigation properly”?
- Natural Risk: Supply chain executives are well aware of risks associated with unforeseeable events such as weather, natural disasters, epidemics, port closings and geopolitical events. “What natural risks should I be concerned with? Can the vendor deliver to us if a natural risk occurs”?
- Execution Risk: Can the vendor execute the project plan and deliver on time and on budget? “What are the critical factors to success/failure during the planning process? What could go wrong during the implementation phase and how do we mitigate it?
Suggested Next Steps
Identify all of the risk factors that could prevent the purchase of your product, service or solution. Make a comprehensive list and then rank the probability as being high, medium or low with each sales opportunity. Then provide solutions to each risk and verify your solutions with customers that have purchased from you. This is the reality check and it’s not optional. We’ll provide some risk mitigation strategies to you in our next blog and a Risk Assessment & Mitigation Tool that you can develop for your use. We’ll also suggest some upfront planning that should occur before you discuss risk and migration with your buying influences.