Benchmarking (Part 2)

Benchmarking (Part 2)

What do we need to benchmark?

Clearly benchmarking involves cost. We need therefore to decide on what areas will give us the best return for the investment … or perhaps what can we benchmark easily and cheaply using, say, publicly available data. One rather obvious strategy is to benchmark against already identified critical success factors – what performance areas are crucial to the longer-term success of the organisation. Within these areas we might them benchmark specific processes. A major pharmaceutical company might decide that R&D is crucial to success ... and then might want to benchmark activities/processes such as number of patents applied for in a given time period, time from patent to market, etc.

If delivery time (from order to delivery) is a key issue for us, and we find out that though it typically takes us 5 weeks to get an order out of the door it takes our main competitor only 18 days, then we have a reason to be concerned and a reason to take action.

How do we get the data we need?

Benchmarking need not always be based on detailed, reliable data. Often we carry out informal benchmarking (though we may not call it that) using ‘data’ from trade shows, talking to salespeople, talking to our customers, etc.

As we have previously mentioned, simple benchmarking data can also be obtained from publicly available information – company reports, industry reports, and so on. We may need to subscribe to a specific sector-based database (though we must be wary of the historical nature of this data) or join a benchmarking club that shares accrued, anonymised data amongst the members.

For some data, we might have to undertake – or commission – specific ‘research’ - and this will of course incur significant cost. Often this is based on surveys and questionnaires

Competitive versus Industry Benchmarking

It is most useful to understand what our major competitors are doing … benchmarks here are directly related to our competitiveness. However, this is often the hardest data to obtain (and why we might have to rely on informal data from our ‘grapevine’).

(Assuming that competing firms did decide to share performance data – for mutual benefit – they would have to be very careful to avoid legislation and regulation relating anti-competitiveness.)

Xerox – when faced with competitors from Japan – were one of the first organisations to undertake competitive benchmarking. They could not understand how their Japanese competitors could get products manufactured for less than they (Xerox) were paying for their raw materials. So, they ‘reverse engineered’ their competitors’ products to understand the differences … and then had to think of the kinds of equipment and process changes that could turn out these different components and get them assembled at so low a cost.

Competitive benchmarking normally concentrates on the 1, 2 or 2 major competitors only … those who (are known to, or thought to) set the standards of excellence in particular areas.

Industry (or sector) benchmarking (where we use data from a large number of organisations comprising a whole sector) is more generic – it helps establish ‘standards’ and ‘norms’ – and helps show trends across the industry. It is therefore more useful in helping to identify product / service trends. It is often promoted by industry associations since this general knowledge helps the industry as a whole.


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