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Chapter 1: Benchmarking For Best Practices: Winning Through Innovative Adaptation
Excerpted from Benchmarking for Best Practices: Winning Through Innovative Adaptation by Christopher E. Bogan and Michael J. English. Published by McGraw-Hill
Benchmarking Is An Essential Business Concept
In a world where common sense prevailed, benchmarking would seem prosaic. It is quite simply the systematic process of searching for best practices, innovative ideas and highly effective operating procedures that lead to superior performance. What could be more straight-forward? No individual, team or operating unit -- no matter how creative or prolific -- can possibly parent all innovation. No single department or company can corner the market on all good ideas.
In view of this reality recognizing human limitations, it makes eminently good sense to consider the experience of others. Those who always go it alone are doomed to perennially "reinvent the wheel," for they do not learn and benefit from others' progress. By systematically studying the best business practices, operating tactics and winning strategies of others, an individual, team or organization can accelerate its own progress and improvement.
The history of innovative adaptation is arguably as old as humankind. For millennia people have observed good ideas around them and adapted those ideas to meet their needs and situations. Fred D. Bowers, Digital Equipment Corporation's benchmarking program manager, muses that the second person to light a fire" is humankind's first benchmarker. Bowers' logic: the second fire-starter observed the first fire-starter and then borrowed the practice. Consider a few other noteworthy borrowings from the annals of early benchmarking history:
- Lowell, Massachusetts - In the 1800s, British textiles mills were absolutely the best in the world. In contrast, American mills were still in their infancy when it came to producing all types of textiles. Francis Lowell, a New England industrialist, set out to change this situation by upgrading business technology in the United States. Lowell traveled to England where he studied the manufacturing techniques and industrial design of the best British mill factories. He saw that the British plants had much more sophisticated equipment but the British plant layouts did not effectively utilize labor. In short, there was room for improvement.
- In 1815, Francis Lowell built a factory that employed much of the technology in the British plants but was designed to be much less labor intensive than the British facilities. It was a splendid example of innovative adaptation. In 1820, this textile mill center became known as Lowell, Massachusetts. By 1840, just two decades later, Lowell had grown to become the second largest city in America and the largest manufacturing complex in the country. This dynamic growth was largely fueled by one man's vision and his ability to creatively adapt practices observed in the world's best mills.
- Ford Motor Company - In 1912, a curious Henry Ford watched men cut meat during a tour of a Chicago slaughter house. The carcasses were hanging on hooks mounted on a monorail. After each man performed his job, he would push the carcass to the next station. When the tour was over, the tour guide said, "Well, sir, what do you think?" Mr. Ford turned to the man and said, Thanks son, I think you may have given me a real good idea." Less than six months later, the world's first assembly line started producing magneto's in the Ford Highland Park Plant. Henry Ford articulated his vision in this way: "The man who places the part will not fasten it. The man who puts in the bolt does not put in the nut, and the man who starts the nut will not tighten it." The idea that revolutionized modern manufacturing and automotive history was imported from another industry.
- Toyota - In 1950, General Motors was the world leader in the automobile industry, and Toyota was just a small supplier to the Japanese domestic car market. At this time, the founder of Toyota sent his son, Eliji Toyoda, to the United States on a mission to study American manufacturing processes and practices. During his visit, Eliji Toyoda visited General Motors, Chrysler, Ford and even Studebaker. He took extensive notes describing all that he saw. No detail was too small for his attention. Also during his visit, Toyoda visited American supermarkets, where he was impressed by the speed and precision with which grocers restocked their shelves at night so that supplies were replenished in time for customers to shop during day-time hours. The observations and insights from Toyoda's study visits were transported back to Japan, where they were adopted, adapted and improved. As history has recorded, these visits planted the seeds for what would develop into Toyota's now famous just-in-time total-quality- control program. Toyota launched its U.S. presence on the west coast and then expanded across the country. During the next three decades, the Japanese car maker flexed its muscles and began challenging the far larger American competitors. By 1983, Toyota had captured 23% of the United States auto market. In the same year, Eliji Toyoda became chairman of Toyota. In 1984, General Motors signed a joint venture agreement with Toyota to manufacture Toyota products in the United States. "I'm convinced that GM's main reason for this joint venture is to see how Toyota runs a factory," observed a vice president of the Boston Consulting Group at the time. The wheel had turned full circle. Now General Motors was studying Toyota to learn about its winning strategies.
- Remington Rifle Company - In the 1980s, the Remington Rifle Company, a division of giant DuPont corporation, was wrestling with a technical problem. Market research revealed that customers wanted shinier rifle shells. The plant managers didn't pay much attention to what seemed a nitpicking piece of market research. After all, Remington was a company that manufactured some of the oldest and best known rifles in the world. Surely that is what mattered most, they reasoned. But marketing executives persisted in their requests to respond to the customer feedback. Unfortunately, the company's engineering teams made little progress in their efforts to solve the problem. As luck would have it, a short distance away from the Remington Rifle Company plant in Arkansas was a Mabelline cosmetics plant that produced shiny lipstick cartridges. Remington employees, who drove past the Mabelline plant each day on their way to and from work, surmised that the lipstick maker might have important lessons to impart. After all, the lipstick cases were not much different in size and shape from rifle shells. The site visit to the neighboring plant paid off and enabled the Remington team to solve the production difficulties that previously had proven so nettlesome.
In view of these historic examples of innovative adaptation, the obvious wisdom of studying others' best practices would seem self-evident. Learning by borrowing from the best and by adapting their approaches to fit your own needs is the essence of benchmarking. Surely there is nothing new or revolutionary in this prescription for improvement. Or is there?
For every example of innovative adaptation that graces the halls of history, there are many many more examples of organizations, groups and people that have declined to look outside themselves for solutions. The fact is not remarkable that people have on many noteworthy occasions been inspired through the benchmarking process. By exposing organizations and people to new ideas and approaches, the benchmarking experience often spurs extraordinary insights and breakthrough thinking.
What is truly remarkable is that benchmarking has not sooner been embraced as a fundamental business process and skill. Only in the late Eighties and early Nineties has benchmarking become widely regarded as a skill that should be communicated and utilized in day-to-day business operations. Benchmarking has broad applications in problem-solving, planning, goal setting, process improvement, innovation, re- engineering, strategy setting and in various other contexts. Quite simply, benchmarking is a fundamental business skill that supports quality excellence.
Benchmarks and Benchmarking
Benchmarking's linguistic and metaphorical roots lie in the land surveyor's term, where a benchmark was a distinctive mark made on a rock, wall or building. In this context, a benchmark served as a reference point in determining one's current position or altitude in topographical surveys and tidal observations. In the most general terms, a benchmark was originally a sighting point from which measurements could be made or it implied a standard against which others could be measured.
In the 1970s, the concept of a benchmark evolved beyond a technical term signifying a reference point. The word migrated into the lexicon of business, where it came to signify the measurement process by which to conduct comparisons. In the early 1980s, Xerox Corporation, a leader in the business process of benchmarking, referred to benchmarking in rather narrow terms that focused primarily on comparisons with one's primary competitors. "Benchmarking is the continuous process of measuring products, services, and practices against the toughest competitors or those companies recognized as industry leaders," observed former Xerox CEO David Kearns.
During the decade of the Eighties, the definition of benchmarking grew in scope and focus. No longer were the metrical objects or benchmarks of primary interest. Benchmarking came to refer to the outreach activity of comparing yourself against others. Various practitioners offered the following definitions:
- "A process for rigorously measuring your performance versus the best-in- class companies and for using the analysis to meet and surpass the best- in-class." [Kaiser Associates, a management consulting firm that has actively promoted benchmarking.]
- "A standard of excellence or achievement against which other similar things must be measured or judged." [Sam Bookhart, former manager of benchmarking at DuPont Fibers.]
- "Benchmarking is the search for industry best practices that lead to superior performance." [Robert C. Camp, a Xerox Corporation manager, author of Benchmarking: The Search For Industry Best Practices, and one of the foremost benchmarking experts at Xerox Corporation.]
The distinction between benchmarking and benchmarks continues to perplex many managers. In our view, benchmarking is the on- going search for best practices that produce superior performance when adapted and implemented in one's own organization. Emphasis should be placed on benchmarking as an on-going outreach activity; the goal of the outreach is identification of best operating practices that, when implemented, produce superior performance.
Benchmarks, in contrast to benchmarking, are measurements to gauge the performance of a function, operation or business relative to others. In the electronics industry, for instance, a benchmark has long referred to an operating statistic that allows you to compare your own performance to that of another or to an industry standard. Operating statistics employed as benchmarks provide incomplete comparisons. In a sense, they are "superficial," for they draw attention to performance gaps without offering any evidence or explanation for why those gaps exist. At times, the performance gaps surfaced through benchmark comparisons may reflect significant differences in operating systems and procedures; on other occasions, benchmark variances may reflect differences in the way different organizations track and measure the performance of their systems.
The root causes of operating differences usually cannot be discerned from the "benchmarks" alone. In this respect, the benchmarks are like divining rods that lead the organization to hidden opportunities to innovate and improve performance. Benchmarking is the actual process of investigation and discovery that emphasizes the operating procedures as the things of greatest interest and value. Consequently, "Best Practices Benchmarking®" can be described as the process of seeking out and studying the best internal and external practices that produce superior performance. One measures this performance through various financial and non-financial performance indicators.
Best Practices Benchmarking®, which includes but isn't limited to the study of statistical benchmarks, can -- and should -- be applied at many levels of the organization and in many different contexts. The benefits of benchmarking have been well recognized in certain industries and operating areas. For instance, many benchmarking projects have targeted critical technical functions such as distribution and logistics, billing, order entry and fulfillment, and training. However, benchmarking is also an advanced business concept with general management applications for high-level functions such as strategic planning, restructuring, financial management, succession planning and supplier and joint venture management.
The pace of change is so rapid today that no single organization can ever control or dominate all effective operating practices and good ideas. To be a marketplace leader, one must look outward - as well as inward -- for constant improvement and new ideas. Customers everywhere are broadcasting the same message to their suppliers: "Faster, cheaper, better." The old school of thought, which held that "if it ain't invented here, it can't be any good," is a curse in today's high-velocity markets. Don't reinvent what others have learned to do better. Today's rallying cries -- Borrow shamelessly!", "Adopt, adapt, advance!", "Imitate creatively!" and "Adapt innovatively!" -- are anthems of business pragmatism.
Benchmarking teams, with a mandate to look far and wide for better operating practices, are arguably one of the best sentinels senior management can post along the watchtowers of the organization. They can sound the alarm when the first signs appear on the horizon that the organization has fallen behind the competition or has failed to take advantage of important operating improvements developed elsewhere. Best Practices Benchmarking® provides employees and managers the tool, the rationale and the process to accept change as constant, inevitable and good. "Change has no constituency," observes General Electric CEO Jack Welch, who has established benchmarking for best practices as an essential part of GE's on-going management and improvement efforts. "People like the status quo. They like the way it was."
The on-going adaptation of best practices helps an organization avoid being ambushed by unexpected change. A company can accelerate its own rate of improvement by systematically studying others and by comparing its own operations and performance with the best and most effective practices of highly innovative and successful companies. The search for best practices quickly draws you outside the confines of your own culture and personal habits. Best Practices Benchmarking® is therefore a pragmatic approach to managing change and performance improvement.
Many organizations have demonstrated the power of Best Practices Benchmarking®. Bell Laboratories, the research arm of American Telephone & Telegraph Co., has notably showcased the positive behavioral effects of best practices. In a fascinating program focused on AT&T engineers, Bell Labs demonstrated that the company could effectively manage individual behavioral change, which leads directly to performance improvement, through an individual best practices strategy.
During a six-year period, Bell Labs trained 248 engineers in its switching systems business unit to emulate the work and social habits of the unit's best performers. The strategies used by the best practitioners were hardly lofty or the stuff taught at the world's best technical or business schools. These best practices were fundamental skills designed to make people more effective and efficient. The program called for the engineers to learn from each other various important business practices and skills. These practices included how most effectively to manage work-in-baskets" that otherwise filled up with memos, correspondence, mail and reading, how to accept constructive criticism, and how to seek help instead of wasting time by insisting on solving problems individually.
The results were impressive: engineers who went through the Bell Labs best individual engineer practices program boosted their productivity by 10% in eight months! This productivity boost saved Bell Labs the money spent on the program after one year, and returned more than six times the investment after two years.
AT&T is not the only major corporation to experiment with a best practices strategy in managing its business. General Electric currently embraces a best practices program that is descended from several earlier management initiatives. More than 40 years ago, then GE Chairman Ralph Cordiner pursued a best business practices strategy when he assembled an internal team of top managers and instructed them to identify and institutionalize the era's best operating practices.
In 1951, [Cordiner] assembled a brainy team of GE executives, plus consultants and professors, including Peter Drucker, to recommend ways to improve GE's management. They studied fifty other firms, pored over the personnel records of 2000 GEers, did time-motion studies of executives at work, and interviewed countless GE managers. Two years later, they emerged with the Blue Book, a five-volume, 3,463-page management bible. Buried in endless pages of stultifyingly elaborate prescriptions are such powerful concepts as management by objective - - as well as some of the most revolutionary ideas [current GE CEO Jack Welch would later espouse. This discussion of decentralization, for instance, sounds a lot like Welch's principle of speed: 'A minimum of supervision, a minimum of time delays in decision making, a maximum of competitive agility, and thus maximum service to customers and profits to the company.' "
GE's Blue Book and every other best practices compendium face the same challenge: How do you avoid bureaucracy when codifying and institutionalizing today's most effective operating practices? The easiest way to fully leverage an identifiable best practice is to declare it a mandatory SOP (standard operating procedure). Paradoxically, an organization risks turning its current best practices into future bureaucratic tendencies as soon as it rigidly mandates and codifies them in hefty operating manuals. The road to competitive ruin is paved with once-effective operating procedures that have outlived their time. Companies implementing best practice strategies must carefully balance the benefits of current SOP compliance with the benefits of future innovation. Tomorrow's best practices will inevitably evolve beyond or diverge from today's best practices. By their nature, best practices are dynamic and progressive. For this reason, Best Practices Benchmarking® is often called an "evergreen" process: it renews the organization each time it is repeated. Consequently, best practice champions regard benchmarking as on-going business process that is fully integrated with continuous improvement in their organizations.
Three Primary Benchmarking Types
Benchmarking gained tremendous influence and currency in the Nineties. Correspondingly, front- line employees and operating managers applied basic benchmarking skills in scores of different business situations. Among these applications, three distinct types of benchmarking proliferated. They include:
- process benchmarking,
- performance benchmarking, and
- strategic benchmarking.
Process Benchmarking: Process benchmarking focuses on discrete work processes and operating systems, such as the customer complaint process, the billing process, the order-and-fulfillment process, the recruitment process or the strategic planning process. This form of benchmarking seeks to identify the most effective operating practices from many companies that perform similar work functions. In recent years, process benchmarking has grown in stature in the United States. Many of the most impressive American benchmarking success stories refer to process benchmarking. Its power lies in its ability to produce bottom-line results. If an organization improves a core process, for instance, it can then quickly deliver performance improvements. These performance improvements may be calculated through increased productivity, lower costs or improved sales, but their net effect frequently translates into improved short-term financial results. For this reason American managers, seeking performance improvements that will show up on their quarterly score cards, embrace process benchmarking.
Performance Benchmarking: Performance benchmarking enables managers to assess their competitive positions through product and service comparisons. Performance benchmarking usually focuses on elements of price, technical quality, ancillary product or service features, speed, reliability and other performance characteristics. Reverse engineering, direct product or service comparisons and analysis of operating statistics are the primary techniques applied during performance benchmarking. The automotive, computer, financial services and photo copier industries, among others, regularly employ performance benchmarking as a standard competitive tool.
Strategic Benchmarking: In general terms, strategic benchmarking examines how companies compete. Strategic benchmarking is seldom industry-focused. It roves across industries seeking to identify the winning strategies that have enabled high performing companies to be successful in their marketplaces. Numerous Japanese corporations are accomplished strategic benchmarkers. A U.S.-based management consultant who specializes in working with Japanese corporations operating in the United States tells this story: "My clients begin by asking, 'What companies are really good?' Then we set up a trip in which the chairman or CEO of my client will go to visit these really good companies. Unlike American companies that begin a benchmarking project by determining what specific activity or process they want to examine, my Japanese clients are interested in fundamental lessons and winning strategies. They feel as if they already understand their processes." It is not surprising that Japanese corporations, which characteristically focus on long-term time horizons, should be most interested in strategic benchmarking. Strategic benchmarking influences the longer-term competitive patterns of a company. Consequently, the benefits may accrue slowly. Organizations seeking short-term benefits, such as those reflected in quarterly performance reports, usually find that process benchmarking produces results more rapidly.
Applications and Benefits
Benchmarking is a remarkably versatile business tool. Roland Loesser, the chief financial officer of the Sandoz Corporation's American operations, observes: "Benchmarking is powerful because it can be applied to virtually every function in our companies." Moreover, front-line managers are using it in many new and creative ways. Some of the more frequent applications include:
Setting and refining strategy: Today's markets are in a dynamic state of flux. Consequently, important insights can be gleaned by studying the experiences and competitive strategies of others. Bath Ironworks, for instance, benchmarked the strategies and operations of 10 shipyards in Holland when the Cold War's end rendered the 108-year-old shipyard's business strategy completely out-of-date. Bath, the U.S.'s fourth largest shipyard and Maine's largest private employer, had assumed that the country's need for combat vessels would remain strong for the rest of the century. (Since 1977, 86% of the vessels Bath delivered were Naval combat ships.) To quickly rethink its strategy and adjust to the "sea change" in the post-Cold War economy, Bath studied the strategy of the Royal Schelde shipyard in Vlissingen, Holland. Royal Schelde and other Dutch shipyards had already reorganized to accommodate merchant ship building and the manufacturing of other complex structures, such as bridges. "Contingency plans can be developed and implemented much faster and at far less cost [through benchmarking] than if developed from scratch," observes Bath Iron Works' manager of quality improvement William R. Tip" Koehler. The strategic lessons learned by other organizations and industries can help your own company refine its strategy, project the possible outcomes of changing its present course, and forecast potential cataclysmic shifts brought on by changing market circumstances.
Re-engineering work processes and business systems: Benchmarking is a necessity for companies engaged in re-engineering their processes and systems. Benchmarking gives you the ability to see things differently. It is like setting up a satellite dish outside your offices. Suddenly, signals from throughout the world can penetrate your organization. Benchmarking enables a company to get outside its conditioned responses or customary structures of thinking. When GTE re- engineered eight core processes of its telephone operations, it examined the best practices of some 84 companies from diverse industries to help the company re-think the rules of the game for each of its core functions. Re-engineering without benchmarking is likely to produce flat 5- 10% improvements, not the spectacular 50-75% performance improvements often seen with radical re-design. Benchmarking enables true re-engineering. Through the study of outside best practices, a company can identify and import new technology, new skills, new structures, new training and new capabilities.
Continuous improvement of work processes and business systems: Not every benchmarking project or initiative will yield major-magnitude change and system breakthroughs. Benchmarking also provides a potent source for incremental changes and improvements. Benchmarking exchanges frequently yield "golden nuggets" that are weighed in ounces rather than pounds. KPMG Peat Marwick, the Big Six accounting firm, borrowed the concept of a supermarket's Express Checkout to start an express line in its word processing pools. The change enabled work teams with minor document changes to go through an expedited process. This small change was of great value to word processing departments that handled high volume work orders. It solved the long-standing and nettlesome problem of work assignments with small changes being stalled in long work queues. Moreover, this innovative adaptation of a supermarket operating practice improved cycle time and boosted internal customer satisfaction. Additionally, it can be applied to many other service functions, such as copying, graphics production and research.
Strategic planning and goal setting: The unexpected missteps of blue-chip organizations such as IBM, American Express, Westinghouse and General Motors have provided the world an important lesson: In the 1990s, market changes can be swift and powerful, economically hobbling even the most powerful corporations. Consequently, a growing number of companies enable their strategic planning and goal setting process through benchmarking. Benchmarking helps organizations anticipate market changes and validate goals and targets. One can only wonder how much sooner these battered giants might have responded to shifting market realities if they used benchmarking as an integral part of their strategic planning and goal setting process.
By reviewing the products, prices, practices, strategies, structures and services of competitors and other industry front-runners, managers can validate the adequacy of their own goals, plans and strategies. For instance, Mutual Life Insurance Company of New York requires all executives to find benchmarking information on their primary and secondary competitors as part of the company's newly revamped planning process. Says MONY Quality Officer Jan Howard: "Planning without awareness of what your competitors are doing is like flying a plane over the Alps in heavy fog without any instrument controls."
Problem solving: Benchmarking frequently demonstrates its value in the problem-solving process. Ironically, most corporate problem-solving processes do not methodically look outside the team or organization for solutions. Standard problem-solving processes provide a structure that make work groups more effective; they also prompt teams to root their analysis in empirical data, which supports management by fact -- rather than by fancy. But most problem-solving processes indirectly encourage teams to reinvent the wheel because they seldom encourage work groups to consider external experience in developing their solutions. As an enabling tool for problem-solving, benchmarking frequently produces elegant answers for thorny operating issues. Consider the following case from the Xerox Corporation, where benchmarking has been deeply integrated into the organization's fundamental quality and problem- solving efforts.
Plagued by high associate turnover in its corporate legal department, Xerox looked for solutions both internally and externally. Internal analysis revealed various causes for the problem; external analysis, however, turned up important insights. Xerox's benchmarking partners shared the same recruitment and selection process and all suffered from the same high associate turnover. Once recognizing that its essential recruitment strategy produced sub-optimal results, Xerox adjusted its recruitment strategy rather than trying to fine-tune the process. In retrospect, this decision makes excellent sense because the best and brightest law students are usually geared to work for high-paying and high-powered law firms -- not for corporate law departments. Many fine lawyers decide to move to corporations after practicing for several years at a firm. The common experience of all the benchmark partners gave Xerox confidence to move away from traditional recruitment on law school campuses to a more radical strategy. This strategy emphasizes recruitment of experienced lawyers, who wish to make lateral career moves away from law firms and into corporate practices. Arguably, Xerox would never have gleaned this insight if not for its benchmarking investigation.
Education and idea enrichment: A Zen-like management riddle asks: "How does a fish know it is wet?" The fish spends all its life in water and knows no other condition. The riddle probes how people, who grow accustomed to operating in certain ways, know there are other approaches -- perhaps better ways -- of performing the same task. Benchmarking is a tool for achieving idea enrichment and general education. Each benchmarking trip is a learning safari. Successful benchmarkers return to their organizations with valuable trophies -- new ideas and approaches for accomplishing old tasks. By regularly benchmarking critical functions, organizations ensure they remain open to new ideas, changing trends and evolving technology. If seeing is believing, then benchmarking is an effective process to ensure that managers and front-line operators see other approaches to accomplishing the activities over which they preside.
Market performance comparisons and evaluations: Human nature encourages people to reflect positively on the organizations and colleagues with which they work. Naturally, people want to validate their efforts. Correspondingly, organizations and individuals frequently presume the products and services they provide to customers are also of high quality. Yet without carefully comparing them to competitor's offerings, they cannot fairly evaluate their relative standing. However fancy gives way to fact when you benchmark your company's products, features and performance against competitors'. This type of performance benchmarking is common in many industries. Mortgage bankers, for instance, compare their interest rates, service fees and product types on a weekly basis. Consumer Reports has long evaluated the features of various products and J.D. Powers has "benchmarked" customer satisfaction levels among automobile owners. Financial World magazine rates the financial performance and management of America's top cities. All these industry and professional ratings provide a fact-based market performance test that employs the essential skills of benchmarking. By heeding these and other types of performance benchmarks, organizations can assess the adequacy of their products, services, features and performance. Such information can help them manage by customer- focused facts.
Catalyst for change: Al Kuebler of 1992 Malcolm Baldrige National Quality Award winner AT&T Universal Card Services observes an operating truth that every benchmarking manager has observed: "Tell me and I forget, show me and I remember, involve me and I understand." Benchmarking is an effective catalyst for change because it involves employees in the personal discovery of more effective operating practices. Benchmarking exposes people to new approaches, systems and procedures. It is first-person experience that helps an employee visualize the final goal of prospective change. In this respect, benchmarking demystifies change, making it more tangible and less threatening. Consequently, benchmarking helps manage organizational change.
A Utilitarian Tool
Managers and employees are inundated with a series of highly abstract yet exceedingly important challenges. These include general mandates to oversee such intangible concepts as change management, innovation, creativity, organizational learning, speed or cycle time reduction, process simplification and re- engineering. For many managers concerned with such matters as serving customers, meeting daily deadlines, reducing costs and growing revenues, these concepts seem perplexing. It's difficult to get your thoughts and your hands around these high sounding but abstract concepts.
Consider the company that wanted to establish its position as the leading innovator in its industry. To achieve this goal, it proposed performing an "innovation audit." The concept was powerful: audit or assess the company's structure, culture, work processes, technology and managerial systems to determine their positive or negative influences on innovation. The magnitude of this task quickly grew daunting. How would the team define creativity and innovation? What would be the actual goal of such an audit? What systems or processes would be the focus of such an audit? What systems if any would be excluded? Arguably since every system and process in the company could influence organizational innovation, the company should consider them all. To avoid attempting to "boil the ocean" on its first foray into this field, the organization refocused on the new product development process. If the company improved this process, it would produce more successful product launches. This success would advance the company in becoming the industry leader in innovation -- regardless of how it defined innovation." Benchmarking in the new product development process provided an excellent, results-oriented approach to exploring the larger innovation theme. As the company in the example, any benchmarker needs to focus its study. A focused study turns the abstract concept into the concrete.
Benchmarking is an easily grasped, functional tool. As utilitarian as a fireplace poker, it can test and probe the hottest management concepts. Benchmarking doesn't support abstract postulations about arcane management concepts. It promotes the active discovery of systems that embody the concepts in real-world situations. Don't sit in isolation, for instance, while meditating how to compete through cycle-time reduction. Study the best practices of other organizations that have learned to perform critical functions more quickly than your own company. Benchmarking offers a kind of low tech "virtual reality" for organizations eager to simulate operational experiences in their own environments. What better way to project a system's impact in your own company than to examine the performance effects of that system already implemented in another organization? "Ideas are a commodity," observes Dell Computer CEO Michael Dell. " Execution of them is not." As a managerial tool, benchmarking provides a double benefit: it provides a way to access new ideas and to test or evaluate the implementation challenges they may present in your own organization.
A full list of benchmarking benefits cited by practitioners reaches as high as Everest. Bottom-line summaries almost always suggest that benchmarking:
- Improves organizational quality,
- Leads to lower cost positions,
- Creates buy-in for change,
- Exposes people to new ideas,
- Broadens the organization's operating perspective,
- Creates a culture open to new ideas,
- Serves as a catalyst for learning,
- Increases front-line employees' satisfaction through involvement, empowerment and a sense of job ownership,
- Tests the rigor of internal operating targets,
- Overcomes front-line employees' natural disbelief that they can perform better,
- Creates an external business view, and
- Raises the organization's level of maximum potential performance.
Finally, benchmarking for best practices generates one more benefit that is arguably the most important of all. It teaches organizations new lessons in competitiveness. "Benchmarking taught the managers how to compete," observed Sam Bookhart, formerly benchmarking manager at E.I. DuPont de Nemours & Company, Inc. "It wasn't just the marketing manager. It was the technical manager and the manufacturing manager and the accounting manager. It taught them how to compete and that resulted in dramatic changes in culture and in improved product and service quality."
In the rough-and-tumble marketplace of the 1990s and beyond, few organizations can afford to ignore these lessons of competitiveness. There's a simple litmus test to determine benchmarking's applicability to your organization. Ask yourself: Can my organization afford to stop improving? Can my organization afford to stop learning? Can my organization afford to stop competing for its position in the marketplace? If your answer to any of these questions is "yes," then put this book aside; it will not benefit you. However, it's difficult to imagine many organizations -- public or private, for- profit or non-profit -- that can respond "yes" to these inquiries. Every organization strives to maintain and enhance its position over time. That is the essence of competitiveness. That's also why this book is dedicated to benchmarking for best practices, the art and science of winning through innovative adaptation!