According to Bain & Co., benchmarking is still the world’s most widely used cost saving tool. But the principle of benchmarking, of comparing the elements of your performance against the best in the business, has a value way beyond cost saving.
Benchmarking helps us compare our game with others, identify the elements where they’re better than us, and allows us to start trying to unravel why that is. Sometimes, once you’ve identified the best in class, the reason for it becomes obvious. Dick Fosbury is a classic example – while at Oregon State University he developed a new technique for the high jump. In 1968 he entered and won the NCAA title, the US Olympic trials, and in Mexico that year, the Olympic gold medal with a new Olympic record. In Munich four years later, 70% of the competitors were using his technique.
It remains the basis of the technique all jumpers use today.
Even in the Fosbury case, competitors had to work hard at the new model to get it to work for them – it’s harder than the “straddle” technique and has a number of subtleties that aren’t at first, apparent. But by the time Munich came round, not only had many of the competitors mastered it, they’d already starting to develop it further themselves. And that’s the principle of benchmarking – not just comparing performance and setting aspirational targets, but identifying genuine best practices, adopting them, studying them and understanding how we might adapt and improve upon them. Unlocking the secrets that will help us raise the bar.
OK, it’s not as sexy as making an acquisition or launching into a new market. It doesn’t have a trendy label, like “lean”, “TQM” or “Six-Sigma”. But the basic business principle of differentiating where it adds most value, and adopting best practice where it doesn’t, is as powerful as it is simple.
Here are five simple steps for raising the bar in your organisation
- Pick the measures - strategically
These should be a balanced set of the most important measures in your business. They are most likely to be based around revenue, cost and quality but should also include key customer measures, e.g. satisfaction, advocacy. - Select the comparators - aspirationally
The point of benchmarking is not to say “we’re better than some, but worse than others”. It’s to identify and bring in new thinking. So don’t just look at the standard competitors – chances are you’re already doing the same things. Pick the outstanding performers, those you suspect are doing something different, and look outside your immediate competitors. Seth Godin recently wrote about “One Flew South” – a standout quality food joint amid the sea of “lowest common denominator fried meat” places that fill Atlanta Airport. As the general manager explained: they compare themselves to other restaurants, not to other airport restaurants. - Identify the best – objectively
In some sectors, like the health service, there is a mass of available information to support objective comparison. Likewise for internal benchmarking across comparable sites. In others it’s more difficult, but never fall back on subjective views, at best they will reinforce the status quo. - Analyse the drivers – forensically
Where the benchmark organisations aren’t direct competitors, try a collaborative approach. Otherwise use visits, customer groups and, to the degree that there’s no ethical compromise, suppliers and ex-employees. Quite often there is good quality information already in the public domain, particularly if the example is a genuine exemplar. The more detailed the understanding at this stage, the more likely the benefit will emerge back home. - Adopt then Adapt – faithfully
This is crucial. Once the fundamentals have been learned, try and adopt them as-is, at least on a trial basis, before making any changes. Run with them and understand them. Without this step the impact will be weakened, diluted to taste by the “not invented here” brigade, and the opportunity for a true performance shift will be lost.
A final word. Dick Fosbury didn’t win the Olympic gold in 1968 by copying, he did it by innovating. He delivered a breakthrough performance and created a new way of doing things that still bears his name. Any organisation that can create breakthrough innovations in a core discipline will likewise create a competitive advantage and pull away from the field. But innovation is hard, it is sporadic, and its advantage is often temporary. Since 1968, all but two Olympic high jump medallists have used Fosbury’s technique; analysing it, adopting it and adapting it to leverage their own advantages of height, strength and power. Fosbury himself never medalled again.
