Seven
Steps to Effective Competitor Benchmarking |
When it comes to Competitive Intelligence, there
are a few simple tools that can provide for sophisticated comparisons of
business functions between organizations that can help firms "benchmark"
the constituent processes of the company with direct or indirect competitors,
allowing a company to gain the upper hand in a marketplace. But, what is
the process for setting the metrics, methodologies, milestones and comparisons
which might be used to measure the success of a CI/benchmarking function,
or the success of a Strategic Planning department as a whole?
Benchmarking is best used and described as a
framework for strategic planning in that, once elements of study are identified,
metrics can be applied to the key success factors (KSFs) of the industry
or marketplace and these measures or "benchmarks" are then used to develop
future quality and market initiatives for the firm to enhance its overall
competitive position.
It is generally considered that there are seven
steps to this process, as explained below. However, this analysis of intra-
and sometimes inter-industry competitors can form the foundation for future
competitor analysis when the emphasis is placed upon the goals and financial
capabilities of the competitor. This becomes a question of how will the
competitor compete with their particular set of resources and culture?
The body of work surrounding business benchmarking
has identified seven unique steps in this benchmarking process, many of which
may offer some insights on the question of metrics.
Seven Steps in the Benchmarking Process:
1. Determine which functional areas within your
operation are to be benchmarked -- those that will benefit most from the
benchmarking process, based upon the cost, importance and potential of changes
following the study.
2. Identify the key factors and variables with
which to measure those functions -- usually in the general form of financial
resources and product strategy.
3. Select the best-in-class companies for each
area to be benchmarked -- those companies that perform each function at the
lowest cost, with the highest degree of customer satisfaction, etc. Best-in-class
companies can be your direct competitors (foreign or domestic), or even companies
from a different industry (parallel competitors with replacement or substitute
products or services; latent competitors which might backwards- or
forwards-integrate into your market; or, out-of-industry firms with whom
you do not compete, but which have best-in-class areas to be studied such
as FedEx or Wal-Mart in logistics).
4. Measure the performance of the best-in-class
companies for each benchmark being considered -- from sources such as the
SEC, companies themselves, articles in the press or trade journals, analysts
in the market, credit reports, clients and vendors, trade associations, the
government or from interviews with other organizations willing to share their
prior research or "swap" it with you.
5. Measure your own performance for each variable
and begin comparing the results in an "apples-to-apples" format to determine
the gap between your firm and the best-in-class examples. Always feel free
to estimate results, as exact measures are usually disproportionately difficult
to obtain and often do not significantly add value to the study.
6. Specify those programs and actions to meet
and surpass the competition based on a plan developed to enhance those areas
that show potential for compliment. The firm can choose from a few different
approaches -- from simply trying harder, to emulating the best-in-class,
changing the rules of the industry or leapfrogging the competition with
innovation or technology from outside the industry.
7. Implement these programs by setting specific
improvement targets and deadlines, and by developing a monitoring process
to review and update the analysis over time. This will also form the basis
for monitoring, revision and recalibration of measurements in future benchmarking
studies.
Since most of the measures in a benchmarking
process fall into one of two categories, financial resources and product
strategy, this understanding can often be used to simplify the framework
of analysis.
It remains my gut feeling that, regarding the
success of the process itself, ROI is only really measured in documented
"wins", for example we can describe success terms of contracts won due to
a CI success. This can therefore be thought of in terms of new business signed
and the profitability of that new business, a problem solved or costs contained
or reduced by the implementation of the CI/benchmarking process.
Arik R. Johnson is Managing Director of the
Competitive Intelligence (CI) support bureau and consultancy Aurora WDC,
where he gives advice to business leaders and teaches about CI for clients
in the Healthcare, Financial Services, Telecommunications, Information
Technology, Media & Entertainment, Energy, Construction, Transportation,
Industrial Manufacturing and Retail/Wholesale Trade sectors. He's earned
degrees in International Business, History, Political Science and International
Relations from the University of Wisconsin-Madison and teaches about business
in the UW system. Arik serves on the board of directors of Madison-based
software house Fuse Technologies, Inc. and is the Wisconsin State Chapter
Chair of the Society of Competitive Intelligence Professionals (SCIP). He
is a sought-after speaker at events on enterprise knowledge engineering &
competitive intelligence and a contributing editor to publications in the
field. More information is available on the Web at
www.AuroraWDC.com. |