One of the innovation practices in a firm's portfolio is benchmarking. And so we want to look at how benchmarking can become an innovation practice. It's built on the idea that there is strategic potential in benchmarking. And there's a book out that actually looks, Benchmarking For Best Practices and Winning Through Innovation Adaption. And the idea here is that benchmarking actually translates an engineering process into an innovation practice. And so we're going to look at ways in which that happens. So first of all, let's ask why, why bother to benchmark for innovation? And it's an easily understood business practice. That's the easy thing. You don't need a lot of expertise. You need to just be able to observe what's going on, and it's similar to what you're doing in your own firm. And competitor practices are readily available. You can see them everywhere. And innovative practices and approaches are continually being revealed and studied. They're studied in the practice literature, they're studied in trade shows, they're basically accessible, more accessible than most of us realize. And by adopting innovative approaches from others, it's often easier and less costly than developing them internally. So that's the argument for why you should benchmark for innovation. And so we're looking at the different types of benchmarking here. You can benchmark for products. You can look at a product and say, how is that product working? How is that product built? You can benchmark for processes, you can examine a process. How well is it working? Are there innovative processes or innovative ways that our competitor is doing something that we aren't doing? What can we adapt from that? You can do strategic benchmarking and look at ways in which a firm is doing something that is linked to their strategy. You can do internal benchmarking between factories in the same firm. You can do external benchmarking, and you can look at the different functions of competitors and other independent branches. So there are a lot of ways to do this, but these are the fundamental types of benchmarking. So in this diagram, this is a very revealing diagram because what it does is it helps you look at what's worth benchmarking. If you look at the yellow part, the lower left quadrant, that's where we have low performance and relatively normal practice, nothing special or unusual, and so likely this is what you're already doing and you don't need to do that. You don't need to benchmark something there. On the other hand, if you go where things are highly vulnerable, on the upper left hand corner, those areas are risky because you might not be able to leap from the practice that you're currently doing now to a practice that is out there and is very high performing. Then in the lower right hand corner you have what we call promising practices. And those practices are good practices, but they're maybe not high performing practices, but they're better than what you're doing right now. And so they're opportunity areas too. As you can see where the arrow is moving, the arrow is moving to the upper right. And the idea there is that you want to look at who is doing a practice or a product in a world class way. And those are the things that you want to try to benchmark. You want to try to emulate and, if you will, copy or match the practice that is going on in firms that are doing things in a world class way. And so those are the ones that have the greatest promise for improving things and show the greatest promise for doing something innovative. Now here we have a benchmarking opportunity pyramid. And this pyramid is just four different levels. So you could, at the lowest level, those are the easiest things to do. You could compare what you're doing to past performance. And you compare present performance to past performance, and find out if you're really doing anything that much better over, let's say, a period of a year or two years or three years. Or on the next level up, you could compare what you're doing with your customers' perceptions and expectations. So you want to benchmark what you're doing against your customers' perceptions and expectations. A third level is where you are comparing with your best competitors. How well is your best, your toughest competitor doing and how well are you doing compared to what that competitor is doing? And then the fourth level is almost what we had in the previous slide, is world class, the ultimate possible performance. What would we possibly have to do in order to reach and benchmark something that would be really, really maybe even out of our league, but that would be something that would be very, very high level improvement? So each of these benchmarking activities goes through kind of a six step process here where you look at what you want to benchmark. You understand your current performance. You make a plan of how you're going to study others. You actually then, this is the benchmark activity, the four steps where actually you study other firms, you study how they're doing it. And then you look at the data and you see how different is what we're doing than what other firms are doing and in what way is it different? And then you use those findings to make improvements. So the basic step here is that you identify and measure, and you understand your current performance. If you don't understand your current performance, you have nothing as a point of departure to measure. And you identify some needed improvements and you establish some benchmark goals. And in your search, you search for best in class performers. You understand how they perform, you learn or you study them, and you identify applicable innovation opportunities. And then you compare the benchmarks to your actual operations. What you have found by looking at what other firms have done, and you see the functional differences, the value differences, what you need to change, and what the cost or the benefit is of that change. And then you implement the benchmarks as innovations, and you translate the benchmarked opportunity from its source, and you fit the benchmark idea into an existing process. So you're always going to be changing something that you're already operating and existing, and you're going to make that change and you're going to make it with the premise that the benchmark choice is really an innovative improvement. And then you monitor the changes and see the value that is actually created, and that happens over a period of time. So here are the basic benefits of benchmarking. You can reveal new innovation opportunities. You can create a culture open to new ideas. This is important. This is a part of the innovative culture of an organization. If you're benchmarking other firms, your employees and your staff and your team is beginning now to look at what a competitor firm is doing and see what improvements could be made in your own firm. And that really makes for a lot of commitment to creatively solving a problem and creatively adopting benchmark opportunities. And so you enlarge the external business view, that's the real big benefit. Suddenly, you're looking, you and your staff and your team, is looking outside of your own firm to see what other firms are doing, and you begin to have a broader view of not only your own firm, a broader view of the marketplace. And benchmarking actually serves as a catalyst for learning. If you're benchmarking, you're constantly looking and you're constantly looking for new opportunities and learning from what works and what doesn't work. And you test the viability of your current operations. If you're benchmarking and, let's say if you're not benchmarking, you're not really caring about what's happening, you're just producing and you're not really discovering what could be better. And finally, you create new performance targets by benchmarking. And so the takeaways here are that by considering benchmarking as another innovation practice tool in the portfolio of tools, you can really add a lot of value to what you're doing. And benchmarking can readily be done without any major in-house training or consulting help, because people know what their operation role is. They understand how something is working, they understand the product that they're looking at, and they can look at how others are doing it. And they can make that comparison fairly readily. And finally, the benchmarking process actually helps create receptivity to innovative ideas. because if you're out there looking at things and benchmarking, you can begin to see what works, what doesn't work, and you can begin to create a receptivity to innovative ideas.
