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Thursday March 30, 2006

Ways benchmarking makes strategies better

I do benchmarking all the time, but I never think that the application of all that data is a 1-size-fits-all model. Benchmarking can be useful to learn what other companies do well to optimize their business model. The key is using the best insights for what my client needs.

Jeffrey Pfeffer just wrote an article for HBS called: Good for the Goose, but not for the Gander that I think is worth quoting:

“There is nothing wrong with learning from others’ experience—vicarious learning, as contrasted with direct experience, is an important way for both people and organizations to learn how to navigate a path through the world. After all, it is a lot cheaper and easier to learn from the mistakes, setbacks, and successes of others than to treat every management challenge as something no organization has ever faced before. So benchmarking—using other companies’ performance and experience to set standards for your own company—makes a lot of sense. In the end, good or bad performance is defined and measured largely in relation to what others are doing. The problem lies with the way that benchmarking is usually practiced: It is far too “casual.” The logic behind what works at top performers, why it works, and what will work elsewhere is barely unraveled, resulting in mindless imitation…fundamental problems render casual benchmarking ineffective. The first is that people copy the most visible, obvious, and frequently least important practices…The second problem is that companies often have different strategies, different competitive environments, and different business models—all of which make what they need to do to be successful different from what others are doing. Something that helps one organization can damage another. This is true particularly for companies that borrow practices from other industries, but often is true for organizations even within the same industry. The fundamental problem is that few companies, in their urge to copy—an urge often stimulated by consultants who, much as bees spread pollen across flowers, take ideas from one place to the next—ever ask the basic question of why something might enhance performance.”

From: Three Myths of Management
By Jeffrey Pfeffer and Robert I. Sutton, HBS Working Knowledge, March 27, 2006

Categories: Learning, Marketing