benchmarking
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BenchmarkingBenchmarking
Farhad Zargari, MD, PhDFarhad Zargari, MD, [email protected]@gmail.comJuly 2010July 2010
Dr. Zargari
Dr. Zargari
What is Benchmarking?
Benchmarking is the process of improving performance by continuously identifying, understanding, and adapting outstanding practices found inside and outside the organization.
Dr. Zargari
What is Benchmarking?
Benchmarking is the process of comparing one's business processes and performance metrics to industry bests and/or best practices from other industries. Why are others better ? How are others better ? What can we learn ? How can we catch up ? How can we become the best in our sector ?
Dr. Zargari
What is Benchmarking?
Benchmarking isMaking Best Practices Your Daily
Practice.
Dr. Zargari
What is Benchmarking? (J. McEvilly-2008)
Benchmarking has three main features:
Dr. Zargari
Benchmark
There are many benchmarks in the world including:
Processes
Design
Training
Service
Rapid product development
Dr. Zargari
Dr. Zargari
Continuous and Breakthrough Improvement
Time
Impr
ovem
ent
ContinuousImprovement
BreakthroughImprovement
ContinuousImprovement
Highly
Competitive
Situation
Benchmarking
Accelerates
Innovation
and Change
Dr. Zargari
Background of Benchmarking
Benchmarking was originally defined by D.T. Kearns, the CEO of Xerox Corporation, in 1981 as the continuous process of measuring products, services, and practices against the toughest competitors or non-competitors who is the leader in their industry (Kolarik, 1995).
Dr. Zargari
Dr. Zargari
Why Benchmarking?
Benchmarking gives us the chance of gaining: Better Awareness of Ourselves (Us)
What we are doing How we are doing it How well we are doing it
Better Awareness of the Best (Them) What they are doing How they are doing it How well they are doing it
Dr. Zargari
Why Benchmarking
Cope withCompetitive
Markets
Keep Pace withScience andTechnology
Changes
InnovationIn
ManagementMethods
MeetingQuality
Standards
PerformanceImprovement
CreativeThinking
Meeting Customers
Expectations
Benchmarking
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Three Major Benefits of Benchmarking
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Dr. Zargari
Types of Benchmarking
On the basis of “What” is being compared with other organizations and “Who” is being compared with our organization, we can classify benchmarking.
“What” is being compared with
other organizations
vs. Who” is being compared with
our organization
Dr. Zargari
Types of Benchmarking
On the basis of “What” is being compared with other organizations we have four main types. These four major types of benchmarking are evolutionary beginning with product, through to functional (performance), process and strategic benchmarking.
Product
Performance
ProcessStrategic
Dr. Zargari
Types of Benchmarking
On the basis of “Who” is being compared with our organization, we have these categories:
Internal vs. External
GenericInternational
Best in ClassBest of the Best
Dr. Zargari
Dr. Zargari
Many firms perform product benchmarking when designing new products or upgrades to current products. Providing an external perspective on opportunities to improve products, technology, manufacturing and support processes, the product development process, and engineering practices are core activities of product benchmarking.
Dr. Zargari
Performance benchmarking focuses on assessing competitive positions through comparing the products and services of other competitors. When dealing with performance benchmarking, organizations want to look at where their product or services are in relation to competitors on the basis of things such as reliability, quality, speed, and other product or service characteristics.
Dr. Zargari
Process benchmarking focuses on the day-to-day operations of the organization. It is the task of improving the way processes performed every day. Some examples of work processes that could utilize process benchmarking are the customer complaint process, the billing process, the order fulfillment process, and the recruitment process (Bogan, 1994).
Dr. Zargari
Wisdom from “Texas Instruments”:
“Unless you change the process, why would you expect the
results to change”
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Strategic benchmarking deals with top management. It deals with long term results. Strategic benchmarking focuses on how companies compete. This form of benchmarking looks at what strategies the organizations are using to make them successful. This is the type of benchmarking technique that most Japanese firms use (Bogan, 1994). This is due to the fact that the Japanese focus on long term results.
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This is concerned with comparing different companies' strategies and assessing the success of those strategies in the marketplace. Analyzes the strategies with particular reference to: strategic intent core competencies process capability product line strategic alliances technology portfolio
Dr. Zargari
Dr. Zargari
This refers to the analysis and comparison of one or more units within the same organization. It is often the case when organizations have an in-house best practice area.
Sharing opinions
between departments within
the same organization.
Advantage:Easier to implementEasier to access data
Disadvantage:External ideas blocked
Dr. Zargari
Where examples of good practices can be found in other organizations and there is a lack of good practices within internal business units. Comparison with external organizations leads to discovery of new ideas, methods, products and services.
The gap between internal and external practices displays the way where to change
and if there is any need to change.
Advantage:Helps to measure one’s own performanceHelps to search for best practices
Disadvantage:Takes timeRequires supportLegal/ethical issuesIndustrial espionage
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Comparisons of business process or functions that are very similar, regardless of industry.
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Best-In-Class Generally, initiator firms will choose to benchmark the
best-in-class. Best-in-class refers to those firms or organizations that
have been recognized as the best in an industry based on some criterion.
Objective The objective of best-in-class is to provide a basis for
continual improvement.
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Best-of-the-Best After becoming a best-in-class firm, it may be difficult
to gain new insight and information from direct competitors.
Therefore, the next level of improvement is called best-of-the best or best-in-the-world.
Don’t limit your effort to players inside the industry only!
Dr. Zargari
Dr. Zargari
Types of Benchmarking
There are several other classifications for benchmarking, based on partner type, adoption level and target process, etc. Following are the most used types: Internal External
Competitive Functional Generic
Dr. Zargari
Competitive benchmarking is the most difficult type of benchmarking to practice. For obvious reasons, organizations are not interested in helping a competitor by sharing information. This form of benchmarking is measuring the performance, products, and services of an organization against its direct or indirect competitors in its own industry. Competitive benchmarking starts as basic reverse engineering and then expands into benchmarking.
Dr. Zargari
Competitive Benchmarking is the continuous measurement of the company’s products, services, processes and practices against the standards of best competitors and other companies who are recognized as leaders. It is also important to remember when using competitive benchmarking that the goal is to focus on your direct competitors and not the industry as a whole.
Dr. Zargari
Functional benchmarking - a company will focus its benchmarking on a single function to improve the operation of that particular function. Complex functions such as Human Resources, Finance and Accounting and Information and Communication Technology are unlikely to be directly comparable in cost and efficiency terms and may need to be disaggregated into processes to make valid comparison.
Dr. Zargari
Benchmarking, originally described as a formal process by Rank Xerox, is usually carried out by individual companies. Sometimes it may be carried out collaboratively by groups of companies (e.g. subsidiaries of a multinational in different countries). One example is that of the Dutch municipally-owned water supply companies, which have carried out a voluntary collaborative benchmarking process since 1997 through their industry association.
Dr. Zargari
Performing a financial analysis and comparing the results in an effort to assess your overall competitiveness and productivity.
Dr. Zargari
Dr. Zargari
TOP-10 Benchmarking Organizations
Organization Ranking
Xerox 1
U.S. Army 2
Corning 3
Abu Dhabi Food Control Authority 4
Internal Revenue Service 5
United Technologies 6
DynMcDermott 7
Dubai Municipality 8
Dubai Chamber of Commerce and Industry 9
Allergan 10
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Dr. Zargari
Plan•Select Process•Understand Process•Select Partners
Act•Communicate actions•Develop improvement plan•Implement•Review Progress
Analyze•Collect Data•Establish the gap•Identify process changes•Target future goals
General Benchmarking Process
Dr. Zargari
A Be
nchm
arki
ng P
roce
ss
5. PROJECT FUTURE PERFORMANCE LEVELS
•LEADERSHIP POSITION ATTAINED•PRACTICES FULLY INTEGRATED INTO
PROCESS
10. RECALIBRATE BENCHMARKS
9. IMPLEMENT SPECIFIC ACTIONS ANDMONITOR PROGRESS
8. DEVELOP ACTION PLANS
7. ESTABLISH FUNCTIONAL GOALS
6. COMMUNICATE BENCHMARK FINDINGSAND GAIN ACCEPTANCE
4. DETERMINE CURRENT PERFORMANCE "GAP"
3. DETERMINE DATA COLLECTION METHODAND COLLECT DATA
2. IDENTIFY COMPARATIVE COMPANIES
1. IDENTIFY WHAT IS TO BE BENCHMARKED
PLANNING
ANALYSIS
INTEGRATION
ACTION
MATURITY
Dr. Zargari
Xerox Experience-1 (Brogan, 1994)
The Xerox of today is not the Xerox of the sixties and seventies. During that time period the organization experienced market erosion from competitors, primarily Japanese. These competitors were marketing higher quality products in the United States at the same price or lower as Xerox. Xerox found that the Japanese were able to assemble quality products at a low price. This was hard for Xerox to grasp because they were the first to develop the photocopy and their name had come to be synonymous with photocopies.
Dr. Zargari
Xerox Experience-2 (Brogan, 1994)
How could the Japanese be beating them at their own game? Xerox found that they had to regroup. In doing this they made competitive benchmarking a fundamental part of their operations. Xerox began to study other organizations within and out of their industry. By 1983, Xerox had bench marked more than 230 process performance areas in their operation. Identifying the best processes used by others, Xerox adapted them for their own use. This is how they regained their core competency and strategic advantage in the photocopying industry.
Dr. Zargari
Dr. Zargari
Benchmarking Costs
The three main types of costs in benchmarking are:
Database
Costs
Dr. Zargari
Dr. Zargari
Benchmarking Pitfalls
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Benchmarking Pitfalls
Dr. Zargari
Give Benchmarking a
Chance - It’s Worth It.