Benchmarking

If you have a son or daughter already in school, you can probably relate to this scene: You come home tired from work and your kid sadly welcomes you by showing a bad grade on a test he took at school. If you are not the scold-first-ask-questions-later kind of dad (and shouldn´t) you will probably ask your son why he got that grade. Kids most of the time answer “everybody got a bad grade” and start talking about his other friends who also failed and even did worse. You will then answer “I don’t care about the others, I care about YOUR grades.”

Then there is this other family scene when the sibling wants to go out late at night and parents don’t let him/her go. “But all of my friends are going” is a typical argument. My mom had a frequently used and effective saying “if all of your friends would throw themselves from a cliff, would you do it too?”

In both scenes, if your kids had some kind of knowledge in marketing or innovation management they could reply: “It´s called benchmarking, and your entire company probably does it too.”

Benchmarking is a common practice where you compare your company with the competition in different aspects such as quality, attention service, new product releases, sales, and so on. This way you get an idea of how good or bad you are doing and measure your success. Well then let me tell you one thing: “I don’t care about the other's grades, I care about YOURS.” I use this family scenes analogy with clients who want to talk about their success comparing themselves to the competition.

As Chan Kim and René Mauborgne state on the strategic focus of value innovation logic: “Competition is not the benchmark. A company should pursue a quantum leap in value to dominate the market.” (1) This opposes the traditional focus of building competitive advantages that aim beating rivals. But since we like comparisons so much, to what do we compare in order to know our success? Here is one idea: How about comparing your results vs. meeting new client’s needs?

I’m not saying benchmarking is not a useful tool, in fact needed to know where you stand, but it should never be a measure of success. If you are only focusing in becoming the best you will only be one step ahead of the mediocrity of the rest. “If all of your friends would throw themselves from a cliff would you do it too?”

In fact, the way I´ve used benchmarking is to detect market opportunities through white-space analysis. New-comers can easily beat and create better values in markets that are dominated by companies who only benchmark themselves and stop taking in account what is really happening in the market itself. This happens frequently in oligopolies in Latin America.

Yesterday I was visiting my Collage and went to my old Industrial Design Labs to talk to Mauricio Guajardo, one of the best teachers I’ve had (and have because he will always be a teacher) and a good friend of mine. I asked him, in his experienced teacher’s point of view, if it was OK to grade students according to their own development and not in comparison to results others have in the class, embracing the fact that not everyone has the same talents and you should be your own benchmark. The class must be imparted so that everyone learns something and improves, therefore what should be compared is the difference between the initial state and the final state of each student's growth.

Mauricio explained to me that the American way is based in evaluating results, much like in a competition. But my argument followed the Japanese way, where effort and your own progress is also taken in consideration. He said as a teacher he tried to take into account both aspects. He once had given an 8 out of 10 grade to a very good student that had a good design but far from what he expected from her. The girl had come up to him since she thought her design was better than others who got higher grades, and when he explained the reasons she said, “if you had told me, I would have done something much better.” He replied, “That’s exactly the reason why I gave you an 8.0!”. In the other hand, he once had a poorly talented student but that gave the best efforts and attitude but couldn’t obtain great results although she had improved throughout the semester. He gave her a high grade because “maybe in 100 efforts, she’ll get one right and keeping that attitude can get you higher that others that just take things for granted.” Meanwhile he also promotes comptetition based on results, like having students themselves order projects from best to worst.

Through the grade examples we can see how, if we are a top benchmarked company, comparing ourselves to others can avoid us from developing to our full potential and if we are a low scored benchmark company we could be underestimating our efforts and our growth possibilities. My recommendation: find ways of evaluating your company’s success focused on the client’s needs that will instantly take you higher in any benchmark aspect you score. Also measure according to client's perceptions, which can be a whole different world far from reallity. Don't think you are a total success only because you are the best among others.

“The hard part”, as Mauricio also explained to me, “is making the student understand why he got a low grade if he feels his result is better from the others.”

Live to your potential!

(1) Kim, Chan. & Mauborgne, Renée. Value Innovation: The Strategic Logic of High Growth. Harvard Business Review on Breakthrough Thinking. US, 1999.

I don’t have an innovation strategy

Many clients, or potential clients, often tell me “I don’t consider innovation in my strategy.” What I usually reply is: “Well, not stating innovation in your strategy IS a strategy.” Omission has a direct impact on the way things get done.

I then ask them: Do you Play-to-Win or do you Play-Not-To-Lose?

In both approaches towards innovation strategy, some kind of innovation, or at least change, is necessary, but at a different degree. Play-To-Win means you want to take control or stay in control of the market by introducing new products or services for competitive advantages. Play-Not-To-Lose is simply that you are not interested in being at the top, but of course, you don’t want to end up last. Those clients who often tell me that they are “doing changes just to keep alive” or “keep up with the market” are playing not-to-lose and most of the time are creating me-too products at mature stages of their cycle. Sometimes those same companies, since they are not doing great innovation efforts, simply don’t talk about their innovation approach, much less about strategy, goals or processes. This is true for many companies in developing countries where I have worked.

Play-not- to-Lose is not an uncommon strategy or part of a strategy. Although we always want to feel like winners and to ‘shoot at the stars’, we can’t always be radically innovating the market in all areas, in all our business units or in all product families. It would just be chaotic and unsustainable. So we should choose our battles, some will be won and some we should fight just not to end up last or obsolete.

The innovation strategy plan DOES need to state those battles we are not interested in, so that our soldiers don’t waste their time and effort. Of course we can’t be completely closed to new ideas that can emerge, but we can guide efforts so that more ideas emerge where we want them to.

Remember that more innovation doesn’t necessarily mean it is a good thing. Innovation should be a part of the strategy plan and have specific goals and impact areas. If you simply don’t think it would be adequate to make changes in a certain department, business unit or product family, then state it in the strategy plan, don’t just omit it, say it! If you don't, it will just cause confusion. Play-not-to-lose is not a mediocre approach, sometimes it is smarter. Don't think it involves less work, it's just a different kind of innovation management. Store your energies when needed, you can leapfrog opponents later (innovation is not sequential) and don’t be afraid to lay low for a while. Just make sure to get your overall strategy right!