Presented By Ayuhsma Nepal

Measure the work process Improve the work process Increase:

Customer satisfaction Effectiveness Efficiency

Measure the organization Compare the process measures with the benchmarking partners Find out who the best is Adopt the best of your partners

1979 - Xerox coins the term competitive benchmarking 1982 - Benchmarks with L.L. Bean 1985 - Metro Toronto Reference benchmarks its public service departments 1987 - Malcolm Baldridge Quality Award Improvement Act 1989 - Benchmarking: The search for industry best practices that lead to superior performances by Robert Camp 1991 It was added in Malcolm Baldridge Quality Award guidelines

A systematic method by which organizations can measure themselves against the best industry practices Process of borrowing ides and adapting them to gain competitive advantage Improving by learning from others i.e. making comparisons with other organizations and then learning the lessons that those comparisons throw up A tool for continuous improvement Used by both manufacturing and service organizations like Xerox, AT&T, Motorola, Ford and Toyota

What is our performance level? How do we do it? Creative Adaptatio n

What are others performance levels? How did they get there?

Breakthrough Performance

Regularly comparing aspects of performance (functions or processes) with others Identifying gaps in performance Developing performance improvements to close the gaps thus identified Implementing the improvements Monitoring progress and Reviewing the benefits

Copying - the fact that others are doing things differently does
not necessarily mean they are better Spying or espionage - openness and honesty are vital for successful benchmarking Not just a competitor analysis - benchmarking is best when it involves collaboration Quick fix benchmarking is a continuous process that is not done once for all time (should be repeated periodically so as not to fall behind as the environment changes)

To achieve business and competitive objectives To understand current performance of organization and improve it accordingly To set goals based on external information (e.g. competitors information and changing business environment) To discover the gaps in the performance of organization when compared with other organization and implement change to close the gap To achieve a continuous improvement in the performance of organization

Situation External process better than internal processes

Outcome Negative Gap

Desirable Action Make a major improvement effort to close or at least minimize the gap Further investigation to determine improvement opportunities Recognition for the internal process to find out, maintain and further improve organizational strengths

Approximately equal process performance Internal process better than external process

Parity

Positive Gap

Generic - comparisons made in a general sense which often uses the terms such as customer, strategic or operational Functional - focuses on practices of a specific type, like marketing or manufacturing Process -comparison of practices, procedures and performance, with specially selected benchmarking partners, studying one business process at a time. E.g. insurance claims or delivery of bulk commodities Global -comparison made across the world Cost - focuses on cost dynamics Performance - looks at revenue or growth

1)

Internal
Looks at the differing levels of performance within the organization and highlights best practices for dissemination to other parts. Advantages -Cost effective -Easy to gain access to all the required information -Does not require to give anything away to competitors or other outside parties and that the processes will be analogous. Drawback -Fact that even the very best internal practices may not be adequate in the face of external pressures -It only looks at the internal aspect. So, may miss out the bigger picture of the organization

2)


Competitor/Peers
This type of benchmarking is carried out as part of a cooperative study involving a significant number of players - e.g. the major banks Often with cooperative study, it ensures that the study is fair and the consultants /advisors involved retain the level of confidentiality

Advantages: -information gained are detailed which allows comparisons -allows to decide the level of excellence one wish to target -provide with the information that enables the study to add real value.

3) Best in industry
 Focuses on the organization that considers to be the leader in

their field/industry sector  Analyzes as what strategies are used by the organization  Involves gathering more information and even exchanging the information regarding the organization

4) World Class
 It simply involves in making comparison as for what the

organization does with the one considered to be the best in that industry sector  It simply means looking for some stretching target  This comparison is made on the basis of what the organization offers to others

Most dangerous competitors : most like you who have many features in common - Customers a 'comfort' factor - Allows customers to differentiate between offerings

  

Differences between you and your competitors - the basis of competitive advantage Leads you to offer a distinct customer value proposition To be successful in business - some kind of competitive advantage

Customer Value Proposition (CVP) a) Distinguishes you from your competitor's products b) Equalizes the price/value trade-off in the customers' mind - in your favor

A superior CVP your competencies are more in tune with market 'needs and wants' than the competition for this updating your competencies with changing customers' needs and wants is necessary. CVPs and organizational competencies - exactly where benchmarking can add value

All aspects of the organization: inputs into the CVP (IT, customer handling processes premises ) - not just staff skills Set of unique competencies and source of competitive edge

Keep evaluating the needs and wants in the market place and how they will metamorphose Understand what your customers' value now and their needs moving forward Take a long term time horizon Understand competitive movements (current and potential) Keep a close eye on changes in the substitutes market Put in hand the changes to your own competencies to continue to meet the evolving market needs and therefore sustain your competitive advantage.

Benchmarking can be of great value Successful benchmarking does

a) Focuses on key, cross-functional business processes that support the long-term strategic intent and enable you to develop process capability b) Focuses on those areas that develop and enhance core competencies

Proto planning
Decide what you wish to benchmark Decide against whom you need to benchmark Identify outputs required Determine data collection methodologies

Data collection Secondary/background research Primary research - from the benchmark Analysis Of the gaps
Of the factors that create the gaps (enablers)

Implementation
Implementation planning Roll-out of new modus operandi (changes)

Monitoring
Collecting data Evaluating progress Iterative change

What to benchmark? Following references should be considered to maximize the benefits from improvements: a) Core to you and your competition b) Important to you in terms of:
x Values x Volume x Cost

Easy to measure and offering comparisons d) Risk inherent

c) x Processes that are difficult to control x Processes that vary in performance

Choosing your benchmark

The choice of organization depends on several factors as mentioned in previous slide Requirements must be established for selecting benchmarking partners

Deciding on outputs

Before collecting data it is vital that we decide on the format of the outputs This will in turn shape both how you collect the data and the method you use for analysis This should lead to developing benchmark metrics for use during the project

Defining the data collection methods

This will be driven by: The outputs required The form of the information The nature of the exercise Time Process to be benchmarked

Primary
a) b)

x x x x x x x

Direct data collection from the benchmark Method: planning the data collection developing an interview guide/questionnaire conducting primary research monitoring process performance and analyzing performance gaps making on-site observations to clarify and verify previous observations conducting a post-site-visit to record observations Preparing a report

Secondary
 It enables us to get:

x picture of the firm(s) that we might wish to benchmark x an understanding of what we can bring to them  It includes desk research including publications and websites  From this, we can develop a shortlist

The analysis consists of two aspects

Determining the magnitude of the performance gaps between

our company and the other companies, and Identifying the process enablers that facilitated the performance improvements at the leading companies

Phases of analysis stage

data analysis data presentation root cause analysis results projection enabler identification

The goal of this step is to identify adaptable process enablers for Implementation.

The objective of this phase is to make changes to our processes to improve performance. It involves implementation planning, i.e.
x developing the how of the change x rolling out the new methods, and x finalizing measures for excellence

o Set goals to close, meet, and then exceed the performance o o o o o o o o o

gap Select best practices and enablers for consideration Modify process enablers to match the company culture and organizational structure Enhance these enablers based on team observations for integrating process improvements Develop a formal action plan for implementing improvements Obtain management buy-in and ownership of the required changes Commit resources Implement the plan - piloting where sensible Iterate changes based on pilot Roll-out elsewhere as appropriate

This is about
Ensuring the new processes work Any 'edge' created is sustained Collection of data on the new process Valuating progress and if necessary, iterating changes Monitoring and reporting improvement progress Identifying

opportunities for future recalibrating the measure regularly

benchmarking

and

Executive summary Background information Measures Results Recommendations and conclusions

More than 800 companies all over the globe are practicing benchmarking standards

Asia Pacific (10 percent) Central and Eastern Europe (10 percent) North America (34 percent) and Western Europe (44 percent)

Industries using benchmarking standards includes:

Aerospace and defense Automotive Industrial and consumer products Life sciences Process Paper Chemicals High technology and telecommunications equipment and many more

Global benchmarking enables companies to compete against their peers and top-performing businesses around the world It also helps them chart a course to improve operations and drive business performance to new levels Some benchmarking models which are used often
Xerox = 10 steps IBM Rochester = 5 phase model with 15 steps Weyerhaeuser = 33 step model AT&Ts = 12 steps

1) 2) 3) 4) 5) 6) 7) 8) 9) 10)

Xerox TRW Automotive Saudi Aramco U.S. Army Corning American Ordnance LLC Battelle VTech Communications General Dynamics Advanced Information Systems Dubai Municipality

Improves performances Gains and increases upper management supports Build professional relationships Meets strategic goals Proves the value of your firm

Benchmarking is not a panacea, a strategy or a business philosophy but an improvement tool. It requires:
1) 2) 3) Opportunity for improvement Owners and managers involvement Repetition

Benchmarking is not a substitution for innovation

Benchmarking is more than just a comparative analysis - this sort of analysis has been undertaken for many years with little benefits. 'lessons are learned'. The difference with a benchmarking study is that a better way of doing things is analyzed and then the key factors - the enablers are then used to close the gap. NB techniques and enablers that were critical in recent past will not remain the same so the processes should be revisited periodically to see if they are still extant and if not to find out what needs to be done.

There are a few key issues for organizations beginning benchmarking efforts: Top management commitment and participation Sufficient time An able, well-trained team is critical - where appropriate get outside help (consultants) Sufficient resources: people, travel, research, consultants, and other factors Process rigor is an absolute sine qua non for success - you cannot 'graze the surface' Quantitative data is often difficult and time consuming to obtain

In addition, there are some principles that have evolved overtime which form a framework to such studies:
Legality - you must be open and honest Exchange - a quid pro quo Confidentiality - it remains between you and the benchmark d) Use - only for the purpose agreed e) Preparation - is essential to succeed f) Completion - of all tasks and implementation must be carried out g) Understanding - of your processes, gaps, enablers [and their relevance to you] and the action to close the gap are key to success
a) b) c)

3 basic ingredients of successful benchmarking

A real problem with management willing to solve it Access to benchmarking partners who have previously resolved that problem A knowledgeable benchmarking team with the ability to use quality tools and research practices to investigate process problems to their root cause

In most cases it is advisable to use external consultants who bring expertise and experience and can help you carry out a benchmarking exercise avoiding pitfalls and maximizing return from effort.