Balancing Operational, Product and Customer Priorities…

Posted on November 16, 2011 by Bob Champagne

Choosing your “strategic bias”…

We’ve had more than a few conversations with clients of late that revolve around the subject of core competency. What is it today? What should it be? What do we want it to be? Must we choose between product innovation, customer care, or operational excellence, or is it possible to have all three? While there isn’t a “one-size-fits-all” answer, the consensus philosophy (as espoused, for example, in the “The Discipline of Market Leaders”) is that there should most definitely be a bias toward choosing one axis of the model for optimization.

It certainly has been an issue that’s generated a lot of strategic debate in corporate boardrooms. Most provocative and paradoxical questions will do that. But the reason this debate so energizes meetings is because it also taps into something deeper–corporate culture and emotion. Operations, R&D, and Customer Service, among other departmental factions, continue to fight for precious budget and capital, and as these resources become increasingly constrained, the consequence of failing to “choose” begins to look like compromise or watered-down decision making. Clearly, it seems, steering a majority of our resources into one of these areas offers the opportunity to create some short-term wins in that area, but it also risks undermining our overall strategy, which could, in the end, leave us with nothing to show.

When a “bias” becomes “THE end game”…

Unfortunately, the very essence of what has made this discussion so valuable is, as well, now creating an unhealthy dynamic in some leadership circles. With resource constraints and the passions of business unit executives both reaching fever pitch, the push to make the core competency declaration is stronger than ever, and the tendency to push for a “clear choice” rather than just a “bias” (which was the original intent of the management model) is more often than not the desired end game of each of these respective operating executives (so long as its THEIR area that benefits from the increased emphasis).

Rather than focus on optimizing just one dimension of the business, we should, instead, look to companies that have managed to assemble the complete package, or, more accurately, perhaps an edge in one domain but without apparent sacrifices in the other two. Apologies in advance for more “Apple advocacy”, but clearly this is an example of a company that not only balances these three dimensions skillfully, but excels in them simultaneously.

Having your cake and eating it too…

Apple is clearly a product-based business…no argument there. Simplicity, functionality, user commitment, and advocacy … the list goes on. When people buy an Apple product, loyalty and advocacy are an integral part of each transaction, and this despite the fact that customers are sometimes even paying a premium price versus competing products. They are immediately reinforced by their “buy decision”. One of our clients calls this “smart value”–the ability of a company, through its product experience, to continuously remind each customer of how smart their purchase decision was. Worth noting also is the fact that, while Apple sells many premium-priced products, they offer, as well, a range of affordable ones that, despite their competitive prices, still feature the design and functionality excellence that customers have come to expect from the company. That their manufacturing and operational processes are sufficiently well-thought-through to allow such products to be offered is a testament to their emphasis on the operational side of the business.

On the customer-care side of things, they are equally credible, if not downright superior, for example, in the way their service channels are so perfectly aligned with customer convenience, the way they make and manage commitments and appointments, the almost cult-like enthusiasm of their staff, the customer-centric culture of their work environments. Even tasks that are traditionally frustrating to customers–warranty issues, software updates, etc.–are so smoothly handled that customers walk away having appreciated the experience.

Separate and apart from the fact that these stores generate more revenue per square foot than any company in history , what is more amazing is the customer-centric focus and attitude that are constantly on display. Whether it is the simplicity of making an appointment at the genius bar , the excellent service you receive, or nice little touches like bypassing the line and having an employee execute the transaction by hand-held device and email you the receipt, it’s all there. When was the last time you heard customers raving about an extra warranty plan for a product that rarely fails?

Product Innovation, Operational Excellence, Customer Advocacy … Walk into any Apple store and you’ll see all three in abundance.

Creating and multiplying your base of “engaged advocates”…

Recently, we’ve shared some views on the need to excel at both product and service experiences. (“Customer Nirvana”) Failure to achieve both means you are only creating temporary success, i.e., until customers have a better choice or option. The path to engaged advocacy requires both. And to achieve product and service excellence simultaneously, as well as profitably, requires operational excellence.

Strategic models that ask you to focus time and money on a single discipline certainly have their place. For example, if your company finds itself in the unfortunate position at being sub-par in all dimensions, then more often than not it will make sense to focus on fixing one area at a time. But as a long-term aspiration, maximizing all dimensions of performance remains the path to being recognized as world class.

There are many football teams that have either awesome offensive or defensive capabilities, but you rarely see any of them playing in the Super Bowl. It’s the team that has managed to strike a proper balance between the groups — offense, defense, special teams — that usually walks away with the trophy.

-b/b

About the Authors:

Bob Champagne is Managing Partner of onVector Consulting Group, a privately held international management consulting organization specializing in the design and deployment of Performance Management tools, systems, and solutions. Bob has over 25 years of Performance Management experience with primary emphasis on Customer Operations in the global energy and utilities sector. Bob has consulted with hundreds of companies across numerous industries and geographies. Bob can be contacted at bob.champagne@onvectorconsulting.com

Brian Kenneth Swain is a Principal with onVector Consulting Group. Brian has over 25 years of experience in Marketing, Product Management, and Customer Operations. He has managed organizations in highly competitive product environments, and has consulted for numerous companies across the globe. Brian is an alumnus of McKinsey & Company, Bell Laboratories, and Reliant Energy, and is a graduate of Columbia University and the Wharton Business School. He can be contacted at brian.swain@onvectorconsulting.com.

Deafening Silence — Failing to communicate in times of chaos…

Posted on November 9, 2011 by Bob Champagne

Climate chaos wreaks havoc again…

Once again, the Champagne family has fallen victim to climate change in the Northeast, or at least two unfortunate weather incidents, whichever your personal/political inclinations require. First came hurricane Irene, and then, last week, the early fall snowstorm. Fortunately for me, I only suffered two days without power, as I was traveling on business for the week. Unfortunately for my family, they were asked to endure almost a week without power, as the outages in the Northeast lingered and local utilities struggled to get customers back in service. But, as of last night, the lights have come back on and life has gotten more or less back to normal.

As I wrote a few weeks back in my “Eye of the Storm” post, nearly every customer understands the nature of uncertainty and can recognize what are, and what are not, predictable/preventable and unpredictable/unpreventable circumstances. Hurricanes and early-season blizzards certainly fall into the latter category. But let’s face it, while we all get angry and frustrated, we are also able to temper, at least somewhat, our emotional responses when we recognize that such events are beyond anyone’s control. There are, however, aspects of such situations that ARE within our control. And failing to deal with these in the face of unfortunate events…no matter how controllable or predictable…can leave us with a feeling of legitimate anger and frustration. Such was the case with the extended power outages this past week.

Crisis management — it’s all about eliminating uncertainty…

I’ve talked a lot in recent months about sources of satisfaction, and, perhaps more importantly, dissatisfaction. But I keep coming back to “fear and uncertainty” as the biggest driver in today’s world, and perhaps the most critical in times of crisis, whether it be natural disasters, political upheaval, or simple technological failure (three whole days of no Blackberry service?). And while we may view much of this as being “out of our control,” as CCO’s, our response in terms of customer communication is ALL within our control.

How to #FAIL

So imagine the frustration of customers when they experience the following (all of which are real examples my family encountered during the recent storm event):

– A website with detailed outage map showing the number of affected customers in each town, and a link (which turned out to be just “bait”) to outage status updates. The status update reported that 95% of customers would be restored within five days. It wasn’t until you clicked a few more towns on the map (assuming you did) that you realized this was a “general” update and not specific to anything. Moral of the story — if you know nothing definitive about the situation (which they clearly didn’t because they were still assessing damage), then admit as much and state, instead, when you DO expect to have meaningful information to share. Lame (and possibly misleading) attempts to suggest that you’re providing legitimate and specific updates when you are not is easily seen through.

– The company’s use of social media during the peak parts of the outage was virtually non-existent. Less than ten Twitter messages during the first 24 hours of the outage, conveying insightful information like “We know there’s an outage”, “This was a really big storm”, and “Stay away from live power lines” could have been administered by my 95 year old grandmother, in terms of content provided (she apparently knew as much as they did) and technological savvy (she may very well know more than they do about how to leverage social media). IRONICALLY, my wife learned that our power was restored by a FRIEND via FACEBOOK!!! And when the information from the company did start coming out, it was hitting their feed well after the updates had already unfolded. And instead of displaying the feed prominently on their website, they buried it behind the “Follow us on Twitter” button (if you personally didn’t go track their Twitter page, you were “SOL,” as they say). In their defense, I suspect there may have been just one single employee responsible for managing all of these updates, but that’s a subject for another post. The company clearly spent tens of millions on the recovery effort. How much effort did they expend on communications and messaging throughout the crisis? Feels like very little.

Now THIS was a useful message!!!!

– A 500+ word letter from the CEO of the company explaining to us in lengthy, florid prose pretty much the same thing — This was a big storm, it was unprecedented, we are trying our best, and reasserting the general commitment of 95% by x date…which means NOTHING to an individual customer. To add insult to injury, we had to listen to the CEO pontificate about how this was the most challenging thing he’s experienced in his career, and how proud he is of his staff, and how concerned he is about his puppy who is out in the cold (OK, the latter is an embellishment of what was really said, but you get the idea). Spare me the lecture on what you can’t do and tell me what you can!!!

– An outage center (automated phone line) that asks (begs) you to report the outage and risky situations, but offers NOTHING else during the automated call, not even the most general, non-specific, non-committal statements, which, admittedly, would have frustrated me…but let’s at least be consistent. All that told me was that they cared a lot about what I could do for them in terms of providing information, but very little about what they could do for me. Heck, it would have been nice if they’d at least asked me to tell them if I’d seen repair work in my area. This might have suggested that they had some interest in learning about the status of restoration (even if they didn’t know themselves).

This entire ordeal, which plays out every time there’s a natural disaster or big crisis event (be it flight delays, hurricanes, or war zones), is becoming an interesting one. We are witnessing a sea change (or maybe it’s a teachable moment) in how we can and should deal with such situations. And it’s becoming clearer that customers (not companies) will probably be the best sources of information during these events. Social media offers a great conduit into that feedback and has proven time and again to be the best medium to solicit and report real-time feedback. The process has clearly changed, perhaps unbeknownst to the company. That, to me, is not only the emerging solution given today’s technology, but the most obvious.

How about we beat the incumbent at his own game?

What is not so obvious is the degree to which companies that we have entrusted to be the “custodians” of information — companies whose primary role is to service customers — remain so clueless as to the most effective ways of providing that service. They appear to be, at best, blind to, and, at worst, simply resistant to using these new channels and changing their internal processes to accommodate them. They are in the best position to aggregate customer information from the variety of channels available, merge it with what they know operationally, and report relevant and meaningful information in real time. Oh and, by the way, imagine the customer engagement you’ll achieve along the way!!! — the ultimate in crowd-sourcing for customer service. But, sadly, this doesn’t happen, and probably isn’t even on the radar screens of most firms. Instead, the more likely scenario is that they will be bypassed completely by some more agile and responsive third party (or perhaps an unseen competitor) that sees in this challenge an opportunity to leverage information and create a unique and refreshing new solution to an age-old problem.

COULDN'T SOMEONE PLAY THE ROLE OF AGGREGATOR OF UPDATE AND STATUS INFO, AND THEN DISTRIBUTE IT TO THE MASSES USING BOTH SOCMEDIA AND CONVENTIONAL CHANNELS????

History has shown us that customers react favorably and swiftly to this sort of innovation, by shifting their loyalty and their dollars to those who demonstrate a willingness and ability to solve problems. All of which leaves me wondering how it is that the company I’ve entrusted to solve these problems for years could be so utterly incapable of recognizing the possibilities and seizing upon the solutions that have been staring them in the face all along.

I recognize that this is a tough assessment and a somewhat emotion-driven “rant” at an industry I’ve spent considerable time advising over the years. And, make no mistake, there are some awesome utilities out there that will step up to the challenge with these and other creative solutions. But, at the same time, there are many who prefer not to rock the boat, to play by the old rules rather than invent new ones. And it’s these organizations I would like to see upstaged quickly by a more innovative and competitive force. Not to wax too lyrical here, but in the stormy waters of competition, your boat is rocking whether you want it to or not!

Fear and uncertainty — Make it go away with clearer, more relevant, and timely communication. You’ll overcome the barriers that stand between you and a base of engaged, satisfied, and loyal customers.

-b

Author: Bob Champagne is Managing Partner of onVector Consulting Group, a privately held international management consulting organization specializing in the design and deployment of Performance Management tools, systems, and solutions. Bob has over 25 years of Performance Management experience and has consulted with hundreds of companies across numerous industries and geographies. Bob can be contacted at bob.champagne@onvectorconsulting.com

Customer Nirvana -When great products meet awesome service…

Posted on November 1, 2011 by Bob Champagne

Improving service — it’s a start…

Most of my posts on this blog are focused on how to improve business processes, especially those that influence customers directly. We talk extensively here about the importance of tracking the right KPIs, effective measurement and analysis of performance results, and how these insights can catalyze creative and innovative solutions to improve the efficiency and cost-effectiveness of our business and operational activities. Done right, these can lead to dramatic improvements through streamlining workflows and rethinking the very nature of of our operating processes. And the value that derives from this can be enormous.

But without great products, you’re swimming upstream…

Truth be told, most of the time we are focused on improving our existing business processes (i.e., the way we currently interact and transact with customers, suppliers, and other stakeholders). In fact, the very core of process change — be it the Michael Hammer approach to re-engineering, or the latest in Six Sigma and Lean strategies — is based on understanding the world as it exists today and then systematically reinventing delivery processes to better meet the underlying objectives of the process. That, of course, is an oversimplification of what these disciplines offer, but when you look at the intricacies of concepts like D-M-A-I-C, which is at the core of many process improvement methodologies, they invariably begin with an assessment of current state and a progression though the systematic steps of business improvement.

But there is another side to business improvement that often gets lost when we explore current operational and delivery processes. As we’ve discussed here before, true customer satisfaction is a function of both product excellence AND delivery excellence. Have a great product and screw up the delivery, and you’ve got a recipe for captive customers itching to defect the moment someone else offers anything close to your innovative solution. Conversely, providing great service in support of a mediocre product only delays the inevitable. Great products and great service, taken together, are the winning recipe for success. Pretty intuitive right? Well, if it’s so intuitive, ask yourself why so many of our improvement efforts focus only on downstream delivery versus upstream innovation?

I am a big fan of systematic business improvement of our delivery processes. And goodness knows, there is no shortage of broken delivery and service processes. There are some pretty good products and solutions out there that are only achieving a fraction of their market potential because of the service environment in which they operate. But at the same time, there are some pretty good service organizations out there that are severely handicapped by their company’s lack of any significant product innovation.

More Jobs anyone?

Myth Busted: Product Innovation DOES NOT start with better research

There is no better example of a company that has achieved both Product and Service excellence than Apple. In all of the Steve Job’s eulogizing that is occurring out there, there is one characteristic that I find particularly noteworthy and relevant to this discussion. It was mentioned by the Wall Street Journal a few days before his death, discussed in a number of interviews, and is a theme that has re-emerged in Isaacson’s biography that hit the shelves yesterday.

A bold ‘call-out’ in an article that accompanied the iPhone 4S release stated simply: Apple doesn’t ask customers what they want.” I must admit, what I heard at first didn’t match what was written. What my ears “heard” was that “Apple doesn’t care what its customers think”. Incidentally, I showed the article to three people and when I heard them share the story with colleagues later in the day, it was evident that they had heard the same thing. Yet clearly the article wasn’t saying anything close to that. The call-out said they don’t ASK customers what they WANT, not that they don’t care what they need.

What they ARE saying is that the key to innovation is not gobs and gobs of market research and consulting fees to ask customers what they want, but a recognition that customers don’t typically know what they want. I realize this sounds a little condescending, but try this interpretation on for size — “It’s not the customer’s JOB to figure out what the product should be, how it should be designed, and what value it should deliver”. In fact, that’s from Steve Job’s own mouth. When you look at it like that, it shows up as a deep, intense respect for customers and their time, as well as a declaration of what the accountability of innovators should be!

When our companies design products, most of us don’t live in that same universe. Rather, we spend lots of time and money asking customers for opinions about things they have no idea about, and which opinions is it not their responsibility to provide in the fist place. Great product developers, on the other hand, inspire customers by giving them something they didn’t know they wanted but which, once they have it, they can’t imagine having lived without.

Redesigning the product aspect of our offers is critical to providing high levels of sustainable satisfaction, yet improving the product design process is altogether different from what we do on the operational side of things. In operations we must start with the “as is”. In the product space, we must frequently ignore the “as is” insofar as creating new solutions are concerned. In operations, we strive to avoid waste and unnecessary mistakes. On the product side, we want to encourage mistakes and perhaps even encourage failures. In operations, we base our solutions on in-depth analysis of past problems. In the product space, we base our solutions on a vision of an inspired customer at some point in the future.

Getting the Product Right

If we look at what companies like Apple do right when it comes to product development, is boils down to both WHAT they do, and the ORDER in which they do it. Let’s look at these one by one.

1. Innovate — Most companies start with research that tells them what customers want — focus groups, surveys, etc. That’s essentially a recipe for a better mouse-trap, but not one one that will create visionary leadership and reveal new market opportunities that will inspire and rally your end users. The first step in product development is to push your team to challenge existing market parameters, barriers, and paradigms, rather than passively accepting them as necessary constraints to their thinking. Are we developing around the boundary of our existing offers (yawn!) or are we redefining what the boundaries are?

2. Integrate — As you begin to define new boundaries and push yourself toward innovation, remember that great products not only exist independently, but also demonstrate their innovation through the offer it is positioned within. Great product companies put as much effort into the paradigm and business model in which their products exist as they do the products themselves. For example, Apple once had dozens of products from Printers to a wide variety of peripherals and product models. One of the first things Jobs did was draw the infamous 2 by 2 matrices- Professional/Personal; Laptop/Desktop. The vision was for each quadrant to have one product, effectively driving the product portfolio from 50 down to 4. Sure, there ultimately evolved more than a handful of products, but the final number was a heck of a lot closer to 4 than to 50. And it’s not hard to figure out which product (iPad, iPhone, iPod, iMac, etc…) fits where, is it?

3. Assimilate — The third step is assimilating it into the market. If you are bold enough to innovate rather than respond, then it will be necessary to help educate and perhaps even overcome the skepticism of customers. It’s a necessary investment when you aspire to redefine a market. But by the same token, this education and informational value can actually be part of the customer experience, and sometimes even drive further levels of delight. Apple storefronts, for example, are as much of an experience in and of themselves as they are outlets for education and assimilation. And at +$40k of sales per square foot of retail space, it’s a pretty cost-effective sales channel!

4. Evaluate — Earlier, I said Apple doesn’t focus on Market Research like other organizations. But that doesn’t mean they don’t do it. They spend money just like every other company does on research, but it’s usually after the fact and not designed to tell them what the customer needs but rather if Apple has hit the mark in its innovative journey. And while some would say it helps validate their success, those inside Apple would say it helps accelerate things, both in terms of further successes, and miscues. Great innovators find ways to accelerate and learn from failures.

So where are your strengths today?

Is it the creativity of your product portfolio? Or is it your ability to overcome product weaknesses and failures through stellar customer service?

If we get the product mix right, then service becomes not a means of correcting or recovering, but rather a way of enhancing and augmenting the customer experience so that the total package does not ask the customer to trade off one dimension of the experience versus another, but, rather, allows them to enjoy the rare combination of exemplary performance in both dimensions.

-b

Service In the Eye of the Storm…

Posted on September 15, 2011 by Bob Champagne

Stuff Happens…

We’ve all been there. The cancelled flight. The lengthy power outage. The inconvenient disruption in internet communications. Higher than normal dropped cell calls. You’d think that whoever is calling the shots on the weather patterns lately would know the magnitude of chaos they are creating in our lives. It’s enough to drive you nuts!

God grant me the serenity to accept the things I cannot change…

Hurricane Irene, though relatively tame to a gulf coast native like myself, once again forced me to reflect on how storms like this can disrupt life’s little conveniences. On the one hand, it’s quite amazing how stressed and freaked out we (including yours truly) get with what are, in the end, minor inconveniences–many of which would be regarded as luxuries elsewhere on the planet.

Let’s face it, we’re all human, and while we get as frustrated as the next person when inconvenienced, we all are capable of realizing and accepting that certain events simply fall into the category of “S**T HAPPENS”. While nobody likes to wait on hold for two hours to talk to an airline, most of us “bite our tongue” when talking to the agent because we know they are probably as stressed, if not more so, than we are because of what they’ve had to endure during the time we were on hold.

…and the wisdom to identify idiocy!

On the other hand, it is equally amazing, given the advances in service capabilities and technology, that we are unable to avoid, or at least help customers to tolerate, the downstream impact of these events. Consider the following examples from last weekend’s flight mess caused by multiple airport closures in the Northeast.

Text message informing a passenger of a canceled flight fifteen minutes after the last alternate departure
Text message instructing the passenger to CALL the airline for additional information, exponentially amplifying an already uncontrollable workload/call volume
Call-in number with an automatic message that says essentially, “we have too many incoming calls, call back later.” Really? A six-billion-dollar Fortune 100 company in 2011 with a message like THIS?
Call queues (for airlines who, under normal circumstances, pride themselves on differentiating between “tiers” of frequent fliers”) that suddenly lose all such distinctions in the midst of a crisis–with hold times from two to three hours throughout the weekend
A website containing little if any useful information on the situation at hand, self-help suggestions for what I could do in the meantime, or anything else that might have alleviated the stress
Complete absence of any visible “behind the scenes” or back office process to re-book flights automatically (my reservation was essentially cancelled leaving me to re-book myself with no apparent prioritization for my loyalty status
A workforce that, despite all their effort and hard work, (and I do mean hard work because they had 200 reps working what I estimate to be at least 300,000-500,000 displaced passengers), did what???

Crises are the real MOTs…

There has been a lot of talk in recent years about “Moments of Truth” (“MOTs”) when it comes to service interactions. We often think about MOTs from a transaction standpoint, e.g.,when a customer calls to connect service, ask a billing question, get updated about a service interruption, or simply to complain about an inconvenience. For me, though, the real MOT is what happens in a true moment of chaos or crisis–when the customer’s daily life is truly interrupted, i.e., when they actually expect things to suck. It’s at that moment, when natural optimists become pessimists, that one of three things happens:

Customers’ bad expectations are realized, either creating or reinforcing a perception that when unforeseen events occur, things will inevitably become hopeless, i.e., a feeling of general resignation.
Lowered expectations become their worst fears…and you become recognized as the company that falls apart rather than shining in the face of adversity.
They are completely “WOWED” by the significant, yet counter-intuitive, responses they see from you at a moment when they have every expectation in the book for not doing so.

For most of us, it’s typically the first experience, and we move on with our lives, disappointed but not surprised. We remain only marginally engaged, and perhaps, when the next opportunity presents itself to switch to another supplier, that new supplier may have the proverbial “edge”. But for companies who really understand these dynamics and strive for true loyalty, they know the power of the third outcome above, and the value that small, but memorable, responses can have in these real MOTs.

What if…

…I had received a text message telling me that an adverse weather situation was unfolding and that by responding “helpme” to their text, they would search for available options and contact me to see if I wanted to initiate any of these two or three alternative plans? What if the message I heard when I called (instead of “We’re busy. Call back later.”) had directed me to a website that contained actual useful information (even if nothing more than “We’re at the mercy of the weather and the airport, and we won’t know anything until tomorrow at 2 p.m.”)? What if instead of my reservation being cancelled, they had proactively re-booked me on another flight? And what if (perhaps for only their million-mile customers) they had actually offered me some REAL solutions, like, for example, flying on a different airline or going through an unconventional (perhaps even inconvenient and uneconomic) routing.

Insanity=

Doing the same thing over and over again, and expecting a different result…

We all understand crises and uncontrollable events. We all know that we cannot blame an airline or a power company for things like earthquakes, weather, some mechanical failures, and the like. And we know, as well, how inappropriate it is to blame the people who are doing their best in a bad situation. But I would argue that in a time and era where margins are thin and everyone is looking for new ways to differentiate themselves…and particularly in a time when customers have been conditioned to expect the WORST from us…that is the perfect time to step up and offer creative and inspiring solutions.

Some of these may be BIG things–the kind of heroics you hear about in commercials, performances that border on the uneconomic and, perhaps, unrealistic–solutions that would drive a company to the poorhouse if they were truly institutionalized (Can anyone forget the FEDEX driver who couldn’t get the drop box open, so he lifted the entire multi-hundred-pound box into the back of his truck?). But I would contend that it’s the little things that mean the most–the things that show you’ve had the FORESIGHT to understand how a customer is truly affected in a crisis. ANTICIPATE your customers’ most likely state of mind in these situations, and develop small solutions that can, in fact, be INSTITUTIONALIZED.

-b

When Benchmarking Gets “In the Way” of Good Performance Management…

Posted on June 27, 2011 by Bob Champagne

Nearly three decades after benchmarking came on the scene, companies still claim it to be an integral part of their internal performance improvement processes. But few would argue that its value to the business is now well below where it once was. And sometimes, it actually gets in the way of identifying improvements and driving change.

There is not a client I work with who doesn’t have their shelves lined with volumes of benchmarking studies and reports. Nearly every industry group produces some kind of comparative metrics report for its members. And every industry has those companies that we might consider to be “benchmarking addicts” — those who participate in nearly every study they can in the spirit of demonstrating their performance improvement “commitment” and “prowess” around driving change. Ironically though, it is rarely these companies that define the top tier of their respective industries in terms of real performance.

Here are some inherent flaws with benchmarking today:

Benchmarking is largely “point-in-time” driven and retrospective in nature. While this can be useful in “stress testing” targets and defining high-level gaps (“low-hanging fruit” or “quick wins”), it largely ignores the trends or shifts in metrics that are far more critical to identifying and driving course corrections.
Comparative studies almost always focus on lagging versus leading indicators. This often leads to a culture of “managing through the rear-view mirror”. It also fixates the organization on measuring things for the sake of comparisons, when some of those metrics may have have become irrelevant or even obsolete.
Benchmarking focuses on “common metrics” versus those that may be critical to you, but perhaps not everyone. It’s okay to have a few metrics you routinely measure for the sake of comparison, but when these metrics begin to define your scorecard, it’s time to recognize when the “tail is actually wagging the dog”.
Comparisons are done for many reasons, not all of which are performance driven. More often than not, benchmarks are used to identify strengths for the sake of communicating to shareholders, regulators, or sometimes even internal Executives. They’re sometimes even a vehicle for rationalizing and justifying poor performance, often confusing the organization and sending all the wrong messages.
Benchmarking often leads to “group think”. We look for commonalities and like to follow the “herd”. Let’s face it — It lowers our risk to say, “if company x is doing such and such, then we should be doing it too.” But it’s sometimes the anomalies in the data that can show us where real innovation is happening. And in the benchmarking world, anomalies are often dismissed as outliers and suggestive of data problems rather than solutions.

These are just a few of the many ways that benchmarking “gets in the way” of real change, and there are many more where these came from.

As with anything we do long enough, it’s easy to get into a corporate habit of doing something and forget WHY we are doing it in the first place. So if you want benchmarking to be a value-adding component of your performance management process, here are a few things you can do:

Realize that benchmarking is about you, and not about others. It’s fine to use comparisons to help you better understand yourself and your performance weaknesses and perhaps “stress test” your targets, but when you start using benchmarks to rationalize and justify existing performance and actions, it’s time to refocus your thinking on you and your company’s improvement goals and the learning benchmarking can provide.
Determine where benchmarking fits into your overall performance management process, and use it that way. In cases where benchmarking is done for some other reason, like communicating to stakeholders or regulators, call it what it is and keep it at arms length from the game of real performance improvement.
Focus your benchmarking on the measures that matter to YOU rather than a consultant’s peer group or client base. More often than not, it may be better to do a small internal project to gather that competitive intelligence, than it would to consume resources to force-fit yourself into a large peer group.
Orient your benchmarking around learning and innovation, rather than simply “following the herd.” This will sometimes cause you to look at different metrics, and look at them differently. Anomalies will become a source of new innovation rather than simply a data problem to discount.

Benchmarking can be a great tool for defining, catalyzing and inspiring change in your organization. Take a hard look at how your organization uses these comparisons today and be honest with yourself about where this supports or hinders your performance management process. Make benchmarking part of your performance management process rather than an end in and of itself.

Category Archives: Business Process Improvement