Management Of Technology Innovation And Change

Published Date: 02 Nov 2017

The term "benchmarking" was first applied to business practices by Xerox Corporation circa 1979. [5] As the term "benchmarking" gained popularity among the general business community, many IS professionals began to wonder if non-IS professionals defined the term the same way, and if not, whether and how IS professional should react to the new meaning. Most of this confusion was caused by the fact that in the popular press "benchmarking" retained two meanings. One, commonly called metric benchmarking, is indeed what IS professionals have been used to. Metric benchmarking is the use of quantitative measures as reference points for comparison against prior experience, industry norms, or best-in-class organizations. The other meaning, commonly called best practice benchmarking, is the identification, and potentially the adoption, of best practices or techniques for performing common tasks. The next section compares the pros and cons of these two types of benchmarking, recognizing, of course, that one type of benchmarking does not preclude the other. In subsequent sections we focus on best practice benchmarking, although not to the exclusion of metric benchmarking. This focus reflects the large volume of existing research and publication concerning metric benchmarking and the relative absence of and need for similar information about best practice benchmarking, particularly in the field of information systems.

There are four basic types of bench-marking:

http://www.qualitydigest.com/feb/bg_ball.gifInternal-The process of comparing one particular operation within your organization with another. Success in this area is a matter of "the left hand knowing what the right hand is doing." Internal benchmarking is by far the easiest, both to research and to implement. Productivity improvement achieved in this type is usually about 10 percent.

http://www.qualitydigest.com/feb/bg_ball.gifCompetitive-The process of comparing an operation with that of your direct competitors. For obvious reasons, this is the most difficult type of benchmarking to carry out successfully, and legal considerations must always be kept in mind. Productivity improvement achieved in this type is usually about 20 percent.

http://www.qualitydigest.com/feb/bg_ball.gifFunctional-The process of comparing an operation with that of similar ones within the broad range of your industry (e.g., copper mining techniques compared with coal mining techniques). Functional benchmarking is relatively easy to research and implement. Productivity improvement achieved in this type may be 35 percent or better.

http://www.qualitydigest.com/feb/bg_ball.gifGeneric-The process of comparing operations from unrelated industries (i.e., ones often used by a wide variety of industries). An example would be a film library using the warehousing techniques of another industry to store more efficiently its catalogue of old movies. The advantage of this type is that the problems of competition do not apply, increasing the access to information and reducing the possibility of legal problems. Productivity improvement achieved in this type may be 35 percent or better.

http://i.cmpnet.com/callcentermagazine/content/200702/benchmarking-chart1.JPG

BENCHMARKING THE INFORMATION SYSTEMS FUNCTION: Professionals in the computer industry have used the term benchmarking since the early 1960s. Initially benchmarking meant comparing the processing power of products produced by competing manufacturers within a realistic business or scientific environment. Computer manufacturers published their benchmarking results in their sales brochures and their marketing literature. To resolve competing claims, academic and commercial concerns developed benchmark standards such as whetstones and dhrystones. [2] Software companies whose products' speed was an important competitive consideration, such as vendors of database management software and sort programs, also used the term "benchmarking" to describe the comparison of their products' performance. [3] Although companies benchmark IS/IT functions for a variety of reasons, the reasons most commonly cited include justifying the company's investment in IT, evaluating the performance of the IS group and its management, and improving the IS functions within the organization. Benchmarking also often occurs as one component of a more extensive cost assessment or cost reduction effort, a total quality management (TQM) program, or a strategic planning effort.

The budgeting process periodically motivates IS managers to perform some benchmarking. Most organizations subject development and acquisition of new systems to stringent return-on-investment hurdles. With the increasing popularity and availability of outsourcing services, many organizations require a justification of existing systems as well. Metric benchmarking allows a company to compare its investment in IT and IS to other similar companies.

A company that spends less than similarly sized companies in the same industry may be operating more efficiently than its competition. Alternatively, it may be spending less because it has neglected to use IT to achieve competitive advantage, to match its competitors' services, or simply to save more money elsewhere in its budget.

Benchmarking might spur such a company to increase spending in IT or it may help the company identify a low cost IT strategy that works effectively. Conversely, a company that spends more than similar companies in the same industry may be operating less efficiently than its competition, using IT to achieve competitive advantage, or investing in IT to reduce other expenses.

Benchmarking is generally performed by a team of employees, sometimes with the assistance of an outside consultant who has had previous experience with benchmarking and the process or processes being benchmarked. The team usually includes a project manager, data collectors and analysts, a facilitator trained in benchmarking who may or may not have expertise in the area being benchmarked, and various support personnel who work only part-time with the team. Among the support personnel, the benchmarking team should probably include a lawyer for dealing with the legal issues surrounding the sharing of competitive information, personnel from library services or others specifically trained in searching for information outside the organization, clerical and administrative workers, and senior management.

Benchmarking is the process through which a company measures its products, services, and practices against its toughest competitors, or those companies recognized as leaders in its industry. Benchmarking is one of a manager's best tools for determining whether the company is performing particular functions and activities efficiently, whether its costs are in line with those of competitors, and whether its internal activities and business processes need improvement. The idea behind benchmarking is to measure internal processes against an external standard. It is a way of learning which companies are best at performing certain activities and functions and then imitatingr better still, improving onheir techniques.

Benchmarking focuses on company-to-company comparisons of how well basic functions and processes are performed. Among many possibilities, it may look at how materials are purchased, suppliers are paid, inventories are managed, employees are trained, or payrolls are processed; at how fast the company can get new products to market; at how the quality control function is performed; at how customer orders are filled and shipped; and at how maintenance is performed.

Benchmarking enables managers to determine what the best practice is, to prioritize opportunities for improvement, to enhance performance relative to customer expectations, and to leapfrog the traditional cycle of change. It also helps managers to understand the most accurate and efficient means of performing an activity, to learn how lower costs are actually achieved, and to take action to improve a company's cost competitiveness. As a result, benchmarking has been used in many companies as a tool for obtaining a competitive advantage.

Companies usually undertake benchmarking with a view towards the many improvements that it may offer. These benefits include reducing labor cost, streamlining the work flow through reengineered business processes and common administrative systems, improving data center operations through consolidation and downsizing, cooperative business and information technology planning, implementing new technology, outsourcing some assignments and functions, redesigning the development and support processes, and restructuring and reorganizing the information technology functions.

BENCHMARKING BASICS

The goal of benchmarking is to identify the weaknesses within an organization and improve upon them, with the idea of becoming the "best of the best." The benchmarking process helps managers to find gaps in performance and turn them into opportunities for improvement. Benchmarking enables companies to identify the most successful strategies used by other companies of comparable size, type, or regional location, and then adopt relevant measures to make their own programs more efficient. Most companies apply benchmarking as part of a broad strategic process. For example, companies use benchmarking in order to find breakthrough ideas for improving processes, to support quality improvement programs, to motivate staffs to improve performance, and to satisfy management's need for competitive assessments.

Costs

The three main types of costs in benchmarking are:

Visit Costs - This includes hotel rooms, travel costs, meals, a token gift, and lost labour time.

Time Costs - Members of the benchmarking team will be investing time in researching problems, finding incomparable companies to study, visits, and implementation. This will take them away from their usual tasks for part of each day so additional staff might be required.

Benchmarking Database Costs - Organizations that institutionalize benchmarking into their daily procedures find it is useful to create and preserve a database of best practices and the companies associated with each best practice now.

SUCCESSFUL BENCHMARKING: There are several keys to successful benchmarking.

Management commitment is one that companies frequently name. Since management from top to bottom is responsible for the continued operation and evaluation of the company, it is imperative that management be committed as a team to using and implementing benchmarking strategies. A strong network of personal contacts as well as having an open mind to ideas is other keys. In order to implement benchmarking at all stages, there must be a well-trained team of people in order for the process to work accurately and efficiently. Based on the information gathered by a well-trained team, there must also be an effort toward continuous improvement. Other keys include a benchmarking process that has historical success, sufficient time and staff, and complete understanding of the processes to be benchmarked.

In almost any type of program that a company researches or intends to implement, there must be goals and objectives set for that specific program. Benchmarking is no different. Successful companies determine goals and objectives, focus on them, keep them simple, and follow through on them. As in any program, it is always imperative to gather accurate and consistent information. The data should be understood and able to be defined as well as measured. The data must be able to be interpreted in order to make comparisons with other organizations. Lastly, keys to successful benchmarking include a thorough follow-through process and assistance from consultants with experience in designing and establishing such programs.

THE FUTURE OF BENCHMARKING:

Although early work in benchmarking focused on the manufacturing sector, it is now considered a management tool that can be applied to virtually any business. It has become commonplace for companies to use in order to compete in and lead their respective industries. It has helped many reduce costs, increase productivity, improve quality, and strengthen customer service.

In his book Benchmarking the Information Technology Function, Charles B. Greene noted that companies are increasingly interested in benchmarking for a number of activities, including:

cost of supporting business driver (transaction costs, or cost per order)

systems development activities, including maintenance, backlogs, development productivity and project management

end-user support

data centers/communication networks

skills management

business strategy alignment

technology management

customer/user satisfaction

According to a 2003 Bain and Company survey quoted in Financial Executive, benchmarking received the second-highest usage score (84 percent) among more than two dozen management tools used by senior executives around the world. The survey also reported that users tend to be highly satisfied (rated 3.96 on a 5-point scale) with the results benchmarking provides to their companies.

VIPER REPORT