The Indian economy is going through a traumatic phase, largely of its own making. The country is paying the price of protection and the licence-permit raj that has stymied growth and competition.
The country’s long-term economic viability will depend upon its ability to perform in a globally competitive environment. In other words, it will have to boost its exports considerably to reduce the trade deficit and set ambitious goals for the long term. But exporting is a serious business, Indian exporters will have to learn how to improve relentlessly the quality of their products, services and processes to carve a market niche in a discriminating world.
The USA, as a nation, has responded to the Japanese global challenge by addressing the issue of quality at the national level. This has manifested itself in the Malcolm Baldrige Award for achieving excellence in managing for quality. This award lays considerable emphasis on customer-driven quality and competitive benchmarking. The examination categories are updated each year. Clearly, the trend is - competitive benchmarking. The USA has given early warning signals to its competitors, in select markets.
Benchmarking is becoming an increasingly popular way for companies to measure themselves against top corporate performers. It is the search for these best practices that will lead to superior performance of a company. It is a positive, proactive structured process which leads to changing operations and, eventually, attaining superior performance for a competitive advantage.
Though, in management terms, benchmarking is a new concept, it is an old idea. Sun Tzu, an ancient Chinese philosopher, had advised that it is not enough to understand your own self but constantly search for the ‘best of the best’ methods and practices used by competitors or others.
It involves knowing one’s own operation - its strengths and weaknesses. In a similar manner, one should know the industry leaders or competitors. And the best practices learnt should be incorporated into your own company.
Even though Xerox Inc of the USA was the first company to undertake benchmarking on a companywide scale and adopt it as a business strategy, many companies have earlier done product benchmarking. Gillette Inc undertook a field study to evaluate the impact of a new design of shaving system by a competitor. It benchmarked the product against several competitors, quality feature by quality feature. The exercise came up with startling results that helped it to redesign its own shaving systems and continuously benchmark the product in the future.
According to David Kearns, chairman and chief executive officer of Xerox, “We took competition analysis a step further and came up with, what we now call, competitive benchmarking. It is an intensive, in-depth study of what we think is our best competition. It is a never-ending process and is an integral part of our new (and stronger) emphasis on quality”.
AT&T, another large US corporation, went into benchmarking to improve its business and culture. Alcoa of the USA, which primarily produces aluminium and aluminium products, also became involved in benchmarking to improve processes. It enabled them to understand why a gap existed between current practices and optimum performance.
Benchmarking, essentially, leads to customer satisfaction. If an organization has a strictly internal-oriented focus, it would rely on its own perceptions of what the customer wants. And this could be totally misleading. Only an external focus will assure that customer requirements are properly met. Benchmarking helps in uncovering these needs and searching out the best industry practices.
The theory is that, by working closely with the best performing companies, benchmark teams can learn how to implement the processes and skills needed to make the company a world beater. According to Kearns, “Competitive benchmarking establishes goals which boost productivity levels equal to or better than the competition. Employee involvement is the process by which we get there. It is problem identification, followed by problem solving”.
Both competitive benchmarking and employee involvement are key elements of leadership through quality. “Employee involvement is a companywide commitment to make business more productive by encouraging employees at all levels to play a key role in solving business problems and improving the quality of our products and processes”, says Kearns.
The rewards of successful benchmarking can be enormous. The gaps between the best companies and the others can be vast. According to a study done in the USA, best-in-class companies generate new products up to two and a half times faster than the industry average.
But benchmarking is a difficult option to put into practice. The company undertaking benchmarking has to do its homework. This includes selecting a benchmark topic and team, defining what functions and processes are to be benchmarked and analyzing those functions in one’s own company. Seventy per cent of the benchmark project’s success depends on how well you plan it. This includes selecting the appropriate benchmark partners. Here, one should be careful because it would be more prudent to look at companies outside one’s own industry. For example, when ICL (a computer company) decided to improve its distribution system, it found the best form of comparison in Marks and Spencer (a big retail stores chain).
Many companies have entered into quid pro quo arrangements to help each other, while the others flatly refuse to share any information.
Benchmarking, in the broadest sense, is very versatile if used properly. Its uniqueness lies in the fact that its applicability is in the manufacturing and service industry. Indian companies could benefit a great deal through benchmarking. Any company, having a foreign collaboration, could benchmark against its collaborator. For instance, Maruti Udyog could benchmark against Suzuki of Japan, Hindustan Lever with Lever Brothers in the UK, and so on.
The thrust areas identified for export purposes are garments, textiles and auto ancillaries. India is a low volume, low value down-market producer of garments. There is no reason why India cannot produce high value up-market garments. The same goes for auto ancillaries.
A serious complaint by importers is that Indian goods are not well-packaged, thereby resulting in damage or deterioration of the goods. Proper packaging is absolutely vital for export. The original condition of a dispatched product has to be maintained. Indian exporters, for starters, could benchmark their packaging with foreign suppliers. If customer satisfaction and an increased market share is our goal, Indian companies should take benchmarking seriously.
CREDITS: Suresh Lulla, Founder & Mentor, Qimpro Consultants Pvt. Ltd.