Competitive Analysis

The terms benchmarking and competitive analysis are often confused. Benchmarking researches external business sectors for information, whereas competitive analysis shows only how firms compare with their competitors. A competitive analysis produces a ranking with direct competitors; it does not show how to improve business processes.

Benchmarking provides a deep understanding of the processes and skills that create superior performance. Without this understanding, little benefit is achieved from benchmarking. Competitive analysis is less likely to lead to significant breakthroughs that would change long-entrenched paradigms of a particular market segment. Business paradigms tend to be similar for comparable businesses in similar markets. While competitive analysis often leads to incremental improvements for a business, breakthrough strategies are derived from taking an external perspective.

During the past twenty years, competitive analyses have helped companies improve their respective market positions. Benchmarking then takes over where this opportunity for improvement ends. Benchmarking enables companies to move from a parity business position to a superiority position. Observing best practices can help any company.

Another difference between benchmarking and competitive analysis is the type of data gathering required. Competitive analysis often focuses on meeting some specific industry standard. All that may be required is meeting some published number. By comparison, benchmarking focuses not on a number, but on the process that allows such a standard to be not only achieved, but also surpassed. Process enablers and critical success factors must be clearly understood for any permanent improvement to be achieved and sustained. This understanding will require extensive data collection, both internally and from the benchmarking partners.

Enablers

Enablers are a broad set of activities or conditions that help to enhance the implementation of a best business practice. An essential part of a true benchmarking approach is analyzing the management skills and attitudes that combine to allow a company to achieve best business practices. This hidden narrative is as important during the benchmarking exercise as are the visible statistical factors and the hard processes.

The enablers, then, are behind-the-scene or hidden factors. They allow the development or continuation of best practices. Examples include leadership, motivated workforces, management vision, and organizational focus. Although these factors are rarely mentioned by specific statistics, they have a direct impact on the company’s quantified financial performance. They lead to a company’s exceptional performance. Note that enablers are relative, not absolute. In other words, they are not perfect; they too can be improved.

Enablers, or critical success factors, can be found anywhere. They do not know industrial, political, or geographical boundaries.

How does one company compared itself to another by enablers? It starts with an internal analysis. For any company to be successful, it must have a thorough knowledge and understanding of its internal processes. Otherwise, it would be impossible to recognize its own differences with its benchmarking partners. The company would not be able to recognize and integrate the differences and innovations that are found in best practice companies.

Defining Core Competencies

As a continuous improvement tool, benchmarking is used to improve core competencies, the basic business processes that allow a company to differentiate itself from its competitors. A core business process may have an impact by lowering costs, increasing profits, providing improved service to a customer, improving product quality, and improving regulatory compliance.

Several authors have defined core competencies for businesses. In his 1997 text Operations Management , Richard Schonberger defines core competencies as a key business output or process through which an organization distinguishes itself positively. He specifically mentions expert maintenance, low operating costs, and cross trained labor.

Gregory Hines, in his text The Benchmarking Workbook , defines a core competency as a key business process that represents core functional efforts and are usually characterized by transactions that directly or indirectly influence the customer’s perception of the company. He further lists several processes. They include:

Procuring and supporting capital equipment

Managing and supporting facilities

The maintenance function directly fits his definition of a core business process.

In the American Productivity and Quality Center’s text The Benchmarking Management Guide, core competencies are identified as business processes that should impact the following business measures:

• Return on net assets

• Customer satisfaction

• Revenue per employee

• Quality

• Asset utilization

• Capacity

Again, the maintenance function in any plant or facility fits this definition. Other sources point to a core competency as any aspect of the business operation that results in a strategic market advantage. The maintenance process in any company provides this advantage in many ways. These include enhancing any quality initiative, increasing capacity, reducing costs, and eliminating waste.