Competitor Benchmarking

Benchmarking is another assessment tool to compare and measure your firm’s business processes against those of your competitors; or as expressed by Jomini, “how can any man say what he should do, if he is ignorant what his adversary is about?” Therefore, use benchmarking to examine your business strategies against those of your competitors.

The value of this tool is that you learn how and why some competitors perform with greater success than other organizations inside and outside your industry. You will find such information highly useful when planning strategies and determining which actions are likely to succeed. Xerox Corporation is an outstanding example of successful benchmarking. The company developed the following 12-step process for competitor benchmarking:

Planning

  • 1. Identify benchmark outputs.
  • 2. Identify best competitors.
  • 3. Determine data collection methods.

Analysis

  • 4. Determine current competitive gaps.
  • 5. Project future performance levels.
  • 6. Develop functional action plans.

Implementation

  • 7. Establish functional goals.
  • 8. Implement specific actions.
  • 9. Monitor results and report progress.
  • 10. Recalibrate benchmarks.
  • 11. Obtain leadership position.
  • 12. Integrate processes fully in business practice.

Table 4.2 summarizes the benefits of benchmarking.

TABLE 4.2

Benefits of Competitor Benchmarking

Improves your understanding of customers’ needs and sensitizes you to the underlying competitive dynamics operating within your industry

Helps validate the most effective strategies against those of your competitors

Helps you document why some competitors can perform similar processes at higher performance levels than at your organization

Creates a sense of urgency to develop long-term objectives and strategies

Encourages a spirit of competitiveness so that personnel recognize that performance levels in best-in-class organizations may exceed their own perceptions of what constitutes industry—and world-class—competitiveness

Motivates individuals to new heights of innovative thinking and achievement

When capable, feign incapacity, when active, inactivity. When near, make it appear that you are far away; when for away, that you are near.

Offer bait to lure him; feign disorder and strike him. Pretend inferiority and encourage his arrogance.

Sun Tzu

To summarize, acquiring competitive intelligence uses a variety of approaches, including the use of agents; conventional tools, such as the Internet, databases, analytics, monitoring behavior, and observation; and benchmarking. These approaches are the prime ingredients to create deception, which in turn are the underpinnings for shaping indirect strategies, creating surprise, and determining the decisive point for concentration.

Further, by defining your competitor’s operating patterns, you are more likely to determine his market position. You can then deploy your personnel and identify areas where you are likely to face the most or least opposition. Armed with such knowledge, you have lead time to take counteractions. What better way is there to establish personal credibility for your managerial skills than being able to motivate your staff to handle potential threats and opportunities?

Therefore, competitor intelligence as an information-gathering, decision-making tool that affects all operating parts of your business either directly or indirectly. It is the centerpiece of all offensive and defensive actions. By exposing strengths and weaknesses in your situation, as well as in those of your competitors, it functions as the core component when developing an indirect strategy and locating a decisive point for market entry.

If utilized with the same care you would give to a delicate instrument, competitor intelligence can signal subtle changes in the marketplace. For instance, it can help you preempt and outmaneuver competitors, preserve financial expenditures for exploiting the best opportunities, and even protect your firm’s secrets from inquisitive onlookers.

There is still another factor that can bring ... action to a standstill: imperfect knowledge of the situation.

Clausewitz

Therefore, listen to the incoming intelligence and be sure to evaluate the reliability of each source. Then, you can validate or disprove reports. In either case you gain confidence and become more adept at making accurate decisions.

After you have assembled reliable intelligence and carefully deliberated on all that is meaningful, develop and implement your strategy with speed. It would be a far greater error to wait for a situation to clear up entirely. The reality of working in a dynamic competitive marketplace is that decisions are required—even in the fog of uncertainty.

Therefore, feel assured that the competitor intelligence you have assembled and screened, and the assessments you have made, will produce the results you expect. And even in the penetrating light of reality, should you discover that some intelligence is contradictory, false, or contains “imperfect knowledge,” then you have little recourse but to lean heavily on your judgment and move on.

That means: Depend on your knowledge of the industry, trust in your years of experience, show confidence in those key individuals with whom you work, recognize the value of your formal and informal training, and rely on the richness of your intuition.

Taking it a step further, should pangs of doubt still persist, yet intuitively you know that rapid action is called for, if you are to prevent a potentially bad situation from deteriorating further, tell yourself that nothing is accomplished without shifting to the offensive. The only reason to pause or even retreat from a situation is to make preparations to eventually move forward.

Also, take comfort in this reality: The risk is quite low that your best-thought-out decision would easily ruin your company, providing you have gathered reliable competitor intelligence, and followed the rules of indirect strategy, speed, and concentration. And, if all your planning is kept within a mask of secrecy, the competition will not see where you are going.

Thus, what is of supreme importance is to attack the enemy’s strategy.

Sun Tzu

Finally, the key points of this chapter are summarized in Tables 4.3 and 4.4. Table 4.3 describes the competitive intelligence process. Table 4.4 summarizes Sun Tzu’s views on the roles of intelligence, surprise, and deception.

By intelligence we mean every sort of information about the enemy and his country—the basis, in short, of our own plans and operations.

Clausewitz

The Competitor Intelligence Six-Step Process

TABLE 4.3

1.

Competitors’ size

Categorize by market share, growth rate, profitability, as well as any other quantitative measures meaningful to your company and industry.

2.

Competitors’ objectives

Determine competitors’ intentions related to product innovation, market leadership, global reach, regional distribution, and similar areas that would indicate a strategic direction.

3.

Competitors’ strategies

Analyze their internal strategies (speed of product development, manufacturing capabilities, delivery, and marketing expertise) and their external strategies (supply-chain network, field support, market coverage, and aggressiveness in defending or building market share.)

4.

Competitors’

organization

Examine organizational design, culture, operating systems, internal communications, leadership, and overall caliber of personnel.

5.

Competitors’ cost structure

Check on how efficiently they can compete, how long they can sustain pricing competition, the cost or difficulty of exiting a market, and their views about short-term versus long-term profitability.

6.

Competitors’ strengths and weaknesses

Identify decisive areas vulnerable to a concentrated effort, as well as those strong areas that should be avoided.

Create a Lifeline to Business Strategy: Employ Competitor Intelligence • 89

TABLE 4.4

Sun Tzu on the Roles of Intelligence, Surprise, and Deception

Attitude toward intelligence

Positive; optimistic

Reliable intelligence can be obtained and is a major key to success Very useful

Main sources of intelligence The possibility of making rational decisions and forecasts

Spies (agents) and observers

Rational, carefully calculated plans can be made on the basis of reliable intelligence Forecasting is possible; and careful planning is an important key to victory

Deception and surprise

Deception is the basis for all successful operations

It is the weapon of choice

Surprise can be achieved and is a key to success

The value of intelligence as a key to success

Make the utmost effort to obtain reliable intelligence Base all planning on intelligence, and make extensive use of deception

Conversely, make the greatest possible effort to deny intelligence to the enemy

Problems

Excessive reliance on intelligence and deception, which can become a panacea

Friction is underestimated, and the value of plans overestimated

 
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