Benchmarking
and shareholder value
Lee Kwan Yew, the former premier of Singapore, had once wanted Singapore
to develop to the status of Colombo. Today Singapore is far more
developed than Colombo and we often speak of reaching the standard
of Singapore. Honda worked out a strategic alliance with Rover of
UK where by both manufacturers learnt best practices from each other.
Apparel exporter MAS works with many international partners such
as Victoria's Secret from whom it has learnt world-class standards.
What
is benchmarking?
There is an old English saying, "do not reinvent
the wheel". Benchmarking is a concept which is based on this
principle which believes that the best practices implemented by
others can be learnt, adapted, modified if relevant and implemented
effectively. The concept of Total Quality Management was developed
by an American by the name of Deming. The Japanese have successfully
implemented it to such an extent that Americans had to eventually
benchmark Japanese companies such as Toyota.
Benchmarking
can be segregated into four different aspects, which are
* Internal Benchmarking
* Functional Benchmarking
* Competitive Benchmarking
* Strategic Benchmarking
Internal
Benchmarking
This is about learning best practices from within the
organisation. Certain divisions such as marketing may be exposed
to different markets and working conditions. Other divisions, which
do not have such exposure, can learn best practices from them. Multinationals
like Procter and Gamble and Nestle have practices whereby their
companies spread worldwide benchmark against each other and aim
to improve performance.
Functional
Benchmarking
This is a situation of comparing an internal function
within an organisation with a similar function in another organisation.
Eurostar, a European railway firm, has benchmarked against European
airlines with regard to customer service as well as catering services
Competitive
Benchmarking
This is making comparisons against one's competitors.
Samsung became successful in the mobile phones and consumer electronics
businesses by benchmarking against other international rivals such
as Philips and Nokia.
Proctor and Gamble has recently benchmarked its Asian operations
against Unilever and has identified that its products should be
pitched towards the lower income earners in the region in alignment
with Unilever's strategy. Even in Sri Lanka, P&G intends to
make changes in this regard and have a strategy similar to Unilever.
Strategic
Benchmarking
An act of learning from the strategic actions which others
have undertaken in order to learn from them. Odel has built a tremendous
brand in Sri Lanka and the lessons learnt in this can be useful
for others.
Dilmah has built an international brand name for Sri Lankan tea
and this could be an ideal benchmark for other Sri Lankan companies
intending to go overseas.
How
Sri Lankan organisations can benchmark
In order to benchmark effectively Sri Lankan organisations
have to develop a culture of learning whereby they are willing to
appreciate and accept the best practices of others. In addition
to this the following would also be useful:
a)
Competitor intelligence gathering
b) Involving staff in the benchmarking exercise
c) Identifying suitable foreign partners
d) Strategic alliances
e) High level of commitment from top management toward learning
Message to the investor
The
need of the hour is for Sri Lankan corporates to become world-class
in their respective fields and become multinationals.
This will help to develop and strengthen the economy as well as
to earn you sustainable wealth. To achieve this they must benchmark
against international firms and reach similar standards. If our
banks could bench mark with HSBC, our television networks with BBC
and manufacturers with Toyota we could build world-class Sri Lankan
organisations. This will help you to preserve your wealth in the
long run in this extremely competitive world. |
