Best-In-Class! Look Outside

June 24, 2011

Business, Leadership, Productivity

We live in a world where things are relative and benchmarks are established through comparisons.

A lot has been written in support of Best-In Class programs. I have been a fan for many years as it’s a great way to define what can be and to help set goals oriented towards realizable stretch goals. There are many businesses where one business unit might be running better than another while the better running unit might still be running relatively poor compared to a business outside the company.

Whether it’s pricing, performance, quality, and even value, comparisons are made against what’s in-class and often benchmarks for what might be excellent get defined by the best in the measured group. In many cases the level or parameters for what “is possible” is determined by what is considered best in that similar group of companies. The automobile industry is a great example. Organizations like JD Powers will determine the best initial car quality in a given segment based on how well a car compares to the best-in-class vehicle. As the performance of the better manufacturers get better so does the standard for which other cars will get measured against. While there is nothing wrong with this approach it can become limiting in driving improvements. Companies like JD Powers do not establish criteria for excellence based on continuous improvement or benchmarks outside of the industry for which they are measuring.

Could there be manufacturers of trains, airplanes or ships that while outside of the automobile industry are within the transportation sector? What could be learned by assessing failure rates in related industries and apply them against yours. For IT service providers can service performance of let’s say the medical technology service industry provide innovation around a new level of performance and insight into getting there?

A number of years ago while at IBM I had the opportunity to work on what we thought to be a “Best-In-Class” analysis of IT spare parts logistics. Basically what we wanted to understand was who in our industry provided the best (as defined by efficiency, cost, quality, scalability, etc.) spare parts management and logistics program. We immediately started to gather information from IBM’s competitors and after a few weeks thought that Hitachi Data Systems appeared to be best-in-class across all the key attributes. How exciting as small improvements that we could learn from HDS could be applied and leveraged across a much larger business at IBM, yielding significant benefits. There was still a lot of work to do so we decided to reach out to the graduate school at Harvard to see if we could get some formal help and provide a few select students an interesting graduate exercise. The IBM name carried quite a bit of clout so it didn’t take long to get a few of Harvard’s best and brightest working on this. It was a great deal for us as the cost was low and the energy level of the folks was very high.

After about 4 weeks we realized we made what we thought was a major error in not communicating a key “rule” of the assignment. We forgot to mention that the assessment and evaluation was to be “In-Class” or within the IT Service Industry. Once we realized our mistake it was too late. The Harvard team had already done significant work looking at spare parts and logistics programs across multiple industries which included companies like LL Bean, GE, Walmart, Exxon, and few others. Instead of resetting the boundaries of the exercise we figured we would allow this work to be included figuring that most of it while interesting just wouldn’t apply and the fundamentals of the research effort was still valid.

In the end we learned 2 very important things. Number 1 was that while Best-In-Class exercises are important looking “Out-Of-Class” can provide new standards for “what is possible” as well as tactical ways to get there. The 2nd thing we learned was that while our initial work suggested Hitachi Data Systems was Best-In-Class (indeed they were for the narrow IT computer service industry), the best company delivering the most effective parts management and logistics services was the American Red Cross. Failures were basically non-existent and order tracking and accuracy of the order (blood supply) was impeccable. They managed inventory levels very well and order triggers while complex were accurate. Even with the significant level of quality in the process their cost per transaction was over 30% below IBM’s and more importantly 25% below Hitachi’s.

The American Red Cross’s processes were easy to understand, straightforward and as IBM was not competing against them they were very open to sharing their methodology, processes, and vision. Improvements were made at IBM that affected quality and cost thanks to The American red Cross and a few very bright students from Harvard.

Look outside your industry for innovative ways to deliver service and in many cases you will find a new benchmark for “what is possible”.

Lastly most significant exponential improvements in how businesses get things done are ideas adopted from outside the actual industry. Just think about the US Mail when the Pony Express could deliver mail across multiple states in a few short weeks. The invention of the Steam Locomotive took the delivery times from weeks to days. The US Mail System benefited from an innovation that was developed outside of its industry.

You can too.

About Frank Picarello

Frank is a well-respected leader in providing technology services to small and medium-sized businesses. He is currently COO for TeamLogic IT, Chairperson for CompTIA's Small Business Owner's Group, and a member of CompTIA's Unified Communication Committee.

View all posts by Frank Picarello

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