Thursday, June 13, 2013

Why Benchmarking In Its Current State for Transportation is Dangerous

I hear a lot about benchmarking in my travels and it makes me think about this idea, why it is used and what it really is.  What also fascinates me about the subject is the real forward looking business leaders never really care what their competition is doing.  The reason is they are so far ahead of the competition it just does not matter.  Could you imagine Steve Jobs worrying, wondering or working on what Sony was doing?  Would the iPod ever have been invented if Steve Jobs' goal was to be incrementally better than the Walkman?  Would the iPhone have been invented if his goal was to be incrementally better than the Motorola Flip Phone?

This is the danger of benchmarking.   When you benchmark you put a lot of attention on the current state and you tend to feel good if you are incrementally better.  But, that is not where true innovation comes from!  Real innovation and real "disruption" comes from thinking critically about the future, being imaginative and creative and thinking about things no one else has thought of.  That is where energy is best spent.

What I find about benchmarking is it is often an internal exercise to justify what someone is doing to higher management.  It is very rarely about anything else - have to prove to higher management that you are doing better than the other guy.  It is also incredibly inaccurate because there are so many external factors that effect the price of transportation beside just the zip to zip and the rate.  Here are some questions:

  1. Do you compare with exact size and operating characteristics?  Sometimes I will hear of giant shippers presenting they are "better than market" based on their benchmarking through external agencies.  My question always has to do with expectations.  Of course, you are better, you are huge!  The question is, from a "should cost" analysis, are you as good as you should be?
  2. What about your operating characteristics were taken into account when the benchmark was done?
  3. Are you comparing prices of how freight is actually moved  or how it was bid?  I have seen this before where companies will send their bid data into the agencies that do benchmarking but that may or may not be how the freight is actually moved.  And, of course, how the freight is moved is what is most important.
  4. And, my final question is this:  Why is everyone better than average?  How could that be?

There are so many people out there who are being told they are doing better than market in the benchmarking I am wondering just who is doing worse?  Someone must be... who are they?  I find benchmarking and Las Vegas have a lot in common -  everyone says they win when they go to Vegas yet somehow the casinos keep getting more cash than they know what to do with.  Someone must be losing.

My opinion is there is far too much energy spent on this topic and it actual restricts innovation instead of driving it.  Think about where you want to spend your time and think about whether this really adds much value or not around the edges.

I would advocate you should spend a lot of time on innovation and by definition if you are innovating you cannot benchmark... your competitors will be too far behind you to even matter.

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