Your organization has made progress with its improvement efforts. It has met its stated performance goals. There are no significant issues standing in the way of meeting future improvement objectives. Under that scenario, you may think all is right with the world when it comes to your business.
I challenge you to rethink that assumption.
Even though an organization achieves its performance goals, that does not mean it is keeping pace with its competitors. In fact, APQC research indicates that performance improvement levels by competitors can outpace that of a rapidly improving organization.
To illustrate, review the graph below. It shows the performance level (i.e., cost per acre) of a pharmaceutical company (Company XYZ) as compared to that of its industry peer group. Company XYZ’s performance shows clear improvement. From 2009 to 2011, cost per acre has decreased by $500 or 6.8%. However, over the same time period, industry peers’ median performance has improved at a greater pace of $700 or 10.3%.
When Good Is Not Good Enough
Simply stated, even though Company XYZ has seen performance improvement, it is still losing ground to its industry peers. The takeaway: Any organization would be prudent to consider the changing performance levels of its competitors when determining the effectiveness of its own improvement efforts.
To shape successful improvement initiatives, organizations must address the “Cost of Not Knowing.” By not understanding industry performance trends, business leaders often make decisions in an information vacuum.
Benchmarking is a useful tool to address this vacuum by uncovering fact-based information related to industry peers. (For example, nonprofit organization Mitre has used benchmarking with great success.) With reliable facts about competition, organizations will have essential information needed to sprint to the head of the race.
APQC would like to know how your organization keeps track of performance trends within your industry. Please share your experience with us.