1
Business Environmental Scans for
Intellectual Property Strategy
Instructor: Gregory H. Watson
Introduction to Strategy, Technology and Integration
ETM 5111
Session 3 – Part 2
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
2
Focus on policy formulation:
Enterprise
Governance
Business
Management
Operations
Management
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
Policy
Strategy
Board / CEO
General Managers
Functional Managers
Performance
3
Vision-directed and values-driven:
How will technology advances drive your business?
Market Research
Technology Assessment
Competitive Analysis
Strategic Benchmarking
Customer Analysis
Business Performance
Enterprise
World of
Facts
Scenario
Options
World of
Possibilities
Critical Assumption Evaluation
Discontinuity Analysis
Values
Business
Case
Vision
Politics
Regulations
Economics
Technology
Environment
In search of
potential strategic
inflection points
Strength-Weakness-Opportunity-Threat Analysis
The management of a business enterprise requires the strategic navigation
of the macro-economic environment of the business. It demands that all
executives understand the performance levels, trends, risks, opportunities,
and threats that define the external context of business operations. It also
demands that executives know how external change will influence the
direction of their past business choices and what flexibility they have in
decision-making to make choices that drive the business toward its agreedupon vision and exercises the desired values for cultural behavior.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
4
Corporate strategy:
What is it?
• A defining statement containing the intent and direction of the
corporation, & delineating the strategic plans to achieve its
objective.
• A living guideline, that focuses and directs efforts of the corporation.
• Constantly tested and modified as required.
• Not to be circumvented without deliberate modification.
Balances and integrates the following elements:
• Vision of strategic direction for long-term strength
• Market direction and needs
• Competitive effects
Articulates the ways in which the
• Technology strategy
opportunities created by the firm’s
• Product strategy
capabilities can be exploited.
• Core competency
• Resource alignment
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
5
Basic strategic considerations:
Key Inputs to Strategy:
• Customer inputs – what is working and not working.
• Market place analysis – growing needs, emerging applications and
significant trends.
• Competitive influences and barriers to entry.
• Internal competency assessment regarding skills and ability.
• Corporate business process benchmarking.
• Business strategic inflection point analysis.
• Resources available for commitment.
Key Outputs of Strategic Dialog:
• Business strategy – goals and objectives of the organization.
• Technology strategy – technologies to acquire or develop.
• Marketing strategy – Why, where and how to focus on customers?
• Product strategy – features and functions to be developed.
• Intellectual property strategy – How will IPR contribute to strategy?
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
6
What are Intellectual Property Rights (IPR)?
IPR includes:
•
•
•
•
Patents
Copyrights, trademarks ™, and service marks SM
Trade secrets
Technical know-how that is closely held (proprietary rights)
Intellectual Property Strategy – How to use your patents?
• Patents can be a valuable asset for any high-tech company.
• Like all assets they must be managed carefully.
• There must be a strategy for their use.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
7
How to use your patents:
There are three alternatives:
1. Enforce and restrict competitive use
– Exclude use by competitors
– Obtain income through selling license
2. Use defensively to counter infringement
– Use against those who charge you with infringement
– Freedom of action, not income is objective
3. Commercial tender for technology access
– Active cross license with or without balance payments
– Freedom of action, not income is objective
A company may chose to use only one, or a combination
of alternatives in one or more of it’s business areas.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
8
Factors affecting patent use:
•
•
•
•
•
•
•
•
•
Size of patent portfolio
Quality of patents (blocking/enabling or incremental)
Size of business
Status of business (for sale, acquisition, IPO, expanding, matured,
nearing bankruptcy, etc)
Emerging or established technology
Emerging or established market
Customer perception/requirements (e.g. second source)
Industry customs (electronics, computer, biotech, drugs, etc.)
Litigation tolerance
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
9
Patent points to ponder:
• Very few patents are technology blocking or enabling.
• Unless you have no products, you may be infringing someone
else’s patent(s).
• Patents have 20 year lives, but the life of much technology is far
shorter.
• Actual value of a patent is very nebulous and subjective and is
always valued the highest by the owner.
• No matter what you believe, given time and resources most
patents can be circumvented.
• It can take many years and many dollars to enforce a patent
through the courts.
• Most litigated suits wind up in settlement. Many of the remainder
are appealed all the way to the Supreme Court.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
10
Patents restrict competitor’s technology access:
•
•
This is the most common concept of patent use.
Works especially well for new emerging technologies, start-up companies with
enabling patents and high R&D investments to protect where portfolio is a large
part of their intrinsic value.
• Can work for large companies with unique technology or market dominance
• Selective license can enhance income and return on investment.
This approach requires high tolerance for litigation expenses over extended time.
Small Companies:
• Helpful in establishing value in IPO or acquisitions.
• Effective in delaying competitive use if litigated.
• Frequently results in license or cross license to settle litigation.
Larger Companies
• Useful if selectively used and the objective is to sell license. Exclusion from
use, is rarely successful without lengthy litigation. But can be an effective delay
barrier to entry.
• Unless defending both a dominate market and large portfolio position, however
this strategy usually works for only a relatively short time, with much litigation
money spent, and results in counter infringement suits resulting in license or
cross license and more legal fees.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
11
Counter patent infringement claims:
• Works for large companies with large portfolios in established
markets, against small or large companies claiming infringement.
• A sometimes effective method of obtaining freedom of action by
limited license or cross license while retaining for most of the patent
portfolio.
• Minimizes litigation expenses.
• Potential reduction of royalty or license fees.
• Ineffective as barrier to entry or restricting competition.
• Ineffective against companies nearing or in bankruptcy or individuals.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
12
Patents assure freedom of technology access:
• Requires aggressive pro-active cross license activities with
competitors with large or small portfolios.
• Works for large companies with large portfolios against large and
small companies in established markets, with rapidly changing
technology.
• Can require balancing payments either way or free swap.
• Minimizes litigation.
• Not effective in emerging markets with emerging technologies.
• Must aggressively pursue small unstable companies before they
approach bankruptcy.
• Not effective against companies nearing or in bankruptcy or
individuals.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
13
General information about patents:
Topics in United States Patent and Trademark Office (www.uspto.gov)
booklet: “General Information Concerning Patents”
•
•
•
•
•
•
•
•
•
•
•
•
What is a Patent
Get your own copy to study.
Patent Laws
What can be Patented
Novelty and other Conditions
Who may Apply
Application for Patent
Specification
Models
Nature of Patent and Patent Rights
Treaties and Foreign Patents
Patent Marking & Pat.Pen.
Infringement of Patents
To discover specific patent claims go to: www.delphion.com
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
14
What does technical strategy integration do?
Naïve questions can lead to profound knowledge:
What do we have?
Technical Inventory
How do we fit?
Technical Assessment
How do we compare?
Competitive Benchmarking
What will probably happen?
Technology Forecasting
What do we do about it?
Technology Strategy
What do we do first?
Product Strategy
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
15
Technical inventory: What do we have?
Identify each of the following:
•
•
•
•
•
•
•
•
•
•
Core competence areas that contribute to corporate capability
Intellectual properties by technology focus area
Licensed technology by technology focus area
Proprietary production operations
Production operations and processes that are ‘world class’ level
Strategic partners and technology alliances
Physical technical resources by technology focus area
Unique technical skills by individual
Packaging and distribution technologies that surpass competitors
Etc.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
16
Technical assessment: How do we fit?
Evaluate how well the technical inventory fits the business need:
• Evaluate the customer requirements for technology for the horizon of
a multi-generation product development plan.
• Look at the required technology for the coming product generations.
• Evaluate the current ability to deliver this technology through either
internal development or external acquisition.
• Are there any gaps in the technology strategy that have no evident
source for the planning horizon?
• Based on the technology assessment develop a technology plan that
will close the gaps (we return to this subject at the end of today’s
session with a discussion of policy deployment as applied in an R&D
product development organization.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
17
Competitive benchmarking: Do we compare?
Compare key technology metrics to best and average competitor:
•
•
•
•
•
•
•
•
•
R&D investment as a % of sales and absolute investment
Number of R&D employees
Technical skills
Patents (absolute number, number per R&D dollar, & rate of new issues)
Number of products introduced per year
Turnover rate
Innovativeness of new product offerings (revolutionary or evolutionary)
Rate of introduction of new manufacturing technology (product tear-down)
Etc.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
18
Technology forecasting: What will happen?
•
•
•
•
•
•
Determine the projected performance levels likely to be reached in the
time frame of your planning horizon (typically the next 3 – 5 years).
Identify technical stimuli which may change the rate of progress.
Recognize the approach of a natural or physical limit and its impact.
Identify emerging / competitive technologies with their potential impact
and cross-over points.
Determine if any critical business assumptions that affect selection of
your business case and product portfolio will change in the coming
year.
Identify your strengths and weaknesses in order to understand the
opportunities for development as well as potential competitive threats.
Use this information to plan future R&D development projects and to
make business decisions about allocation of capital and resources.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
19
Are we at a strategic inflection point (SIP)?
Analyze your business case – is it based on the current reality?
• Is your key competitor about to change?
• Is your key supplier about to change?
• Are your key customers in trouble, preoccupied or about to
change? What do they tell you?
• What do your peripheral inside sources tell you? Listen,
question and check-out yourself.
• Is it a first version trap?
• Dialog, debate, dialog, debate, dialog .............
• Doubt the data, it’s based on the past. This is about the future.
• It requires a judgment call: What does your gut say?
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
20
How to get out of the SIP?
You only get out of the slump by outrunning those who are after you. And you
can only outrun them if you commit yourself to a particular direction. Getting
through a SIP requires enduring a period of confusion, experimentation and
chaos, followed by a period of single-minded determination to follow a new
direction toward an initially nebulous goal. It requires personal casualties and
trans-formations. It requires accepting that not all will survive, and those that do
will not be the same as they were before.
•
•
•
Allow some chaos until a path develops. Experiment outside the box. Relax
some rules, but
Once the direction has been determined:
– Make firm decision, and be committed yourself,
– Articulate clearly and unequivocally the decision & direction & end result,
and insist on commitment by all (get with the decision, or out),
– No hedging or back-ups. Burn the bridges!
– Make a series of incremental changes consistent with your new objective.
Act early. Avoid too little, too late stagnation that leads to ineffective action!
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
21
Technology strategy: What can we do about it?
How can your technology strategy help to get you across a SIP?
• A technology strategy is a planning document that defines an
organization’s approach to integrating new technology into its
product development program.
• The technology strategy defines those areas that are critical-tosuccess for the organization’s future competitiveness, prioritizes
them according to business need, and determines the method by
which the organization will provide this technology at the proper
timing as required by market demand or competitive moves.
• A company’s technology strategy should also identify alternative
technologies that it places on a “future watch” to track emerging
developments that would create a more aggressive SIP shift.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
22
Product strategy: What do we do first?
How does the product strategy emerge from a technology strategy?
• A product strategy is the resultant of implementing the technology
strategy over time.
• The product strategy identifies product lines and describes the
company’s plan for the introduction of technology through both
variant programs that make incremental change to the products
and through revolutionary change that deliver a ‘clean sheet’
design of a ‘breakthrough’ product.
• The product strategy also integrates the learning from the external
environmental scans of both the marketplace and the sources of
technology to define the business case for introducing new ideas
to the market at the timing that makes the best commercial sense.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
23
Personal reflection:
Consider the case of Compaq Computer Corporation in 1991 when it
was surprised by the rapid consolidation of its distribution chain over a
two month period from 10 dealers to 6 dealers with a resultant situation
where the inventory held by the dealers was $400 million above their
needs, causing them to cancel 10% of Compaq’s expected annual
sales. This situation created a crisis. Compaq had been very close to
its dealers – monthly dealer meetings and major account meetings with
the dealers and their major accounts. What type of technology strategy
investigation would have indicated that Compaq was on the verge of a
crisis and would have allowed the management team to anticipate the
situation before it occurred? [Hint: this situation deals with the process
technology, not the product technology and requires you to think about
how these ideas apply to process as well was products.]
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
24
Strategic Benchmarking and
Competitive Product Analysis
Instructor: Gregory H. Watson
Introduction to Strategy, Technology and Integration
ETM 5111 – Summer 2003
Session 3 – Part 2
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
25
The danger of internal focus:
Benchmarking forces
organizations to look
outside of themselves.
 Xerox and L.L. Bean
Trigger: crisis - inventory management
 Ford and Mazda
Trigger: paradigm shift - accounts payable
 Compaq and Federal Express
Trigger: innovation - call center operations
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
26
The objective of benchmarking:
 To accelerate the process of strategic change that
 Leads to breakthrough or continuous improvements
in products, services, and processes, which
 Results in enhanced customer satisfaction and
improved competitive advantage by
 Adapting business process improvements and best
practices of organizations who are recognized
for excellence in performance.
Benchmarking is an organizational learning process.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
27
What is benchmarking?
Benchmarking is a structured approach for
learning about process operations from other
organizations and applying that knowledge to
improve your own work processes.
Key Activities:
• Measuring
• Comparing
• Analyzing
• Implementing
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
28
Benchmarking:
Is...
Is not...
 A discovery process
 A cookbook process
 An improvement method
 A panacea for problems
 A source of breakthrough
 Just business-as-usual
 A learning opportunity
 A management fad
 An objective analysis
 A subjective gut feeling
 A process-based analysis
 Just measurement
 A tool to generate ideas
 Just quantitative
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
29
The logic of benchmarking:
Benchmarking logic is not: Benchmarking logic is: Obtainable Benefits:
Competitor cost is 15% lower
than ours is...
The leading companies are
20% more effective than I am
The reasons are...
...We must reduce costs
15% or more
 Develops realistic stretch
goals and strategic targets
 Establishes realistic,
actionable objectives for
implementation
The practices they use are...
 Provides a sense of
urgency for process
improvement
An appropriate target for
my performance is...
 Encourages striving for
excellence, breakthrough
thinking and innovation
And I will accomplish that
performance through the
following steps:
1. ...
2. ...
3. ...
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
 Creates a better
understanding of
competitors and industry
dynamics
 Emphasizes sensitivity to
changing customer needs
30
Different trends in benchmarking:
Strategic
Benchmarking
Operational
Benchmarking
Process
Benchmarking
Performance
Benchmarking
Perceptual
Benchmarking
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
31
Benchmarking Concepts:
Strategic Benchmarking: benchmarking of business strategy
or business processes - reviewing breakthrough alternatives
for profitability and productivity improvement.
Operational Benchmarking: benchmarking of work processes
or practices - reviewing productivity improvement alternatives
for efficiency, effectiveness, and economy of operation.
Performance Benchmarking: benchmarking of product or
service results or outcomes using a standard comparison or
test under known performance conditions.
Perceptual Benchmarking: benchmarking the feelings or
attitudes about process, product or service performance
by the recipient of its output.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
32
Don’t forget the data!
•
•
•
•
•
Benchmarking without data is like apple pie
without ice cream -- an essential ingredient
is missing.
Data that is not benchmarked is like a
lonesome pine -- it stands by itself, so it’s
height cannot be judged very well.
Data without statistics is like food without a
distribution system - you something of value,
but the value cannot be realized.
Process improvement enablers without data
are simply wild guesses about what needs
to be done.
Improvement should be based on inferences
from the data that speak about what
improvement needs to occur.
Data is essential to improved choices: the better our
interpretation of data, the better our choices!
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
33
Benchmarking: Establishes need to change
Stretch Goal
Parity Goal
{
Improvement Goal
{
Performance
Gap
Short-term goal
Gain from Entitlement
Tomorrow's
Performance?
Yesterday's
Baseline
Today
Time
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
D
D
34
Encourages managed change...
 The gap between internal and external practices creates
the need for change.
 Understanding industry best practices identifies what
must change.
 Externally benchmarked practices provide a picture of
the potential result from change.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
35
What are critical success factors?
These are quantifiable, measurable, and auditable
indicators of process performance in key business
processes. They are measured in basic business
terms such as measures of business effectiveness
(quality), efficiency (cycle time), or economy (cost).
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
36
Seeking process critical success factors:
Key Business Process:
Proposed Critical Success Factor:
Reason Proposed:
Critical Success Factors (CSFs):
Those quantifiable, measurable,
and auditable indicators of both
process capability and process
performance. They indicate in
basic business terms the level
of performance obtained in a
comparative manner using the
building blocks of process to
describe performance:
• Effectiveness (quality),
• Efficiency (cycle time), or
• Economy (cost).
CSF Process Owner:
Analysis for CSF Qualification
1. Is the proposed CSF quantifiable?
How?
2. Is the proposed CSF measurable?
How?
3. Is the proposed CSF auditable?
4. Does the proposed CSF indicate process results over time?
How?
5. Does the proposed CSF indicate progress toward goal over time?
How?
6. How does a change in a key business process correlate with changes in the proposed
CSF?
7. Is this measure for a proposed CSF measure widely accepted by other companies?
8. Is this proposed CSF measure widely accepted by other companies?
Which companies?
9. Is it easy to obtain data?
Is the resulting CSF measure easily calculated?
10. Is this proposed CSF reported in open literature?
Where?
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
Where?
Is the data integrity reliable?
37
Applying operational definitions:
Describes the critical success factor – in terms of
observable characteristics or measurements – of the
process being defined. In other words, it is used to
clarify, in specific terms that everyone involved can
understand, the critical success factor that company
is going to benchmark.
For more information on operational definitions see Session 2.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
38
Sources of benchmarking data:
Advantages
Disadvantages
An approach to benchmarking that
targets specific product designs,
process capabilities, or
administrative methods used by
one's direct competitors.
Provides a strategic insight into
marketplace competitiveness and
can provide a "wake-up" call to
action.
- Legal issues regarding business
relations between competitors
may become an issue.
- The detail from the study may
be insufficient for diagnosis.
Provides highest degree of
process detail and simplified
access to process information
Internal
An approach to benchmarking
where organizations learn
from "sister" companies,
divisions, or operating units.
The internal focus tends to
be operational rather than
strategic, and bound by
the organization's cultural
norms.
Industry
An approach to benchmarking that
seeks information from the same
functional area within a particular
application or industry.
Takes advantage of function
and professional networks to
develop detailed process
understanding
- Although an external
perspective is used, the
functional concentration tends to
best support operational studies
rather than strategic studies
- Does not challenge the
paradigm of functional thinking
An approach to benchmarking
that seeks process performance
information that is from outside
one's own industry. Enablers
are translated from one
organization to another through
the interpretation of their
analogous relationship.
- Provides the greatest opportunity
for process breakthroughs
- Because organizations don't
compete, reliable detailed
information is usually available
- provides incentive for strategic
change initiatives
- Difficulty in developing an
analogy between dissimilar
businesses
- Difficulty in understanding
which companies to
benchmark
Source of Data
Competitive
Generic
Description
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
39
Basic data collection methods:
•
•
•
•
•
•
•
•
•
•
•
Process map: block diagram, deployment map, thought map
Failure mode and effects analysis
Ishikawa CNX diagram
Y = f (X) analysis
Measurement capability study
Process capability study
Statistical process control charts
Basic descriptive statistics and time-trend analysis
Cross company – hypothesis test of means and variance
Summary sigma chart
Process distinctions and discontinuities identified
Use Six Sigma tools to identify and characterize process differences!
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
40
Apply the principles of statistical thinking!
• Statistical problems in benchmarking:
– Single data point measures passed off as “benchmarks”
– Averages used to represent performance benchmarks
– Missing variation data in process characterization
– Sources of variance not identified by measurement analysis
– Comparative charts not indicating both mean and variance
– Process changes not correlated with performance shifts
– Interactions not identified among process variables
• Care must be taken during analysis in order to have best results!
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
41
More data collection methods – 1
Method
Existing Data Review
Questionnaire/Survey
Telephone Survey
Definition
Analysis and interpretation
of data that already exists
in-house or in public domain
Written questions sent
directly to benchmarking
partner – can contain any
type of question: multiple
choice, open-ended, forced
choice, or scaled answer.
A written script
of questions used
to solicit data or
information over
the telephone.
When to Use
Before conducting original
research to establish what
is the historical baseline
When you need to gather
information from a wide
number of sources
When information
is needed quickly
or to rapidly screen
potential sources.
Advantage
A large number of sources
of information is available
Permits extensive data
gathering over time, can
be analyzed by computer,
and data is easy to compile
Disadvantage
Gathering the appropriate
information can be very
time-consuming
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
Response rates are low; the
interpretation of questions is
sometimes subjective, creative
ideas rarely surface, difficult
to probe for “how-to” answers
Can cover a wide
range of respondents
quickly; People are
more candid over
the telephone
Locating the right
person to answer your
questions, no exchange
of process information,
requires multiple calls
42
More data collection methods – 2
Method
Interview
Focus Group
Site Visit
Definition
A face-to-face meeting
with a benchmarking
partner using questions
that are prepared and
distributed in advance
A panel discussion between
benchmarking partners with
a third-part facilitator at a
neutral location
An on-premise meeting
at a benchmarking partner
facility that combines the
interview with work process
observation
When to Use
When you need one-on
one interaction to probe
and drive data collection
to a specific objective or
level of detail
When you want to gather
information from more than
one source or perspective at
the same time – When there
are diverse opinions or ways
to approach the objective
When you need to observe
specific work practices
Encourages interaction,
in-depth discussion, and
open-ended questions - a
flexible style can provide
unexpected information
Direct sharing of information
on best practice – brings the
partners together to discuss a
mutually established agenda
Can observe actual practice
and verify process, enablers
and measurement systems
Logistics must be managed Result may be the “lowest
common denominator”
Requires careful planning
and preparation – who asks
what of whom?
Advantage
Disadvantage
Takes time – interviewees
may be reluctant to talk
about sensitive issues
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
When interpersonal or face
to face interaction is needed
to evaluate “human aspect”
of a process
43
What is strategic benchmarking?
 A systematic process for evaluating alternatives, implementing
strategies and improving performance by understanding and
adapting successful strategies from external organizations who
participate in an on-going business alliance.
 A tool to focus on those critical business areas that must change
in order to first attain and maintain competitive advantage in a
chosen business activity.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
44
Goal: operational excellence!
What is a “world class company?” Six Sigma!
A world class company produces six sigma results and:
 Knows its processes better than competitors know their processes.

Knows its industrial competitors better than competitors know them.

Knows its customers better than the competitor knows its customers.

Responds more rapidly to customer behavior than competitors.

Uses employees more effectively than do competitors.

Competes for market share on a customer-by-customer basis.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
45
Relating benchmarking to planning:
Environmental
Analysis
Organization
Competitor
- Strategic Intent
- Core Competence
- Process Capability
- Product Line
- Strategic Alliances
- Technology Portfolio
- Strategic Intent
- Core Competence
- Process Capability
- Product Line
- Strategic Alliances
- Technology Portfolio
Customer
Expectations
Strategic
Plan
Strategic
Benchmarking
Investor
Expectations
Operational
Plans
Operational
Benchmarking
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
46
Kaizen for daily management:
Key Performance Measure
Operational
Benchmarking
Results:
D
D
Incremental Process
Improvement
• Customer dissatisfaction
• Low employee morale
• Costs out-of-line
• Internally-focused planning
• Inflexible to change
• Obsolete technology
• Evolutionary improvement
Note:
Time
D
D
= Desired Direction
Short-term, incremental = tactical change = kaizen
By itself, incremental process improvement is not enough.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
47
Hoshin for breakthrough gains!
Key Performance Measure
Strategic
Benchmarking
Results:
D
D
Effect of Applied
Benchmarking
Incremental Process Improvement
• Customer delight
• High employee morale
• Strong cost consciousness
• Externally-focused planning
• Adaptive to change
• Appropriate leading technology
• Revolutionary improvement
Time
Long-term, breakthrough = strategic change = hoshin
Breakthrough improvement comes from external learning.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
48
Creating a benchmarking study plan:
Study Objective:
Determine best practice in industry for managing
customer service. Emphasize call center performance.
Study Approach:
Map customer engagement process and identify
customer touchpoints. Measure performance at each
touchpoint and compare to selected companies known
for excellence. Identify practices used by leading firms.
Schedule:
Six months from initiation.
Resources:
Travel Budget: $37,000
Workdays/Person: 21
Team:
2 Full-time – Leader and Researcher
5 Part-time – Team Members
Work Plan:
MS Project plan for conducting the benchmarking study
activities with estimated dates for completion.
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
49
Model for process benchmarking:
Act
Plan
Adapting Planning
Improving a Study
Analyzing Collecting
Data
Data
Check
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
Do
50
Planning a benchmarking study:
Adapting
Improving
Planning
a Study
Analyzing Collecting
Data
Data
Plan
- Select process
- Gain owner's participation
- Select leader and team
- Identify customer expectations
- Analyze process flow and measures
- Define process inputs and outputs
- Document the process
- Identify process critical success factors
- Determine data collection elements
- Develop preliminary questionnaire
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
51
Benchmarking planning questions:











What process should we benchmark?
What is our process and how does it work?
How do we measure it?
How well is it performing today?
Who are the customers of our process?
What products and services do we deliver to our
customers?
What do our customers expect from our process?
What are the critical success factors for this
process?
What is our process performance goal?
How did we establish that goal?
What data should we collect for comparisons?
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
52
Collecting benchmarking data:
Adapting Planning
Improving a Study
Analyzing
Data
Collecting
Data
Collect
- Collect internal data
- Perform secondary research
- Develop partnership criteria
- Identify benchmark partners
- Plan data collection
- Develop survey or interview guide
- Solicit participation of partners
- Collect preliminary data
- Conduct site visits
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
53
Data collection questions:








What companies perform this process better?
Which company is best at performing this process?
What can we learn from that company?
Who should we contact to participate as our partners?
What is their process?
Who do they measure process performance?
What is their performance goal and how was it set?
How well does their process perform over time? At
different locations?
 What business practices, methods, or processes
contribute to the performance level of their process?
 What factors could inhibit the adaptation of their
process into our company?
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
54
Analyzing benchmarking data:
Adapting Planning
Improving a Study
Analyzing
Data
Collecting
Data
Analyze
- Aggregate data
- Normalize performance
- Compare current performance to data
- Identify gaps and root cause
- Identify entitlement opportunities
- Project performance to planning horizon
- Develop case studies of best practice
- Isolate process enablers
- Assess adaptability of process enablers
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
55
Benchmarking analysis questions:
 What is the basis for comparing our process
measurements?
 How does their process performance compare
with our process performance?
 What is the magnitude of the performance gap?
 What is the nature or root cause of the
performance gap?
 How much will their process continue to improve?
 What characteristics distinguish their process
as superior?
 What activities within our process are candidates
for improvement?
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
56
“Adapt, don’t adopt. It is error to copy.”
W. Edwards Deming
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
57
Adapt lessons & improve process:
Adapting
Improving
Planning
a Study
Analyzing Collecting
Data
Data
Improve
- Set goals to close, meet, exceed the gap
- Modify enablers for implementation
- Gain support for change
- Develop action plans
- Communicate the plan
- Commit resources
- Implement the plan
- Monitor and report progress
- Identify opportunities for benchmarking
- Recalibrate the benchmark
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
58
Benchmarking questions to improve:
 How does our knowledge of their process help us to
improve our process?
 Where should we project the future effectiveness of
their process performance?
 Should we redesign our process or reset our performance
goal based upon this benchmark?
 What activities within their process would need to be
modified to adapt it into our business environment?
 What have we learned during this study that will allow
us to improve upon the "best" practices?
 What goals should we set for our own process
improvement?
 How can we implement these changes in our process?
 How will other companies continue to improve this process?
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
59
Dealing with variation in benchmarking:
 Benchmarking gives a single point estimate of process performance.
 Variation exists between geographic entities having similar processes.
 Variation exists within each of the measurement observations.
 Variation exists across the implementation time of improvement.
RADAR CHART: Multivariate Indices
The most value from results of
benchmarking is in the trend
information, not in observation
of a single data point about a
level of performance. The most
significant learning is about the
reasons for change and the 100%
Factor B
corresponding results from a
Change – learning what worked
and why. That is profound
knowledge about a process!
Factor A
Excellent
Average
Bad
50%
0% 40%
1
3
5
Factor C
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
70%
100%
Factor D
60
Applying statistics to benchmarking
Comparative analysis of work processes performance:
6
Sigma Level
5
In reality, each dot represents a distribution
that has a range which may be statistically
tested and compared to other data points.
4
3
1 2
3 4
5
Process Baseline
Process Entitlement
Process Benchmark
6
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
7 8
9 10 11 12 13 14 15 16
Observed Work Processes
61
Typical initial benchmarking studies:
Process cost comparisons
Customer satisfaction improvement
Product development efficiency
Organization management structure
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
62
ETM – 5111:
BREAK
Instructor: Gregory H. Watson
Summer 2003
Session 3 – End of Part 2
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.