In a recent Q&A email, a member of the InnoLead community asked the following question:
Who should we be benchmarking against? An IL member in the financial services industry asks whether it makes sense to only benchmark innovation activities and outcomes against other financial services firms — or to consider other “best in class” companies outside of her industry. What do you do, why, and what’s the thinking behind it?
Below, we’ve summarized a few of the top answers from the community.
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Most financial services firms aren’t on the leading edge — Financial services industry respondent “I have found it helpful to benchmark across industries and domains. The innovation processes and toolkit is relatively domain agnostic, from my perspective. As a financial services respondent, I can say I don’t consider financial services to generally be on the leading edge of innovation. Some think the industry has responded to potential disruption slowly as a result of perceived barriers to entry around scale and/or the regulatory environment. While there are a few positive outliers, e.g., USAA, JP Morgan, et. al., most financial services firms lag innovation leaders across industries. In practice, I will add I haven’t found a single firm to benchmark against. In fact, our most effective benchmarking has been unbundled and more granular, identifying best practices at a process/tool/strategy/tactics found across many firms and using the combined collection as the composite benchmark.”
Don’t benchmark at all — Pharmaceutical industry respondent “I advocate for not benchmarking at all, as innovation is about something that had never been done before. The only ‘benchmarking’ I would do is comparing specific tools to stimulate and facilitate innovation.”
Use multiple lenses — Financial services industry respondent “I feel like we should benchmark against all firms – not just financial. We try to look through multiple lenses – what are our competitors doing, what are tech firms doing, how do we stack up?”
Look beyond your industry — Aerospace industry respondent “We’ve found that benchmarking within our industry leads to bath-water results. We resemble our customers and our markets, and only looking at innovators in our space is a mirroring and ‘me-too’ exercise. Looking beyond [our industry] has yielded better ideas that are more relevant to the problems that no one in our industry are solving for, and a better innovation operating system and organization for us to execute with as a result.”
Benchmark against a variety of data — Software industry respondent “Benchmark against both – best in class for programs, best practices, frameworks, adoption/reach, etc. Benchmark against similar LOB and/or similar return-on-invested-capital [ROIC] and growth companies to assess effectiveness and execution.”
What are your customers doing? — Consulting firm “You should be benchmarking against both [competitors and firms you perceive as outside your sector], since that’s what your customers are doing. If you’re unsure, you could interview a few customers to see who they are comparing you to.”
It depends on program maturity — Automotive services respondent “It depends upon the state of your business, industry, and your innovation objective. If your business is in growth stage with plenty of runway and your industry is not fully mature (or in decline stage), then an industry benchmark may suffice if you are after ‘incremental innovation.’ However, if you are after ‘transformative innovation,’ it is much more important to benchmark across several analog categories to triangulate appropriate benchmarking for your business need. For example, at AAA (since I built my innovation program to deliver transformational innovation — ultimately reinventing our value proposition), I create a blended benchmark across the financial services, high-value brands, consumer discretionary, and high growth categories to triangulate benchmarks appropriately for the needs of our current business model. The net result is that we ultimately hold ourselves accountable to materially higher benchmarks than our industry, given the transformative need of our innovation efforts.”
Keep results separate — Insurance industry respondent “I think you want to benchmark both but keep the results separate. Neither is perfect but both will provide insight and trends.”
Benchmark how you used to work — Consulting firm “In my opinion, the best benchmarking is against how you used to work. I’m not sure how useful or accurate you can be when analyzing versus external companies.”
Are your specific about what you want to learn? — Manufacturing industry respondent “I would recommend benchmarking more broadly. If you are specific about what you want to learn, you may find that the best benchmarks are outside your industry. I benchmarked other manufacturers pursuing advanced services strategies, for example, to learn about their challenges. All were outside my industry. I benchmarked different companies [in various industries] to learn about lean startup in large organizations.”
Look for breakthrough ideas — Technology industry respondent “A company in the financial services should NOT limit themselves benchmarking against only financial services companies. This approach severely limits your input from only other ‘financial types’ who likely think just like all other financial types. You should be looking for breakthrough ideas. …Innovation by its very meaning means introducing something new or different. If you look in your own industry, you’ll likely not find a way to innovate that is new or different… Different ways of innovating, of discovering, of thinking should be sought by studying a broad range of industries. Your job is then to understand the applicability, translate the methods, and adopt these new perspectives on discovery and innovation. This may lead you to a way to Uber-ize your competition.”
What metrics are you measuring? — Hospitality industry respondent “It depends on the metrics they want to be measured against. Typically measuring within the industry will be most relevant to storytelling for the audience but looking to related industries can often uncover gems. I try to do both.”
Benchmark against the best — Healthcare consulting firm respondent “It makes sense to benchmark outside your industry if the bar within your industry is too low. For example, I ran an national IT support operation. At the time, customer satisfaction rates and related service metrics within the industry were low, and generally regarded as unacceptable. I ended up benchmarking different areas (like my help desk) against the best phone/web/email service desks for which there was data. If sufficient, relevant metrics/data are available without too much extrapolation, benchmark against the best.”
Always look at best practices — Hospitality industry respondent “I think you should always look at best practices, especially outside of your own industry. There is always a chance that you might already be the ‘most innovative’ firm in your industry, and looking at others [in your space] can provide interesting insights but may ultimately hold you back.”
‘Best in Class’ is just a cliché — Consulting firm “‘Benchmarking’ is a pretty lame way to do research, because who knows if what’s good for them is good for you. And looking for ‘Best in Class’ is a red flag for cliché thinking that isn’t likely to lead to much of anything that’s useful. Look at the ‘Good to Great’ companies — how many of them are still around?”
What you adopt needs to work in your internal ecosystem — Consulting firm
- “Product benchmarking as part of a competitor intelligence program is a core ingredient to developing insights about how one’s own products or services stack up in the market. However, by examining current products, one is inherently examining past decisions made by a competitor. A stronger intelligence program looks for evidence that can help generate insights about how a competitor will make decision in the future. This usually drives one toward scenarios, gaming, and studying competitor decision-making trends, cultures and other behaviors. Adopting another firm’s product ‘best’ attributes can be the wrong thing to do without understanding the context within which the company made those decisions — the trade-offs, risk tolerances, strategic intent, etc.”
- “For innovation process benchmarking, my opinion, based on working roughly 200 cases with startups, corporates, and non-profits is that the sector matters, but the core learning comes from how different innovation methodologies, structures, and tools work or don’t work in different sectors, geographies, cultures, etc. The size of a company, its risk tolerance, overall objectives, and corporate level strategy, position in an industry, as well as its innovation maturity are all factors that need to be considered. So, for the specific question about looking at financial services firms’ innovation programs, I think I’d want to diagnose first my own company(perhaps using Rita McGrath’s simple eight-stage framework) in terms of where it is in the innovation space and where it wants to go, and then look for services-based business that are similar. Examining companies in other sectors but have similar cultural, size, and positioning situations could also identify best practices that apply.”
- “Sowing the two thoughts together — intelligence benchmarking as a rear-view mirror exercise and innovation process as a tailored fit and journey — I’d look inward first, then look outward and learn about specific innovation program elements that are most relevant to you — regardless of the industry. Adopting a competitor’s best practices just because they are best for them won’t help if it doesn’t work in your internal ecosystem.”
Extract out the principles — Consulting firm “Of course you should go outside your industry in benchmarking; you need to learn from the best. But a primary reason for this is not to follow best practices — copying what some other company else is doing well — but best principles — understanding what that company is doing well in its situation in its industry, and then extracting out the principles that the company is using and applying those principles to your business in its situation in its industry.”
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