In today’s fastly developing world, almost all
economic systems, organizations and manager teams are looking for modern and
practical approaches in order to achieve best competitive advantages and
survive. Effective management processes that will help define and apply the
best practices in overall business strategy planning are vital for improvement.
For such global reasons, benchmarking – “a
systematic and continuous process involving the comparison of characteristics
of the best products, services and processes in order to improve
business performance” (Arash Shahin and
Mohamed Zairi, n.d.) – is a relevant subject nowadays. In
this rather descriptive report, benchmarking practice will be the subject in
the context of application to and integration with business strategic planning.
Taylor was the pioneer in suggesting the concept of “one best way” to do work.
His management science ideas were encouraging the comparison of work processes
by implementing scientific method (Taylor, 1911). However, through
the three quarters of the last century, the approaches related to benchmarking
were considered art rather than a science (Watson, 2007,
Only when Xerox Company had to form a team (1976) to establish a learning
process in order to make clear their weak points and learn from business
leaders of other organizations, science side of benchmarking was initiated.
1.2. Definition of Benchmarking
to International Benchmarking Clearinghouse (?nternational
Benchmarking Clearinghouse, 1995) benchmarking is a
close association between business partners for sharing data on processes and
measures which evocates innovation and improves performances. A process of
finding and implementing the best practices (See Figure 1:Graphic illustration of bnchmarking (IBC)3)
Figure 1: Graphic illustration of benchmarking (IBC)
In other words, benchmarking means being
simple and adaptable enough to accept the fact that there are competitors doing
better than you and wise enough to adopt their practices for your business
Benchmarking Clearinghouse, 1995, pp. 5-6)
1.3. Stages of development
by Gregory H. Watson in his strategic benchmarking book (Watson, 2007), development of
benchmarking can be viewed as a transition through five overlapping generations
in its maturity of practice. These stages are as following:
1) 1st generation – Competitive product
analysis and Reverse Engineering.
2) 2nd generation – Informal Visits and
3) 3rd generation – Competitive Benchmarking (1976
4) 4th generation – Process Benchmarking
5) 5th generation – Global Benchmarking
under the scope of first two generations, benchmarking concept is prone to art
rather than being a scientific process. Starting from crisis event in Xerox
Company caused by court ruling (1976), the need for more proper, scientific
benchmarking process was realized by Xerox CEO David Kearns and from then on
benchmarking practice consequently develops as a more scientific process (Watson, 2007, p. Intro).
2. Case Studies in Benchmarking
first case study intends to describe how strategic benchmarking operates in
practice by providing Nokia Mobile Phones (NMP) experience that occurred during
the period from 1995 to 1998. The major steps of strategic benchmarking will be
illustrated in terms of the followed case study.
Background information. Nokia
was founded in 1865 by F.Idestam and originally it was a paper manufacturing
bod. Afterwards, the Nokia Company was born with the united efforts of Idestam
and his friend Leo Mechelin as a share company.
1998, NMP was already world leader in mobile phones transaction and between
1996 and 2001 the company’s turnover percentage went up to 500 percent (See,
But before that period there was significant challenges going on.
December 1993, Gregory Watson – then the vice president of quality at Xerox
Corporation – was invited to join Professor Gary Hamel as a speaker to the NMP
senior management team at their annual business kick-off meeting. In that
meeting G.H. Watson was going to speak about how to use strategic benchmarking
to evoke the organizational change.
What business reasons were there for Nokia Benchmarking
Study? Firstly, Nokia was a distant third
in market share behind more successful brands of Motorola and Ericsson. Surveys
showed that the company had no brand value and people were confused about
Nokia. In addition, at that time in history, cellular phone industry took up
20% of the total revenue for the entire corporation.
Focus areas of NMP management to grow its business. The objectives of the Nokia quality planning program
included creation of intellectual property1 and globally recognized “Nokia
branded” life cycle; operational
excellence; and finally, customer intimacy and a more concentrated focus on
quality (Watson, 2007,
2.2. Conducting the Benchmarking Study.
Because of the fact that both Motorola and Ericsson had received prestigious
they were expected to disseminate information about their systems publicly.
Hence, both companies offered site visits to their award-featuring plants.
2.3. Developing a
Creative Understanding of Strategic Benchmarking Information. Obviously, there were
some sharp distinctions between the ways these three companies’ management
systems worked. However, it was not the matter of finding out which was
superior. Rather, the real questions was about the weak points of benchmarked
organizations and using those to the advantage of NMB’s to redesign its quality
system (Watson, 2007). a) The basis for surpassing Motorola
was “an internal conflict between the
need to get products to the market faster and the need to assure that quality
of the products released was conformed to Six Sigma quality
specifications”(G.H.Watson). Management decision for applying Six Sigma
method was based on Theory O! b) On
the other hand, Ericsson Company’s weakness was over-standardization of
decision-making process that lessened the flexibility of Ericsson and created a
false culture which allowed postponing decisions for internal considerations
1 ?ntellectual property refers to creations of mind such as inventions,
literary or artistic works, et. (Organization,
n.d.) In Nokia case, it implies the objective of
designing new quality management approaches which would be new to cellular
2 Motorola’s Bandit Project was an essential feature of the initial
Malcolm Baldrige award application. Ericsson had an application for the
European Quality Award.