What is Benchmarking?

Benchmarking – A Valuable Tool for Improving Product Innovation

Product Innovation is one of the most popular business functions to benchmark primarily because of its valuable purpose – it delivers top-line growth, creates new customer value and establishes a competitive advantage. For these reasons companies strive to continuously improve Product Innovation performance. Benchmarker is a valuable tool because improving Product Innovation performance can be challenging for a variety of reasons:

• It is inherently complex because it requires cross functional collaboration across the entire organization
• New product investment decisions are made by cross functional management teams
• Numerous studies confirm there is no correlation between the amount of money a company spends on Product Innovation and the performance results it achieves in the market. New product success is traced back to the quality and proficiency at which an organization executes its Product Innovation process. If you want to improve performance you must improve the Product Innovation process.

The bottom line – benchmarking is an excellent tool for companies who wish to improve their Product Innovation performance. It enables companies to zero in on specific problems, isolate high value improvement opportunities, and identify strengths that should be preserved. The process of benchmarking itself engages key stakeholders in consensus building.

Recommendations when benchmarking Product Innovation:

• Benchmark performance and process metrics to uncover true performance drivers and improvement opportunities
• Utilize a large sample to improve accuracy and avoid implementing unproven practices
• Benchmark against top performing companies regardless of their size. Choose companies with established ‘centers of Product Innovation excellence’ that have a proven ability to win at new products
• Select top performing companies across all industries. Don’t limit yourself to one industry – after all, how do you know the companies in that industry have the right formula? If you are trying to be a top performer, set your sights on learning from the world’s best performers. Also, many companies rely on new products to gain entry into adjacent or new markets making a benchmark focused on an existing industry too limiting
• Select top performing companies across numerous geographies. Don’t limit yourself to local geographies that may not be experiencing the same degree of competiveness when it comes to Product Innovation. Many companies rely on new products to gain entry into new geographic markets making a benchmark which is focused on companies in an existing geography too limiting.

Types of Benchmarking

Business Performance– An analysis of how one or more benchmark companies performs against specific business performance metrics such as: Percentage of Profits from New Products. This type of evaluation is strictly quantitative.		Metrics– An analysis of how one or more benchmark companies performs against specific metrics such as Project Slip Rate, Schedule Delays, Time-to-Market and Cycle Time. This type of evaluation is strictly quantitative.
For example: This chart benchmarks popular business metrics considered to be good indicators of Product Innovation performance: Percentage of Profits from New Products and Percentage of Revenue from New Products. The top 20% of the best performing companies are displayed on the bottom bar, the industry average is displayed on the top bar and a sample company is displayed on the middle bar. (Source: Stage-Gate International Benchmarker™)		For example: This chart illustrates the percentage of projects which entered the development stage, and were commercially successful, commercial failures, or were “killed” prior to launch. These metrics are then compared with industry benchmarks. (Source: Stage-Gate International Benchmarker™)
Business Processes– An analysis of how one or more benchmark companies approach specific Product Innovation processes such as new product development and portfolio management. This type of evaluation can be quantitative, qualitative or both. It typically focuses on measuring the key activities, roles and resources utilized to execute Product Innovation.		Practices/Activities– An analysis of how one or more benchmark companies executes specific activities or practices such as Product Definition, VOC and Preliminary Market Assessment. This type of evaluation can be quantitative, qualitative or both. It typically focuses on measuring proficiency and quality of execution.
For example: This chart benchmarks the degree with which a company executes best practice activities in a high quality fashion. (Source: Stage-Gate International Benchmarker™)		For example: This chart illustrates the extent to which a company executes best practice activities during the new product development process. These metrics are then compared with industry benchmarks. (Source: Stage-Gate International Benchmarker™)

Comparison of Benchmarking Methodologies

The bottom line - there are numerous benchmarking options to suit a variety of objectives, budgets and schedules, however, the options which offer best value for money are Methods #1 and #3. The results are quick, the databases are large and the results are personalized to highlight how your specific company measures up against others. The trade-off between the two different approaches is that Method #1 evaluates a single point of view (i.e. one person completes the questionnaire) whereas Method #3 evaluates many people’s opinions (i.e. a team of people complete the questionnaire).