Using benchmarking to follow the leader will never make your company great. At its heart benchmarking is finding out what others are doing and copying it. When clients ask Bill Gallagher, a highly respected consultant in the banking industry, to benchmark a process, he responds by asking, "Why would you want to pay me lots of money just to help you learn and copy what someone else does, rather than focusing on doing it the best way possible for you?"
This is because copying others doesn't require the expertise, independent thinking, and creativity that make companies great. It is an activity at which children, primates and even other animals excel - as demonstrated by my dog, Pandora, who became extremely adept at picking and eating wild blackberries by watching me.
Highly successful companies differentiate themselves by creating their own best practices. While building Microsoft into a leading software company, Bill Gates continually told his employees, "We set the standard." He knew that Microsoft would never be number one if they just did what everyone else did.
It is still important to keep your eye on what others are doing. Bill Gates always knew what his competition was doing. However, you need to be aware of the strengths and weaknesses of benchmarking before adopting it as a solution to your particular problems.
If a competitor manufactures exactly the same product as your company and they are producing it more cheaply and efficiently than you, then finding out what they do may help you improve your manufacturing processes.
However, even in this case it is important to be skeptical about another company's statistics and costs. Multiple hidden factors can affect these numbers. Labor may be cheaper in the area where they operate or they may have a highly advantageous contract with a supplier which you can never match that significantly reduces their costs. Thus, you can't assume that the process you plan to copy is the real source of a company's advantage.
The value benchmarking can add becomes even muddier when people play a key role in executing the processes you are copying. Unless your employees are clones of the employees in the company that you are copying, it is going to be difficult to duplicate their success.
Employees bring all sorts of personal differences to the table that interact with workplace processes. Each employee has unique strengths, weaknesses, motivations, attitudes, anxieties, and even stressors unconnected to your workplace. When you further add to this mix differences in managers, workplace conflict, and organizational climates, it becomes impossible to anticipate or control how a process will work in your company.
Even within an organization it is difficult to transfer practices across divisions as the famous AES case illustrates. AES developed a highly successful flat organizational structure at their Thames plant in Connecticut which they called the "honeycomb system."
When AES subsequently tried to use this same system in a new plant that they opened in a rural area in Oklahoma, they ran into all sorts of problems because they had a very different labor pool. To make the honeycomb system work in Oklahoma AES had to roll out the system with more structure and revamp their training practices.
There is also the problem that today's leaders may be tomorrow's losers. Jim Collins' book Good to Great is based on the best practices of a group of 11 companies which elevated their stock market performance from at or below general market returns to three times above market returns and then maintained this performance for 15 years. But today a number of these companies no longer qualify as great.
Toyota, creator of the famous "Toyota Production System" which has been copied by countless companies around the world, now has serious quality problems as manifested by its deadly epidemic of runaway vehicles. It is unclear what the cause of the problem is, but it calls into question whether this highly-touted system is the panacea that everyone thought it was.
Thus, there is no way of knowing whether the practices you are copying are an engine for enduring success or dependent on existing economic conditions and will no longer work when markets and business environments change. There is always a lot to be learned from observing what others do and it can stimulate us to come up with new creative ideas. Companies, however, need to realize that true success comes from forging their own path. Just following the leader may doom them to always being second best.
It's not just that. The problem with benchmarking is that it is 'retrospective' - you are comparing yourself with what someone did last year/period. The world moves too fast these days & by the time you have caught up with the person you are benchmarking yourself against... they have moved on again...