Benchmarking the Underutilized Measuring Tool – 2
In working with entrepreneurs facing the unknown it seems to take a while to get many of them to think benchmarking. Forecasting the unknown is very difficult and the less information the higher the risk. In working with student entrepreneurs I do find most are very open-minded and seek all the help they can get. Unfortunately, not being exposed to benchmarking makes it not in their vocabulary.
Even in my consulting for small companies through the many years there were attitudes like, “What can you learn from other companies” or “Other companies are a waste of time and effort and stifle innovation.”
Give you an example, when a student team I work with had designer undergarments as a product, we got to a point to talk about benchmarking. They came up with Victoria’s Secrets. When looking at a company that was in a similar market, except for the gender, there was to lot to learn. We learned how long it took to get where they were successful, the amount of capital it took and their approach to distribution. Business schools for years did case studies gathering lots of information, but they weren’t necessarily applying the efforts to startups.
Ironically the young people today can gather numerous data and information from the Internet. I sat in groups with student entrepreneurs and maybe when I asked a question hands would be clicking the keys and with minutes there was a wealth of data. I recognize data is not information until utilized, but this gave us good dialogue to start with.
In the past, trying to gather data from companies unless they were public was very difficult. Today gathering data from private companies can be obtained from numerous places starting with the Internet and utilizing networking, consultants, trade journals, press releases. The universities I am in now with student entrepreneur programs, have numerous outside people like myself willing to try to help students. These people are called EIR, Experts in Residence. I dislike the term expert and in fact I maintain I’m not an expert, but I am an observer so listen to my years of observation and if they are useful, great. The University I work with now have over 400 EIR’s. The students are aggressive enough in searching and may find in some of these people a wealth of information for benchmarking.
I like to point out what not to do with benchmarking. Do not settle for the mean or average level. The information you find should not be used to copy competitors. Second best strategy can become a plus. In my career working with small companies and benchmarking against competitors we found niche products. When cable TV first started in Southern California, Cox became the king.
A small engineering design and development company I was consulting for realized at that time that a $300 firewall made sense. This upset Cox and they were uncooperative, but after a couple years, a public company is Seattle-area purchased the small company for millions of dollars. Today working with startups entrepreneurs seeking money, the normal exit plan is being sold to or merged with another company. The ultimate benchmark is finding comparable deals for companies close to what the startup is planning. These comp’s give credibility to the exit plan and can help convince the investors to write that paycheck.