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Benchmarking: Underutilized Measuring Tool | Dick Dadamo | Lunch & Learn
The document discusses the importance of benchmarking for startup growth, highlighting it as a crucial tool for improving business processes and achieving a competitive advantage. It outlines methods to collect benchmarking data, factors to assess, and the benefits of performance comparisons. Ultimately, the author emphasizes that benchmarking is essential for informed decision-making and strategic planning in startups.
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Benchmarking: Underutilized Measuring Tool | Dick Dadamo | Lunch & Learn
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- 2. Startup Difficulty Forecastingthe unknown is very difficult The less information the higher the risk Seek all the help and advice you can get Particularly difficult for customer support 2
- 3. 3 The Wrong Assumptionsby CEO's Our idea/concept/product will win because it is unique and covered by IP's Marketing is nothing more than obtaining a very small percentage in a growing market Our company will beat out competitors because we are 1st to market There is little to learn from other companies Comparing (Benchmarking) other companies is a waste of time and effort and stifles innovation
- 4. 4 Benchmarking, the Underutilized MeasuringTool 4 Benchmarking is a "must" for growth What is Benchmarking? Why Benchmark? Who is Benchmarked? How to get other company's Benchmarking data? What performance factors to Benchmark What are the methods of Benchmarking? How will Benchmarking improve existing processes? What not to do with Benchmarking Key; Look for companies/technology and the marketing place similar to you
- 5. 5 Benchmarking, the Underutilized MeasuringTool 5 What is Benchmarking? A method of comparing a company's business processes and Key Performance Indicators (KPI's) to industry best practices. A method of comparing company's business processes and KPI's to competitors. A method of comparing company's business processes and KPI's to other industries. A marketing tool to find where competitors are not fulfilling customers unfulfilled needs or wants A method of validating your company's value proposition Look for companies/technology in the marketing place similar to yours.
- 6. 6 Benchmarking, the Underutilized MeasuringTool 6 Why Benchmark? Gap analysis - compare company's actual vs. potential performance To strengthen core competencies - To improve business processes To achieve incremental performance gains To achieve a sustainable competitive advantage To provide a foundation for growth As part of a Strategic Plan – SWOT (Strength – Weakness – Operations – Threats) analysis Can aid the foundation for business and marketing plans Pick a revenue level to define the organization to get there - PEP
- 7. 7 Examples of SWOT’s StrengthsWeaknesses (What lies ahead) Financial Intellectual Location Customer service Efficiency Infrastructure Quality Staff Management Price Delivery time Cost Capacity Get to know your company in depth Relationships with customers Brand strength Local language knowledge Ethics Principles Patents & IP Strong brand names Good reputation among customers Cost advantages from proprietary know-how Exclusive access to important resources Favorable access to distribution networks Time to Market Board of Directors and/or Advisors
- 8. 8 Examples of SWOT’s Opportunitiesand Threats (What lies ahead) Political/Legal Market trends Economic condition Strategic alliances Expectations of stakeholders Get to know your company in depth Technology Public expectations Competitors and competitive actions Bad PR Global Markets Regulations
- 9. 9 Benchmarking, the Underutilized MeasuringTool 9 Why Benchmark? • Gap analysis - compare company's actual vs. potential performance • To strengthen core competencies • To improve business processes • To achieve incremental performance gains • To achieve a sustainable competitive advantage • To provide a foundation for growth • As part of a Strategic Plan - SWOT analysis • Can be foundation for business and marketing plans • As a tool for "Thinking out of the box" • As a breeding ground for innovation • Quantum leaps (breakthroughs) • To learn "how to" from other more experienced companies • To determine what is needed to become a Best In Class
- 10. 10 Benchmarking, the Underutilized MeasuringTool 10 Who should be Benchmarked? • Employees • Partners • Competitors – Cornerstone • A Roll Model worthwhile following • Best in Class • Larger Public companies – PEP example $25 - $100 million
- 11. 11 Benchmarking, the Underutilized MeasuringTool 11 How to get other company's Benchmarking data? From private Companies • From their Customers • From their Vendors/Suppliers – C • Job applicant Interviews • Focus Groups • Roundtables • Trade Shows • Trade journals • News Releases • Internet • Example –Bob G. • Networking • your accounting and law firms • Investment Bankers • Consultants • From their Board of Directors • Advisors (EIRS) • Dunn and Bradstreet • Google/Facebook
- 12. 12 Benchmarking, the Underutilized MeasuringTool 12 How to get other company's Benchmarking data? From public companies • From Public company quarterly and yearly reports • From analysts reports • From Competitors– EM - Drives
- 13. 13 Benchmarking, the Underutilized MeasuringTool 13 What performance factors to Benchmark – when needed The Surface Factors Quality as measured by customer Time to produce product/service Cost of product/service Price of product/service Financial data Revenue Gross Margin Profit The Deep Dive Factors -in time Cash conversion cycle Days Outstanding RFQ capture rate Time to deliver prototypes/1st articles Sales per employee – Yelp Added value per employee Organizational arrangements Competitors customer lists Strategic plans Productivity and Efficiency Analytics
- 14. 14 Benchmarking, the Underutilized MeasuringTool 14 Formatting your Benchmark Comparison to Competition Profit Gross Margin Operating cost Marketing Cost R&D cost Inventory level Hiring – Great to be a leader PP&E level
- 15. 15 $ million Change CompanyTicker Product Q1-09 Q2-07 to Q1-09 AVX Corp AVX Diversified Electronics $271.81 -29.1% Checkpoint Systems Inc CKP Security & Protectuion Service $158.95 -18.8% Coherent Inc COHR Scientific & Technical Instruments $105.40 -26.1% CTS Corp CTS Diversified Electronics $118.10 -30.4% Dolby Laboratories Inc DLB Diversified Electronics $204.10 70.7% Littelfuse Inc LFUS Industrial Elecrical Equipment $84.40 -34.6% Methode Electronics Inc MEI Diversified Electronics $89.80 -28.3% MTS Systems Corp MTSC Scientific & Technical Instruments $107.70 2.4% National Instruments NATI Technical & Systems Software $157.80 -12.1% OSI Systems Inc OSIS Semiconductor Equipment 7 Materials $144.10 -5.7% PLEXUS Corp PLXS Printed Circuits Assembly $388.90 2.4% Rogers Corp ROG Plastic & Printed Circuit material $65.50 -33.1% Scansource Inc SCSC Computer Wholesale $389.80 -25.7% Trimble Navigation Ltd TRMB Scientific & Technical Instruments $289.00 -11.8% TTM Technologies INC TTMI Printed Circuit Boards $149.00 -8.0% Peer Group Max $389.80 70.7% Peer Group 75% $237.96 -6.9% Peer Group Average $181.62 -12.5% Peer Group Median $158.38 -12.3% Peer Group 25% $106.55 -28.7% Peer Group Min $65.50 -34.6% MFLEX MFLX FPC & Assembly $174.10 67.2% MFLEX % Rank 66.6% 99.6% Revenue MFLEX – Companies in Base — Change During Recession —
- 16. 16 Operating Cost% (SG&A%)vs Gross margin% 0.0% 10.0% 20.0% 30.0% 40.0% 3.3% 5.2% 5.4% 5.5% 5.8% 7.2% 8.4% 8.7% 9.5% 12.2% 14.5% 14.7% 21.5% 22.1% 23.2% 24.2% 25.6% 29.1% 32.1% 33.9% 42.0% Gross Margin% SG&A% Correlation 0% Operating Profit Trend PMTR BHE MFS ATSN PWER MERX NTE MAG MOBE SLR INVX JBL ROG VICR TTMI PKE PLXS SANM FLEXCLS MFLEX increasing profit
- 17. 17 Benchmarking, the Underutilized MeasuringTool 17 Benefits of Performance comparison charts Normalizing the data allows comparison of different size companies Shows position of your company in field of companies Shows how your position changes from one time period to the next By charting many parameters you can focus on the ones needing improvement
- 18. 18 Name Price Added Value QualityTechnology Assembly MFS L K K K J Global L J J J J Nitto J J L L J Foxcon n L L J J L How does M-FLEX compare to the Flex competitors: How does M-FLEX compare to the EMS competitors: Name Price Added Value Quality Technology Flex FoxConn L L J J K Pemstar L J J J J Flextronics K L J J J
- 19. 19 Benchmarking, the Underutilized MeasuringTool 19 How will Benchmarking improve existing processes? • Quality improvement • Cycle time reduction – S • Learn industries best practices • Align strategic planning • Competitor analysis • Customer satisfaction determination • Performance measurement • Reward and recognition • Organization restructuring • Create Value • Marketing research • Partnership sources • M&A sources • Create Innovation • Evaluate company's Barriers • Needed for Strategic Planning
- 20. 20 Benchmarking, the Underutilized MeasuringTool 20 What not to do with Benchmarking Settle for the median or average level Should not be used to copy competitors (2nd best strategy) However, when getting started, if you want to challenge existing companies in your market by niches or leadership, you can go either way. If a niche you seek, challenge the leaders weakness; if leadership is your choice, then challenge the leaders strengths.
- 21. Benchmarking - Examples Designer Garments Engineering Product Designs Gold Bond Senior Product 21 Gold Bond
- 22. 22 Summary Benchmarking is amethod of comparing performance to others There are many parameters, other than Sales and profit, to Benchmark Benchmarking can use graphic and analytical methods of comparison Benchmarking is a source of productivity and profit improvement Management learning and experience accelerates by Benchmarking Benchmarking teaches you what to do and what not to do If growth is your plan, Benchmarking is a must Where to start
- 23. The Ultimate Benchmark- Comps The vast majority of exit plans for startups today show being ultimate acquired or a merger. The ultimate in benchmarking is finding comparable deals to create credibility in the exit plan projections to get the investors to write that check. 23
- 24. Dick Dadamo dickd@cox.net Dadamo SmallBusiness Observer Startup Knowledge Base www.richarddadamo.com Reservoir information “You Know I Am There” Dick Dadamo presents: A series of workshops to present The Entrepreneur Mindset, from an investor viewpoint. Topics including: Advisory Boards Time Management Planning Business Ethics Strategic Alliances Finance Benchmarking Mindset Investors vs. /Entrepreneurs Risk Taking Would be Entrepreneur Forecasting Nuco Presentation Business Model Canvas Steps to the Big Money Interpersonal Relation Skills Planning Three Phases In a Big Company Business Ethics 23