Continuously Able – How Businesses Outpace Their Competitors Using ‘High Level Benchmarks’

Helping companies to identify not only the direction of development of their capabilities, but also the ways to achieve them

I’ve built this series of four articles on the undisputed premise that a company’s success depends on what it can do better than its competitors. Therefore, effective managers focus on understanding, selecting, building and maintaining their firm’s capabilities.

In the first article in the series, I described how strong capabilities emerge from processes that are composed of organizational routines that are built on microfoundations of individual attributes, team processes and connectedness, and conflict management methods.

In the second article, I described the different types of capabilities—hygienic, differentiating, and dynamic—and how different life sciences business models require different capabilities.

In practice, this means that, especially in changing markets, firms cannot rely on the ability to “benchmark” against their competitors. They need to build their own set of capabilities – their capabileome – that is appropriate for their chosen business model. Then, in the third article in the series, I shared my research on how firms build their capabileomes from the bottom up, identifying weaknesses and carefully designing their microfoundations to enable their organizational routines and express the capabilities they need.

This research-based understanding helps businesses become more capable than their competitors. But it doesn’t meet the challenge of staying ahead of strong competitors in a changing market. Meeting this ongoing challenge is the subject of this fourth and final article in the series.

Acme comparators
Sometimes, but relatively rarely, staying ahead of competitors means changing the business model. If this is true for your company, please go back and read the second and third articles in this series. But if you face the much more common challenge of staying ahead of ever-improving competitors with the same business model as yours, then you face a different kind of challenge. Under these circumstances, I have found that effective firms have given up comparing themselves to others. As one survey respondent told me, “Benchmarking helps you catch up, but it doesn’t help you stay ahead.”

Instead, leading firms compare themselves to the best possible options for their business model. The same respondent put it as: “You should compare yourself to the best you could be, not the best that currently exists.” Supported by many of the executives I interviewed, this idea of ​​“comparing peaks’ is theoretically sound, but raises practical questions such as: The best you could be, right? What acme benchmarks can a leading firm use to help it stay ahead of the competition? In my research, I delved into these questions as they relate to the commercial functions of life sciences companies and discovered four benchmarks that commercial leaders use to help them stay ahead of their competitors.

Figure 1

Figure 1

Acme understanding
Since all commercial competitiveness begins with understanding the market better than anyone else, leading firms begin by comparing themselves to the pinnacle of market understanding. I heard questions like, “What do we know about the market that no one else knows?” and “What do we see happening in the market that we can’t fully explain?” By asking these questions, sales leaders weren’t comparing themselves to their competitors, they were contrasting your business intelligence and analysis capabilities to the theoretical maximum. Often the answers to these questions were humiliating. If everything you know about the market is known by everyone else, and there are many things you cannot explain about the market, this is a sign that you are way behind your acme comparator.

I found that leading companies used this gap to drive improvement in their business intelligence and related functions. They first identified critical gaps in their understanding of the market (eg, why prescriber preferences vary among prescribers with similar characteristics).

They then identified weaknesses in the organizational procedures that caused these lapses (eg, procedures to characterize the irrational motivations of drug prescribers). They then pinpointed the micro-foundations that weakened these routines (eg, poor skills in conducting and interpreting qualitative market research). This practical, targeted approach to improving capabilities is made possible by acme benchmarking. Because these leading firms were already as good or better at understanding the market than their competitors, this could never have been initiated by competitor benchmarking.

Acme solving
The second ultimate comparison I observed was in deciding where to focus efforts. In this case, I heard questions like, “How different is our focus?” and “How do we know our focus is best?”

To answer these questions, I had to cut through the jumble of details, because at a very specific level, no two companies do exactly the same thing. But if, on a broader level, sales leaders find themselves making more or less the same value proposition to more or less the same people, then it provides a humbling ultimate comparison.

Driven by this, I have seen businesses identify weaknesses in their segmentation, targeting and positioning capabilities. These are often explained by industry-typical but suboptimal routines, such as those for designing extended, beyond-product, value propositions. Fixing such routines often involved addressing the micro-foundations of managing conflicts between marketing, market access and medical issues. Again, the motivation and ability of these leading firms to improve their already good capabilities was driven by comparison with the top tier, not with their competitors.

Figure 2

Figure 2

Translation Acme
Perhaps the most difficult benchmarking my research had to uncover involved turning strategic decisions into action. Here reality was masked by “social silence” and other political behaviors. But I ended up hearing questions that could be summed up as, “What’s the difference between what we said we were going to do and what we actually did?” Surprisingly, the answer to that question was often “much more than we thought’, and when that was the case, it again revealed an opportunity to improve capabilities, this time in strategy execution.

In one typical case, the implementation problem was solved by changing the organizational procedures for communicating the strategy and designing its indicators. And making these routines possible required some restructuring of micro-fundamentals like team membership and reporting lines.

This was yet another example of using the acme comparator to drive the development of capabilities that, through the limited lens of a comparison exercise, seemed unnecessary.

Acme training
The fourth acme comparator I observed being used by leading firms was in the area of ​​maintaining organizational learning capabilities. These are distinct from market insights and relate to how firms learn from experience. When I listened to the leaders here, I heard questions like, “Once we implement, what will we know then that we don’t know now?” and “What assumptions are we making and how will we know if they were good?” Of all the acme comparators, these questions were the most -likely not to get a good response and thus revealed the most room for ability development.

These missing responses initiated new organizational learning procedures, such as those for determining if/then hypothesis tests (e.g., If this segment does not favor us, then we will know that our assumption that contraindications lead to prescribing behavior, is wrong). Learning procedures of this kind were enabled by new micro-basic skills, such as those of deductive reasoning. As with the other three acme comparators, comparing current organizational learning to what is possible identifies ways to build capabilities that would not be revealed by simple benchmarking.

Figure 3

Figure 3

Endless possibilities
The British have an idiom – “Drawing the fourth bridge” – which refers to any task that is necessary but can never be completed. What I found in the companies I researched is that staying ahead in a changing, competitive life sciences market is a lot like painting the Fourth Bridge.

Whatever capabilities a firm has that give it superior competitiveness very quickly become visible to its competitors, who rush to imitate them.

Because imitation is always easier than innovation, the capability gap between leading firms and their followers can quickly close. Only constant attention to the development of capabilities can maintain a leadership position. The challenge for leaders is that they lack the pace or benchmark to compare themselves to.

The companies I studied overcame this by replacing competitors with peak comparisons. They asked themselves questions that revealed what abilities were possible, not what abilities others already had. This allowed these firms to identify not only the direction of development of their capabilities, but also the ways to achieve them.

Critical questions revealed capability gaps. They revealed weak procedures, which in turn showed where microfoundations needed to be improved.

Building from these improved microfoundations, the best firms I interviewed followed a path of continuous capability improvement. They were, in the words of Claude Lévi-Strauss, like the best scientists; they didn’t have the right answers, but they were asking the right questions.

All four articles are available upon request from [email protected]

Professor Brian D Smith works at SDA Bocconi and Hertfordshire universities. He welcomes comments at [email protected]

January 9, 2024

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