TOWARD THE NEXT GENERATION OF IPAS
1ST EDITION
MODULE 7
PRACTICAL EXERCISE
Toward the Next Generation of IPAs. 1st Edition
Module 7
Course author Inter-American Development Bank (IDB) (www.iadb.org), through its Integration and Trade Sector (INT). Course coordinator Inter-American Development Bank (IDB) (www.iadb.org), through its Integration and Trade Sector (INT), the Institute for the Integration of Latin America and the Caribbean (INTAL) (www.iadb.org/en/intal) and the Inter-American Institute for Economic and Social Development (INDES) (www.indes.org). Module author Dr. Ashraf A. Mahate Pedagogical and editorial coordination The Inter-American Institute for Economic and Social Development (INDES) (www.indes.org) in collaboration with CEDDET Foundation (Economic and Technological Development Distance Learning Centre Foundation) (www.ceddet.org).
1st edition Copyright © 2017 Inter-American Development Bank. This work is licensed under a Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose. No derivative work is allowed. Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB’s name for any purpose other than for attribution, and the use of IDB’s logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license. Note that link provided above includes additional terms and conditions of the license. The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent.
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Table of Contents List of Figures .................................................................................................................. 5 Glossary ........................................................................................................................... 6 Module Introduction ....................................................................................................... 7 General Objective of the Module ................................................................................... 8 Learning-Oriented Questions ......................................................................................... 8 UNIT I. BENCHMARKING................................................................................................. 9 Learning Objectives ........................................................................................................ 9 I.1. What is Benchmarking? ............................................................................................ 9 I.2. Why Do You Do Benchmark? ................................................................................. 10 I.3. Principles of Benchmarking ..................................................................................... 11 I.4. Why Carry out a Benchmarking Exercise? .............................................................. 12 I.5. Criticisms of Benchmarking ..................................................................................... 13 I.6. Types of Benchmarking ........................................................................................... 13 I.7. When Do You Do Benchmark? ............................................................................... 16 I.8. Benchmarking Is Not‌ What? .............................................................................. 16 I.9. Expected Results, Benefits and Pitfalls from Benchmarking ............................... 16 I.10. Benchmarking Methods................................................................................ 17 I.10.1. Phase 1: Planning........................................................................................ 18 I.10.2. Phase 2: Data Collection and Analysis ...................................................... 20 I.10.3. Phase 3: Integration .................................................................................. 20 I.10.4. Phase 4: Action .......................................................................................... 20 I.10.5. Phase 5: Maturity....................................................................................... 20 SYNTHESIS OF THE UNIT ............................................................................................... 21 3
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Bibliography ................................................................................................................... 21 UNIT 2. GAP ANALYSIS ................................................................................................. 22 Learning Objectives ...................................................................................................... 22 II.1. The Importance of Gap Analysis ............................................................................ 22 II.2. Performing a Gap Analysis ..................................................................................... 23 II.2.1. Matrix .......................................................................................................... 23 II.2.2. Spider Diagrams ......................................................................................... 24 II.2.3. Line Chart ................................................................................................... 25 II.2.4. Root Cause Diagram .................................................................................. 26 SYNTHESIS OF THE UNIT .............................................................................................. 27 Bibliography .................................................................................................................. 27 UNIT 3. LEAPFROGGING ............................................................................................... 28 III.1. Leapfrogging ......................................................................................................... 28 SYNTHESIS OF THE UNIT .............................................................................................. 30 Bibliography .................................................................................................................. 30
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List of Figures Figure 1. Structure of the module ................................................................................... 7 Figure 1.1. Categories of benchmarking and their relative merits ............................... 15 Figure 2. The gap analysis ............................................................................................. 23 Figure 2.1. Matrix analysis ............................................................................................. 24 Figure 2.2. Spider chart ................................................................................................. 25 Figure 2.3. Line chart ..................................................................................................... 26 Figure 2.4. Root cause diagram .................................................................................... 26 Figure 3. Principle of leapfrogging .............................................................................. 29
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Glossary n Benchmark: a comparator or the best in the group that is used as a refer-
ence point for performance. n Benchmarking code of conduct: ethical behavior norms which should be fol-
lowed when conducting a benchmarking exercise. n Critical success factors: a selected group of measures which are considered
vital for the successful growth of the organization. It is assumed that if these factors are carried out correctly then the organization should be able to achieve its vision. n Gap or Gap analysis: the difference between the performance of the organ-
ization compared to the benchmark group. Technically, the gap can be positive or negative. n Leapfrogging: the process by which a poorly performing organization takes
action that puts it ahead of the best in the group. In other words the organization makes a jump to the first position. n Quantitative measures: measures that have a numerical value. Typical ex-
amples of quantitative measures include number of hours, cost, etc. n Qualitative measures: These are measures that are non-numerical such as
ranking or opinion etc. n Secondary research: using indirect sources in order to collect information.
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Module Introduction All organizations whether they are new entrants or established operators need to be relevant to their investor/customer base. The problem is that more often tan not IPAs tend to use backward-looking measures such as the flow of FDI, the number of projects etc. These are excellent measures, however they refer to historical performance and say very little about the future. Therefore, to change the future an IPA needs to understand its present situation and find the direction to the future so that it becomes the leader. This module seeks to explain how an IPA can understand its relative performance compared to the best in the group. In doing so the IPA is able to understand why the benchmark comparators are best in the group—in other words what makes them good. These initial steps allow the IPA to understand how does its performance differ from the best in the group and more importantly how it can make the jump to become the leader. These relatively simple steps are covered over three units as shown in Figure 1. Figure 1. Structure of the module
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General Objective of the Module This is a practical module whereby the aim is to provide learners with skills that allows them to become multi-disciplinary. In other words the skills should allow learners to assess and redefine the services, products or even processes within their own IPAs. At the end of this module learners will be able to: n Benchmark the IPA to the best-in-class regional and international IPAs. n Use the benchmark to design and conduct a gap analysis for their IPA. n Prioritize the key changes and needs to be addressed in terms of strategies,
services, products etc. in order to fill the gaps. n Select the most important and feasible change or product development and
produce a proposal. n Develop the proposal into actionable tasks with responsibility points and
time lines (i.e. a comprehensive project plan). n Deliver the internal change or product development as per the proposal and
write an accompanying report (i.e. the project report). n To be able to carry out leapfrog initiatives.
Learning-Oriented Questions The learning-oriented questions below are optional. 1. What is meant by an IPA benchmarking exercise and how is it carried out? 2. What purpose does a gap analysis serve and how can IPAs use it to improve their performance? 3. Why do IPAs need to measure their performance? 4. Can a balance scorecard approach be used to measure the performance of an IPA? 5. What are the key differentiators in service, products and processes for the best in group IPAs?
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UNIT I BENCHMARKING
Learning Objectives This unit examines the process of analyzing the performance of an organization against a pre-selected group of comparators. The fundamental aim of this process known as benchmarking is to highlight differences both positive and negative. As a result at the end of this unit learners should be able to do the following: n To understand what is meant by benchmarking and the different types. n To be able to appreciate the advantages and disadvantages of the bench-
marking process. n To comprehend the benchmarking process. n To be able to convert the results of a benchmarking exercise into an action
plan for change.
I.1. What is Benchmarking? Benchmarking is a commonly used practice of continuously improving the service, products, processes and even intangible aspects of a company through identifying, analyzing and adapting to the best in the group practices. These best in the group practices can be internal or external—that is, within or from outside the organization respectively. It is important to note that benchmarking focuses on the process that 9
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leads to superior practices rather than simply measuring the outcomes. As such, in most cases the benchmarking also requires a change in the organizational culture in order to yield the greatest results. Benchmarking is not quality assurance as this focuses on meeting certain standards either set by a regulatory body or through the organization’s stated aims. Also, in most cases quality assurance is the outcome of either management or external requirements whereas benchmarking is totally voluntary and carried out for the sole purpose of self-evaluation and improvement. As such the primary aim of benchmarking is to make comparisons based on actual evidence. Some examples of benchmarking go beyond simply making comparisons with peers and encourage “outside-the-box� thinking. This is done whereby the benchmarking process provides the data and identifies the areas that need to be changed in order to achieve certain strategic objectives (see Hacker and Kleiner, 2000). Benchmarking does not conflict with other process and product improvement systems but rather complements them.
I.2. Why Do You Do Benchmark? There are a number of very different reasons as to why an organization may wish to carry out a benchmark exercise. One of the first examples of formalized benchmarking is from the late 1970s when Xerox was experiencing serve competition from low cost manufacturers who in some cases were producing superior photocopiers. In response, Xerox decided to carry out reverse engineering and identify the best practices. Xerox is reputed to continuously benchmark over 200 competitors so as to ensure that its products, processes and services are at the leading edge of technology and innovation. There is actually no clear time to carry out benchmarking however good practice suggests that it needs to be carried out continuously at regular intervals. The importance of continuous benchmarking is that the company becomes regularly updated as to which organization is the best in that sector. This also provides continuous data for the organization to change or improve the process. Some of the reasons as to why an organization may carry out benchmarking are as follows:
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n Declining performance or increasing performance by competitors. n Poor customer satisfaction and even a lack of knowledge of what they ex-
pect from the company. n The need to understand the methods and practices required to reach new
goals or performance levels. n Adopt best practices. n Develop an innovative organizational culture. n Encourage creative thinking within the organization. n Carry out a competitor analysis. n Increase the speed of process improvement. n Identify emerging technologies.
I.3. Principles of Benchmarking The most important principle of benchmarking is to gather information either internally or externally regarding a functional area of work using one or more metrics as a quantitative basis for comparison. These metrics are then used to identify the leaders within the functional area or even sub-areas. The metrics allow for a comparison to be made with the benchmarks. In doing so, benchmarking seeks to answer two important questions, namely: n What alternative process/service/product attributes exist compared to that
of the company? n How do these alternative process/service/product attributes compare to
that of the company and what risk to they pose? The second question is extremely important as it allows benchmarking to serve as an early warning indicator of future problems. Take for example, the case of Blockbuster which in the 1980s and 1990s was an international video hiring library. However, the company failed to correctly identify the risk posed by online videos and now no
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longer exists. Therefore, being able to understand and appreciate the risk posed by competitors allows a company to remain relevant. Meade (1998) argues that the efficiency of benchmarking rests on the ability of the company carrying out the exercise to identify appropriate benchmarks and metrics. Assuming that this is done then benchmarking can: 1. Improves internal practices, services and/or products. 2. Allows the organization to learn about current best practices globally. 3. Allows the organization to increase the speed of development and improvements. 4. Contributes to continuous quality management. 5. Promotes new and innovative thinking within the organization. 6. Allows the organization to collect performance data. 7. Focuses on outcomes and the processes leading to them. 8. Involves the adaptation and adoption of best practices. 9. Allows the organization to set specific targets. Source: Meade (1998)
I.4. Why Carry out a Benchmarking Exercise? Perhaps one of the most important reasons for conducting a benchmarking exercise is to highlight problem areas and where the potential for improvement can take place. Also, the benchmarking exercise can help an organization to change. The process of carrying out benchmarking allows the organization to prioritize areas for change (see McKinnon, et al., 2000). Another important benefit of benchmarking is that it allows the organization to ensure that it is on track in terms of making the required changes. However, this is only possible if benchmarking is carried out on a regular basis. In doing so, benchmarking allows an organization to see which of its
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innovations have made a difference to its performance. Some organizations have actually used the benchmarking process to collaborate with other firms (see Epper, 1999).
I.5. Criticisms of Benchmarking Benchmarking is not without its critics who argue that in some cases it can be an expensive exercise and its scope needs to be clearly defined. All too often benchmarking is carried out without adequate planning or the individuals involved receiving the correct training. Also, simply comparing with peers does not lead to real or disruptive innovation. In many cases organizations tend to adopt or adapt practices that they see taking place instead of developing breakthrough innovation. Even if the organization is committed to carrying out a proper benchmarking exercise it may not be possible to identify industry leaders. There are occasions when it is truly impossible to know who the best is in any specific area. In some cases the data across organizations may not be comparable because of differences in reporting conventions, market regulation etc. which make the results unreliable.
I.6. Types of Benchmarking There are a number of different types of benchmarking exercises each being suitable for a particular situation or purpose. The three most common types of benchmarking exercises are as follows: 1.
Sector benchmarking: this is whereby a particular functional area is compared against other organizations in that sector. These can be further subdivided into: a. Competitive benchmarking: this is where comparisons are carried out against direct competitors. b. Industry benchmarking: this is where all the firms in the industry are used as comparisons.
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2. Generic benchmarking: this is whereby comparisons of processes and practices are carried out regardless of the industry. A typical example of such a benchmarking exercise is customer service whereby comparison can be made with the best regardless of the sector. 3. Best practice benchmarking: this is whereby an organization may select the best comparator and benchmark itself. A typical example is the World Bank Ease of Doing Business Rankings whereby the best forming location is selected as a comparator. 4. Standards-based benchmarking: this is whereby the standards set by an accreditation body such as International Standards Organization (ISO) or a professional organism are selected as a comparator. 5. Criterion reference benchmarking: this is where a criteria is developed internally within the organization as a comparator. 6. Qualitative benchmarking: here the aim is to learn about differences in a qualitative manner and hence be aware of the choices and priorities of competitors. A typical situation whereby qualitative benchmarking may be used is to examine the complaints process of an organization. Of course, an organization will be interested in quantitative comparisons such as the number of days taken to resolve a complaint but also the manner in which it was carried out. 7. Process benchmarking: this is where a particular process is benchmarked with firms from within the industry. 8. Performance benchmarking: this is whereby the products and services of an organization are compared to its peers. 9. Strategic benchmarking: this is whereby the strategic direction of an organization is compared to its peers. 10. Internal benchmarking: this is to compare one department or section within an organization against others.
The above different types of benchmarking exercises can be categorized into three groups, namely, internal, external and best practice. Each category of benchmark has its own advantages and disadvantages as shown Figure 1.1
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Figure 1.1. Categories of benchmarking and their relative merits Type INTERNAL
Description Carry out comparison between departments or sections within the same organization.
EXTERNAL
Comparisons with external organizations.
BEST PRACTICE
Comparisons carried out for "Best" Practice in key areas.
Advantages • There will be a common language/culture/system. • All data should be available internally. • Existing lines of communication exist. • There is no threat of privacy of data. • A good way to train staff and identify weak departments or sections. • Cheap and fast to conduct. • If carried out in the same sector then there is considerable comparability. • Sector-based data is relatively easy to obtain. • Allows to obtain a better understanding of the industry. • Ability to learn across sectors and make huge improvements. • External focus ensures a better understanding of market developments. • Removes blinkers.
Source: Author
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Disadvantages • There is no external focus. • May foster compliancy as there is no real market measure.
•
•
• •
May not expose the organization to breakthroughs taking pace in other industries which can impact its future performance. Competitors less likely to share information.
Needs to be carried out frequently. Expensive and can take time.
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I.7. When Do You Do Benchmark? There are different reasons as to why an organization may use benchmarking. Some of the common ones are as follows: n The management wants to be at the leading edge of innovation. n The organization wants to understand where its process/service/products
are placed compared to competitors so as to make a change. n To understand and capitalize on the changing dynamics of industry. n The organization wants to achieve performance excellence through conti-
nuous improvement. n The organization is failing to meet the needs of its stakeholders.
I.8. Benchmarking Is Not… What? It is important to understand the benefits of benchmarking but at the same time to be aware that it is not a “fix” for all the organization’s problems and failings. Also, benchmarking is not a quick solution but requires a commitment from the organization in terms of time and resources. Some of the common misconceptions of benchmarking are listed below: n It’s a quick recipe book. n It is able to solve all the organization’s problems. n It’s a one-time activity. n The sector comparisons are already available in the internet.
I.9. Expected Results, Benefits and Pitfalls from Benchmarking Benchmarking provides organizations with numerous benefits some of which are: n Identifies areas of activity that need attention or improvement. 16
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n Showcases the strengths and weaknesses of the organization in compari-
son to others. n Allows the company to become aware of emerging technologies as well as
threats. n Provides the organization an alternative set of performance measures. n Promotes innovation.
The American Productivity and Quality Centre study of thirty organizations found that the average first year returns on a benchmarking exercise were US$76 million. Among the 40% of the lowest returns the payback ranged from US$1 million to US$9.9 million. On the other hand for the best performers the payback was as high as US$189 million. The payback tended to be in reduced costs, increased productivity and reduced cycled time of operations. The key pitfalls of benchmarking are largely to do with the methodology or approach. Some of the common pitfalls of benchmarking are as follows: n There is no commitment from top management. n Lack of planning due to the misconception that the organization can simply
collect data and compare against comparators. n Not linking a failure in performance to understand the cause. n Failing to compare apples with apples. n Selecting easy and convenient measures instead of those that matter. n Failing to communicate the aims and objectives of the benchmarking exer-
cise to internal stakeholders. n Not prioritizing and seeking to make all the changes at once.
I.10. Benchmarking Methods Although different organizations use alternative forms of benchmarking methods they can nevertheless be classified into five broad phases, namely planning, data collection and analysis, integration, action and maturity. 17
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I.10.1. Phase 1: Planning All successful benchmarking exercises need to start with the planning stage which can be broken down into two components. First, planning the project and second forming the teams. In the case of the former, the essential tasks are to understand the aims and objectives, identify the strategic items, the benchmarking methodology and identify the critical success factors. In the case of forming the teams it’s important to select the most appropriate members and ensure that they are trained. Also it’s important that a benchmarking schedule is developed so that all team members are aware of what is required and when. Good examples of benchmarking also develop a code of conduct which incorporates the legal aspects as well setting the ground rules of the activity, professional ethics and confidentiality. The planning stage also involves selecting and defining the products/services/processes to be benchmarked during the exercise. This is in addition to developing the purpose for the benchmarking exercise and identifying the team leaders. In some cases it may also be important to state the deliverables along with the documentation that will be provided at the end of the exercise.
I.10.2. Phase 2: Data Collection and Analysis The first step to data collection is to understand the organization’s own process then to carry out extensive research in order to identify the best benchmarking comparators and then gather the information. In analyzing the data one needs to understand the relative performance as well as the reasons for the differences. Ideally, there should also be a solution proposed that will assist the organization to bridge the gap between its performance and that of the best in the group. An important aspect of data collection is to: n Identify appropriate comparators that are the best-in-class processes. In
some cases it may not be necessary to have the world’s best example.
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n The comparators need to have a proven track record that shows they are
the leading examples in the product/service process and should not be one period winners. Logically, the comparators can be any group of benchmarks that the organization wishes to compare itself against. Therefore, the secondary research is extremely important to correctly identify the best comparators. This aspect of the activity tends to use databases, industry or trade publications, government agencies, annual reports, seminars and conferences, networking, professional organizations and books. As such the aim of the secondary research is to obtain information regarding the top performing comparators. Identifying the comparators is only the first step and the next stage is to develop the measures that will be used. Essentially, there are two types of information, namely quantitative and qualitative. The former are useful to evaluate certain aspects such as cost, sales, time etc. On the other hand, the latter refers to aspects such as methodology, philosophy of operation, organizational focus, procedural detail, and personnel training. Once the comparators and metrics have been decided upon the next stage is to collect the actual data. Interestingly, in any data collection process one needs to recheck whether the data collected meets the needs of the benchmarking exercises. There are instances where the data collected does not meet the needs and certain aspects of data may need to be recalculated. Also, different companies may produce the information in different formats using various units so all the data will need to be normalized. For example, one company may provide data in kilograms, while another in pounds and yet another in tons and all this needs to be brought into a common format. Also, it’s important that comparisons are made using the same variable i.e. apples are being compared to apples. While making the comparisons of the organization against the comparators it’s important to understand the enablers—this is, what allows the comparator to be the best in the group? It is through understanding the enablers that the organization can develop a new process to allow it to achieve the 19
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improvement goals. In some cases the enablers can be ranked to understand which has the largest impact on performance.
I.10.3. Phase 3: Integration Once the analysis has been carried out and documented it needs to be communicated to the internal stakeholders. The usual type of report that is produced has the following areas of coverage: overview of activity; issue or processes to be benchmarked; reasons for subject choice; goals of the exercise; results; list or illustration of gap analysis; details of best practices; methodology used; recommendations for improvement with action plan; future activities and perhaps some level of expected outcomes from the changes. It is important to appreciate that the results need to obtain acceptance. There are many ways in which acceptance can be obtained through first communicating findings. In fact, the communication aspect has to be ongoing so that internal stakeholders are not surprised by the findings. Some benchmarking exercises put communication milestones so that stakeholders are routinely updated at each point of the study. Once the study has been accepted one needs to develop an implementation plan followed by establishing a steering committee in order to champion the plan. Once the plan has received initial approval one needs to obtain approval for the resources required to carry out the changes.
I.10.4. Phase 4: Action In this phase the benchmarking exercise seeks to implement its solution or action plan for change. First, the goals for the change need to be agreed, a budget established, the change process agreed and also the impact needs to be measured and communicated.
I.10.5. Phase 5: Maturity In this phase the benchmark lessons are learnt and the cycle repeated on a regular basis so that there is a process of continuous improvement. 20
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SYNTHESIS OF THE UNIT This unit has sought to explain the principle of benchmarking which is to compare an organization against a group of comparators which are assumed to be the best in the group. The objective of benchmarking is to make either an internal or external comparison. An internal comparison is to select the best department within an organization and compare it to others. In the case of an external benchmark the aim is to identify and compare against other organizations which may be in the same industry or not depending on the objectives of the exercise. Benchmarking is an excellent tool but it’s important to note that it is a quick fix for all the organization’s problems. To be carried out correctly benchmarking needs to follow five important steps.
Bibliography n Bogetoft, P. (2012). Performance Benchmarking. Springer Publications. n Coers, M. and Raybourn, C. (2001). Benchmarking: A Guide for Your Journey
to Best-Practice Processes. Passport to Success Series. American Productivity & Quality Center. n Epper, R. M. (1999). “Applying benchmarking to higher education: Some les-
sons from experience.” Change, 31(6), pp. 24-31. n Meade, P. H. (1998). A guide to benchmarking. Dunedin, New Zealand: Uni-
versity of Otago. n Stapenhurst, T. (2009). The Benchmarking Book. Routledge.
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UNIT 2 GAP ANALYSIS
Learning Objectives At the end of this unit learners should be able to do the following: n To understand what is meant by gap analysis. n To be able to conduct a gap analysis and produce the appropriate reports. n To be able to use the appropriate gap analysis tools.
II.1. The Importance of Gap Analysis An important aspect of benchmarking as discussed in the last unit is to compare the organization against comparators. However, when making this comparison one invariably also arrives at the level of difference between the organization and that of the comparator commonly referred to as the gap. More formally, gap analysis is the process of comparing actual current performance with either a predefined benchmark or some form of potential or desired performance. Gap analysis can also be viewed from the perspective of frontier analysis whereby the inputs are known to lead to a certain level of output. Therefore, any deviation from the expected level of output is considered as the gap which theoretically can either be positive or negative. As such gap analysis identifies areas which require an improvement. One can also
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conduct a market gap analysis which implies identifying the gap between the products or services currently available and what the consumer demands. In this case the gap analysis allows the company to develop new products and services. Figure 2 illustrates the principle underlying concept behind a gap analysis whereby the starting point is the benchmarking exercise which identifies the best practices. This allows the organization to determine the analyzed gap based on the difference between the current situation and the best practices. From here the organization can determine its priorities and therefore the improvement plan. Figure 2. The Gap Analysis Step 1 Current Situation Assess the current situation in light of making comparisons with the best in the group.
Step 2 Understand the Gap Identify the weak areas or gaps.
Step 3 Adopt the Best Practices Develop the priorities as far as the weak areas are concerned and construct an improvement plan.
Source: Author
II.2. Performing a Gap Analysis There are a number of different techniques that can be used to highlight the current gap as shown below.
II.2.1. Matrix This is whereby two parameters are used which can lead to the construction of a matrix as a result of which comparisons are made and the gaps identified. Figure 2.2 illustrates an example of a matrix analysis whereby the first parameter is the strategic parameter and the other axis the gap.
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Figure 2.1. Matrix Analysis
Source: Author
II.2.2. Spider Diagrams A method by which information is organized in a two dimensional manner so as to highlight relative differences. Figure 2.2 illustrates a spider chart which has the rating on the central axis and the green line shows the benchmark while the blue is for the company. The difference between the blue and the green lines shows the gap. There is no limit to the number of comparators that one can use in a spider chart.
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Figure 2.2. Spider Chart
Source: Author
II.2.3. Line Chart This is a standard technique where information is plot as dots and then connected to form lines. Figure 2.3 shows a typical line chart whereby the blue, red and yellow lines refer to the organization and the benchmark. The horizontal axis shows the parameters and the difference between the lines highlights the gaps.
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Figure 2.3. Line Chart
Source: Author
II.2.4. Root Cause Diagram This chart is called a fishbone because it looks as such. It is drawn as a cause and effects from this. Figure 2.4 illustrates the root cause diagram.
Figure 2.4. Root Cause Diagram
Source: Author
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SYNTHESIS OF THE UNIT Gap analysis is a process that derives from the process of benchmarking. The benchmarking process as described in in the last unit allows the leaner to make a comparison with the best in the group. The gap analysis goes to the next stage and helps learners to determine the level of gap and how to illustrate it.
Bibliography n Beane, W.E. (2013). Mind The Gap!: Analyze and Improve Performance. Create
Space Independent Publishing Platform. n Franklin, M. (2006). Performance Gap Analysis. Association for Talent Devel-
opment.
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UNIT 3 LEAPFROGGING
III.1. Leapfrogging Leapfrogging allows an organization to understand its current position compared to the benchmarks and then make a radical jump into the first position. The concept of leapfrogging was first discussed by economists such as Fudenberg, Gilbert, Stiglitz and Tirole (1983) who argued that under certain conditions a new entrant can actually jump ahead of more established competitors. The usual argument for leapfrogging is that leaders within a sector or industry become complacent and feel that there is no need to innovate as they are earning sufficient returns. However, new entrants or even weak performing competitors have a greater need to innovate to survive and hence in many cases have no alternative but to leapfrog. In the process of leapfrogging the former established competitors become displaced and now they need to leapfrog in order to survive. Figure 3 illustrates the principle behind leapfrogging.
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Figure 3. Principle of leapfrogging
Source: Author
Brezis and Krugman (1997) used the concept of leapfrogging to argue that established players are committed to an existing level or type of technology whereas new players do not have such restrictions. Therefore, new players can adopt the new technologies and hence make a leapfrog jump.
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SYNTHESIS OF THE UNIT This unit builds on the knowledge acquired in the last two units and shows how a new or weak performing IPA can make the jump become the best in the group. The most important aspect here is that even if an organization is a leader it can still make a jump so that it gets further ahead of its competitors.
Bibliography n Kaplan S. (2012). Leapfrogging: Harness the Power of Surprise for Business
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