BENCHMARKING IN DISRUPTION ECONOMY

A METHOD OF PERFORMANCE IMPROVEMENT

TROUGH REINVENTING INNOVATION
Ionica Oncioiu
Titu Maiorescu University
ionicaoncioiu@yahoo.ro

Alina Alecse Stanciu

1 December 1918 University
alecse.alina@gmail.com

ABSTRACT

The present economic environment is challenge us to perform, to think and re-think our
entities strategies in according with a new economic world characterised by volatility,
uncertainity, complexity and ambiguity and with new economic concepts as: circular economy,
sharig economy, scarcity of resources, environmental crisis, green growth, globalization 2.0.
Even if we are employees or entrepreneurs, the pressure of Digital Era and the technological
convergence on the basis of Industrial Revolution 4.0, the rise of artificial intelligence
(machine) and augmented intelligence (machine+men), will re-shape the economic
environment in which entities will soon have to try to operate sustainable and successfully. The
entities will impove their strategies and will apply tools and methods, in order to raise the
quality standards, market positioning, gaining new markets and disrupting. A very powerfool
method, Positioned in the top 5 best management tool from 2010 until the present used by
entities in disruption economy is Benchmarking ., Benchmarking is a very powerfool tool also
for the start-up’s or mature entities. This article present in the framework of positive scientific

current our point of view of how benchmarking and accelerated innovation co-work to change

the business climate, improving the entities performance in the disruption economy.

Key words: Benchmarking, Accelereted Innovation, Disruption Economy.

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 INTRODUCTION
In the current context of disruption economy, the entities must be focused, adaptable and
flexible at the demands of an unfriendly competitive market, applying a continuous and
systematic process of comparing products, services, processes and outcomes with other
entities. The goal is to improve outcomes by studying in detail, identifying, adapting and
implementing best practice approaches of the top entities in the industry and use it as
benchmark. Benchmarking it is an ongoing process to measure one’s practice and to find the
best way to reduce costs and achive business goals, which allows managers to see clearly how
the business have change over time and help them to compare their competitor’s rates of
success with their own. Disruption economy is the perfect gound for innovation, because
“disruption is directly connected with eruption”1 : the weaknesess and the threats are countered
by opportunities and strengths in the present competitive economic landscape. The essence of
the disruption economy is the power of rethink, rework and reorder the entity, trought
benchmarking process in order “to end X activity and subsequently create Y” by reinventing
innovation.

BENCHMARKING - DISRUPTION TOOL

The Benchmaking method was first used in a quatitative approach, to compare the
production cost with those of competitors in the same activity sector. In the early ’80’s,
Benchmarking focused on comparing similar functions in different entities. The advantage of
this approach was to moderate the competitive aspect and provide opportunities for learning,
sharing knowledge about a particular activity with the goal of improving the studied field. First
used and implemented in Xerox Company, benchmarking was defined in the ’80’s by David
Kearns, Executive Director, Xerox Corporation as: “a continuous process of measuring
products, services and practices against the toughest competitors or those companies
recognized as industry leaders”.

Later, the benchmarking evolved knowing an qualitative approach, because the method
became the most relevant for a continuos quality improvement in any sector. In 1994, Kleine
associated the benchmarking with the performance: “an excellent tool to use in order to

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identify a performance goal for improvement, identify partners who have accomplished these
goals and identify applicable practices to incorporate into a redesign effort.”

In the last 20 years, when the global economy required the flexibility and adaptation of
the entities and under the pressure of new digital era, the importance of benchmarking as
management tool increased, positioning benchmarking as “ a key component of business
excellence - bringing greater awardness of benchmarking to leading organizations around the
world.”3 Is the time when benchmarking method has come to a new approach of effiency,
performance improvement and disruption tool.

New ideas are developed trough innovation and entities focus on critical capabilities
building strategic advantage in order to bring business added value and disrupt. The entities
performance is improved by “tailoring and incorporating best practices into their own
operations - not by imitating, but by innovating”4. This approach was possible applying
bechmarking to any product, process or business, focusing on 4 cardinal points: time
management, quality, cost and customer satisfaction. The result of this new approach was the
innovation, the capacity to compare any business operation with the competitors and rethink
the entity process in order to increase the profit, the customer satisfaction and loyality and to
reduce the costs. According to Global Benchmarking Network (GBN), “the main value added
from benchmarking compared to other improvement tools is to learn how to improve from
others.”5

In the article “Benchmarking sustainability performance: the next step in building

sustainable business models”, Elliot Maltz, Henry H. Bi and Mark sustained that “developing
sustainable business models is becoming an increasingly important strategic issue, and
benchmarking can assist a company in setting goals”. Until the present, benchmarking, as
management tool was used by entities to: improve performance - developing new methods of
operational efficiency and products design; understand relative cost production - and new
opportunities for improvement; gain strategic advantage and to increase the rate of
organizational learning - bringing new ideas and encourage the experience sharing.

In the current of economic disruption, Benchmarking is related to innovation.

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 Quest 1: Considering this hypothesis, the question is:
“ Is prepared the entity of the future for breaking the rules in order to perform?”

INNOVATION & PERFORMANCE - BETWEEN Q&A (QUESTIONS & ANSWERS)

Innovation is a complex long-term process who involve multiple activities, interested parties
and resources with the final goal a “new dimension of Performance” (Peter Druker). According
to Innovation.cc, is a process related with the “New”, because to be innovative is necessary to

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use New Technology and New Resources, to apply New Knowledge, in order to obtain New
Products or New Service. If we “connect dots” as Steve Jobs use to inspire us, the Performance
and is directly connect with Innovation and and for an entity to be innovative must be willing
to perform and disrupt market and economies applying new methods to the madness of
originality and sometimes without borders.

The question is hard and rutless for any entity and the answer is of decisive value. For the
present and the future entities the real challenge before profit is to discover the real needs of
the customers through studies and surveys and in according with that to re-build their strategy,
their objectives, their services and products, their culture. The key between the real customer
expectations and needs and the economical cost which they pay is the Innovation. A dual
process, which involve both economical and social environment.
In economical environment Innovation is the equivalent of the process by which the entities
develop and maximize the impact of new ideas, informatios, creativity and resources to create
a new useful products and services with another value for their customers. The present
economy and the economy of the future is service-orieted and high speed digital. To conquer
the customers and new markets is vital to develop a high speed of Innovation inside of the
entity.
In social environment, the Innovation is a link between Evolution and Revolution. Evolution
who increase the customers purchasing power trough the diversifying consumer demands and
expectations, and Revolution of the methods, technology that will help the entities to disrupt in
order to respond at this new demands and expectation of the consumers.
To answer at that quest and taking into consideration the duality of the Innovation process
we consider that a possible solution for emerging in this new economic environment is The
Acceleration of Innovation linked with the Benchmarking.
We support this answer with The Vision of J.P Kotter in his recent book “Accelerate - to
build strategic agility for faster-moving world (Kotter, J.P., 2014. Accelerate (XLR8). Boston,
Massachusetts: Harvard Business Review).
The solution for achieving the Performance suggested by J.P.Kotter is a network named
Dual Operating System, who act like a “solar system for the entity and generate Agility and
Speed”, in order to benchmark. 8 satellites named by J.P.Kotter “ The Accelerators”: Big

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 Quest 2: It is necessary for the entities to develop a Map of Innovation that will help
them innovate?”

Opportunity Sense of Urgency ; Coalitions ; Change Vision ; Volunteer Army ; Removed

Barriers - Action ; Short Terms Wins; Sustained Acceleration and Change Inserting have the
mission to lead the entity to Performance and are directly related with the Benchmarking
process.
In our opinion we consider that from these 8 satellites, the more connected with the
Innovation Process and Benchmarkins are: The Opportunity Sense of Urgency - the entity
realize the need for change through Benchmarking process, even if we consider the entity as a
whole, an activity, a process or the outcome of these 2; The Change Vision - as the result of
the coalition represent the Action Code to achive the strategic objectives with agility and speed
and finally the Action by Remouving Barriers - where the entity reveal the answer at our quest.
The Dual Operating System proposed by J.P.Kotter may be the best solution for the entities in
their desire to achieve their proposed performance standards, however is a process which
grows naturally, organic over time, by developing different version, starting with 1.0.
In the same time the present entity refocuse the activities, ousourcing functions, keeping
only the principal assets, the core of their business. A high rate of acquisitions and mergers
together with this focus has lead the increasing of concentration in the markets and different
industries. The new economy is circular, digital, service-oriented and high speed, transparent,
developed on the emerging technologies and disrupting traditional sources of competitiveness,
in one word Innovation. According to World Economic Forum and on the influence of the 4.0
Industrial Revolution, new technologies offer opportunities to transform the way entities do
business, because they develop new ways of creating value in a circular economy, for both
emerging and established businesses.

To answer at that question we must consider a multitude of variables related at the entity,
as: the localization of the entity, the industry, the size of the entity, the purpose of using this
Innovation Map, and others coming from the external environment: Globalization 2.0,
Environmental Crisis and the Scarcity of Resourses, Individualism and Value Pluralism,
Demographic Change, The Digital Era, Industrial Revolution 4.0, The Rise of Artificial
Intelligence and Machine Learning. In this turbulent economic environmet and the entities
search points of stability.

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Quest 3: Is the Innovation Process prepared to match each problem of the entity with an
strategic objectives in this economic Vortex, or it is an Illusion?”

Starting from the hypothesis according to which “Innovation is a complex process,based on

a collective effort, in order to solve a problem”, Greg Satell in his recent book “A Playbook for
Navigating a Disruptive Age” (G.,Satell. 2017. USA:McGraw Hill Education) introduce a new
term “ Innovation Playbook” and encourage the entities to develop this PlayBook inside of
them as a winning solution of the market ahead of competition.
According with Satell to build the entity Playbook is necessary to respect and implement 6
principles of Innovation process. For the entity to be innovative is necessary to activelly seek
out a problem that suits the entity capabilities, culture and strategies, in which Innovation will
find the solution, based on the strenght of the entity. Trough the Innovation process the entity
achieve his strategic objectives and in the same time the process bring culture added value. In
order to build the Innovation map is important to create a connection with the entity strategy
and strategical objectives. Every point of the Map must match with an strategic objectiv. The
way that we create is sustained by a collective culture with strong relationships and bounds and
the result is represented by the platforms in wich ecosystems of talent, technology and
information interconnect helping the entity to become and indispensable partner.
Taking in consideration the multiple variable mentionated above, G. Satell developed an
Innovation Matrix, 4 models of Innovation: Basic Research, Breakthrough Innovation,
Sustaining Innovation, and Disruptive Innovation.
In our opinion we consider that this Map of innovation is a key for the entities who offer a
powerfull approach for the developing of the strategy and help them to be ahead of the
competition and disrupt the marketplace, scalling their effort and conquer the digital platforms.

It’s a controvesial hypothesis in the preset time. Until now, we presented Innovation from
the positive trend perspective considering as a complex business process, very clear defined,
methodical, interconnected with reasearch and development structure, with rigurous activities
that can be reiterated and scaled up. We support our position with the affirmations of Fredrik
Erixon and Bjorn Weigel who consider in the book “ The Innovation Illusion - How so little is
created by so many working so“, that “the world is on the brick of an innovation boom”, one

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that will lead to a New Era of high economic growth. Western Economies are on the threshold
of fast-and-furious technological development.
But all these with one condition: that Innovation process translate from the lab in the
marketplace, othterwise is an Illusion.
By presenting the “intimate relation between capitalism and innovation” and using the
Schumpeter 4 stages of innovation: invention - innovation - diffusion and imitation , Erixon
and Weigel launches a Quest in order to understand how modern innovation actually contests
markets, or forces radical adaption upon business labor and gouvernments. Corporate managers
turn the entitiess into bureaucratic entities free from entrepreneurial habits making in that way
the capitalism predictable. The condition of a real market and the predictibility of capitalism,
bring us on the field of negative trends.
Erixon and Weigel introduce in stage the 4 actors as 4 forces that have made the economy
less prone to innovation: Gray Capital, Corporate Mangerialism, Globalization and
Regulations, forces who describe 4 horsemen of capitalist decline riding down innovation
before it has any chance of reaching the wider world.
The first horseman is Gray Capital: represented by anonymous corporate owners, such as
institutions and sovereign wealth funds, who have replaced the original risk-taking
entrepreneurs.

The second follows naturally in Gray Capital’s wake: institutional owners need predictibility
and security so they encourage Corporate Managerialism. Managers focus on meeting targets
and reducing uncertainty, while the potentially great rewards of high-risk innovation are
shunned.

Globalisation is the less predictable : high degrees of specialisation that it is difficult for
disruptive innovators to establish a presence. The globalization influenced the culture of
managerialism on two waves: first pushed the orizontal expansion an propped up business
volumes based on existing products sold in home and other markets and the second wave:
vertical globalization companies redrew firm boundaries and build global production networks
based on high degree or supply chain and value chain fragmentation.

Regulation, which has become so complex that the rules favour incumbents and deter
challengers. Regulations companies lost the interest for tansforming markets with big

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innovations, capitalism lost orientation. Today big problem is regulations that exacerbate
commercial innovation uncertainity and make companies less experimental and
entrepreneurial. Economic research shows clearly that the reallocation of innovation
investment due to regulatory distortion has considerable consequences for economies.
Regulation does not just influence performance of innovation and productivity, but migrates
into the micro level of corporate selection of managers and executives require them to be
related less to innovation and more to corporate managerialism.

CONCLUSIONS:
The rise of “new business models and new technologies must force the markets to adjust
through diffusion, adaptation, and imitation.” Even if the entities implement Dual Operating
System, PlayBook or they surveille the 4 horsemen of capitalism, the result of their action must
be the same for the entity: The Increasing of Performance. According to a survey from Bain &
Company (2017) 5 emerging forces act on the entity: scale and customer intimacy; professional
managers vs. mission-critical roles; assets vs. ecosystems; capital gets a reset; and Engine 1,
Engine 2.
In the present the scalling process is important. It will be in the future also, but with another
dinamic and with the advantage to abtain benefits without owning assets or capabilities. Big
data, algorithms, automated transactional activity, machine learning and human intelligence
from customere care will influence the entities to achive full potential, be competitive and
disruptive by using the benefits of scale and the benefits of customer intimacy.
The mission-critical roles will remain important, even if the automatization and outsourcing
will transform the future entity and reduce the professional managers. The Performance will
become transparent as a result of the entity Projects. Each project will have a team and a
budget, self-managed, coordinated by mentors with mission-critical roles.
The ecosystems have been developed based on the outsoucing made by the entities. From
noncore activities and extended to all components of the value chain, everything is outsouced,
offering to entities the advantage to shed assets and rent capabilities of others keeping the focus
on the core activities and using the other methodologies, customer scale and experience. In
that way, the disruptiveness platforms were developed, troungh the interconnection of
disintermediation elements, profit pool migration, speed, customer transparency, globalization.

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They become “critical pivot points in their sector”and have generated the classification of
entities in 3 types: The Platforms named Type 1, Outsourced Serices Providers - Type 2 and
Product and Serices entities - Type 3, who in the future will develop win-win pertnerships in
order to achive Performance and to create Added Value for customers. For an entity to perform
and be strong part of thi ecosystems is vital to rise the new leaders who understand this
opportunity, who value the importance of an partnership developed on the basis of fanancial
decisions before managerial and who is able to connect the accounting informations with the
circular economy and Innovation process.
The financial future of the entity will continue under the auspices of equity and debt
raising, but the difference is the flexibility of the capital. This trend is in line with a new
concept “the Stewardship”by approaching the investors with the entity strategy, time and
investments and also offering the possibility for the investors to invest in different tipes of
industries. In the future the investors will fosus on the project investments, creating new
ecosystems where the barriers between public and private ownership and the line between
equity and debt will blur. Public companies will act as investors and adopt private practices in
leading and private companies will protect the public sectors. The balance-sheet project-based
become funding source and to protect their wealth and that of future generation acting like
stewards, the investors “will invest in project rather the companies”.
Tha last emerging emerging force is related at the core of the entity: The Sustained
Innovation by creating Engine 1 and Engine 2 of the entity.Engine 1 is based on the core
activies and Engine 2 is the Innovation space, where the entities use all the resources to
capitalize the opportunities discovered in this turbulent environment.

In our opinion the development of the entity Engine 2 will be in the future the only solution
to obtained Performance in the VUCA World. In Engine 2, the process of Innovation is
reinvented, trought a vision, a start and an end point of this vision and trough the development
of an ecosystem formed by sequential actions where the hardware and software vertically
integrated. But the Performance is obtained only trough parallel operation of the two engines
The Engine 1 power is given by continuos improvements, risk assessment and financial
analisys, while The Engine 2 power is given by creativity, agility, the vision of seeing what
others can not see and top talent rotate between the two engines developing mission-critical
roles. To be a innovative entity must build Engine 2 under the umbrella of Engine 1,

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respecting the structure conditions, with separated budget and staff, where the “Resource
allocation will be a point of integration across Engine 1 and Engine 2, and will be continuous
and zero-based.”

BIBLIGRAPHY:

1.
https://www.forbes.com/sites/jeffboss/2015/11/23/5-things-you-need-to-know-about-the-
disruption-economy/#756469321e16)

2. Rigby, D.K., Management Tools 2015- an executive’s guide, Bain & Company Inc, Boston,
2015

3. Mann, R., Expert Point of view note - the history of benchmarking and it’s role inspiration,
Journal of Inspiration Economy, sept.2015

4.

5. GBN Benchmarking 2030

6. “Benchmarking sustainability performance: the next step in building sustainable business

models”, Elliot Maltz, Henry H. Bi and Mark, Journal of Public Affairs (2016)Published online
in Wiley Online Library(www.wileyonlinelibrary.com) DOI: 10.1002/pa.1606

1. Erixon,F. and Weigel B., The Innovation Illusion - How so little is created by so many
working so. USA: Yale University Press
2. Kotter, J.P., 2014, Accelerate (XLR8). Boston, Massachusetts: Harvard Business
Review
3. Satell, G., 2017, A Playbook for Navigating a Disruptive Age. USA:McGraw Hill
Education
4. .http://www.bain.com/publications/articles/firm-of-the-future.asp
5. https://www.weforum.org/agenda/2017/09/new-tech-sustainable-circular-economy/

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