Industrial Company’s Innovation Strategy Based On Benchmarking Results

Abstract

This article represents the process of forming a sustainable development strategy of an industrial company based on the market environment research and benchmarking. This strategy is focused on the production of high technology products. We defined the conditions for a successful development of a company's strategy of innovative development. We proposed a scheme for converting the results of benchmarking into a company's strategy of innovative development. The article points out four stages of benchmarking, considers the main types of benchmarking (internal benchmarking, competitive benchmarking, functional benchmarking, process benchmarking). In this case, the studied companies can be competitors, but economic practice shows that it is also possible to obtain successful borrowings from those firms that operate in completely different industries, regions, markets, even in other countries, etc. The effectiveness of the technique under consideration depends on the correct organization of the data collection system in various fields of the open press, in the analysis of manufactured products, at exhibitions, in the position of a competing firm on the market, in the use of former employees of these firms, etc.

Keywords: Benchmarking, industrial company, innovation activity, innovation strategy

Introduction

The Japanese are considered to be the founders of benchmarking, who have perfectly learned how to copy other people's achievements. They carefully had researched European and American goods and services to identify their strengths and weaknesses, and then released something similar at a lower price (Bloxham, 2009). At the same time, the Japanese successfully transferred technology and know-how from one business area to another. The term «benchmarking» is close within the meaning to the Japanese term «dantotsu», which means «effort, concern, concern of the best (leader) to become even better (leader)» (Ellibee & Mason, 1997).

In the West, benchmarking began to be actively used in the late 1970s. In 1972 a consulting company PIMS, that studied the impact of marketing strategies on profits, determined that in order to develop effective behavior in a competitive environment, it is necessary to know the experience of the best companies that have succeeded in similar conditions (Epper, 1999).

During this time, the Japanese company Xerox began to look for the reasons for the sharp loss of its market share in copy machines. The company studied in details the experience of the Japanese company Fuji. The use of this experience allowed Xerox to reduce costs and increase labor productivity (Dunn et al., 2007). Since then, benchmarking has become part of Xerox's development strategy.

Problem Statement

(Amin & Amin, 2003)

Research Questions

The main problems of the current economic situation in Russia are achieving global competitiveness and ensuring sustainable development of high-tech industries.Their solution is associated with the development and implementation of a strategy of active innovative development for industrial companies. In this respect, an important role should be given to benchmarking, with the imperative of learning and applying advanced experience.

Purpose of the Study

Goal of research: to reveal the possibilities of benchmarking when developing a company’s strategy of innovative development.

Research Methods

The research is based on general systems theory and systems analysis, modern methodology of project management, theoretical foundations of general and innovative management.

• Areas of innovative activity.
• Ranges of this activity.
• The ratio of own and borrowed funds.
• Profit distribution for reinvestment in production, dividend payment and other purposes.
• Areas of investment.
• Sources of innovation (own developments or attracted from the outside, including benchmarking using).
• Rational proportions between innovative projects.
• Growth rate, timing of product change and technology of its production.

Findings

• Analyzing company's own business processes. Ideally, it is assumed that they are already thoroughly known, however, an operational analysis of production and economic activities will allow in due time to elicit so-called «bottlenecks» and propose measures to eliminate them.
• Studying other companies’ business processes. This task is much more difficult due to the existence of trade secret law, the patent system, etc. However, it is reasonably possible to analyze the available economic indicators and their dynamics using various information channels.
• Comparing your own results with the results of the studied companies. It is the simplest stage which realization is possible on the company's own resources.
• Determining the necessary changes, both quantitative and qualitative, to improve your own business processes. This stage is the most difficult, as it requires financial investments.

• Internal benchmarking. It is carried out within the organization. It compares the characteristics of production processes that are similar to analogous processes.
• Competitive benchmarking. It measures the company’s characteristics and its comparison with competitors’ characteristics. It conducts the research of specific products, process capabilities or administrative methods of competing companies.
• Functional benchmarking. It compares a specific function of two or more organizations in the same sector.
• Process benchmarking. It is an activity about changing certain indicators and functional features for their comparison with companies, the characteristics of which are perfect in similar processes.

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Conclusion

The reasons for the sharp popularity rise of benchmarking in recent decades are based on the fact that economic competition has become global, and most companies are beginning to realize the need for a comprehensive detailed study and subsequent use of effective management decisions of other companies for their own future success in the innovation field. In order not to be left behind their competitors, all companies, regardless of size and field of activity, need to constantly study and apply world best practices in all spheres of business activity and use them in developing an innovation strategy.

The knowledge about the best firms' working methods and the needs of buyers, collected in the process of benchmarking, is important information necessary for the company’s innovative development and ensuring its competitiveness. Thus, benchmarking allows companies to transform their activities in accordance with market’s requirements.

Acknowledgments

The work was supported by Act 211 Government of the Russian Federation, contract № 02.A03.21.

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