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The Steps to Creating Benchmarks by Consulting Businesses

By February 17, 2021No Comments

February 2021

Benchmarks have historically been used by successful consulting businesses as part of their sales collateral and delivery methodology. One of the best known examples is PRTM, who started the activity in the 1980s, initially with their “Product and Cycle-time Excellence” (PACE) framework and latterly the co-development of the “Supply-Chain Operations Reference-model” (SCOR) with the Supply Chain Council. The business subsequently sold to PWC in 2011.

So, how should a small consulting business develop their own benchmark? Having observed both successful, and less successful, executions of this method, there appear to be three stages in the evolution.

  1. The Diagnostic Benchmark

This is the most common starting point, and one used by many. It may be used one-to-one with a specific client to identify performance shortfalls or shared and completed with multiple current and potential clients to identify areas for engagement. The key points on this are:

  • Focus in a very specific sector sub-set, and in an important functional process area. High-level and generic analysis will not lead to engagement with managers with deep domain expertise. Working in a narrow and important area gives you the opportunity to become the domain experts. It can often help if the area of focus is commercially not competitive between interested parties, such as regulation issues in the financial services or pharmaceutical sectors, where the topic is of joint interest to all.
  • Make sure you measure both inputs and outputs. The latter – such as growth rates, profitability, lead-times through a process, or cost per unit – are all important and what a company needs to deliver. However, they are often not very helpful in informing a company what it needs to do to improve them.   Make sure you also measure key inputs, often on a subjective and qualitative basis, identifying the links to the output the ‘things that need to change’ in order to achieve the desired outcome
  • If used as a 1:1 diagnostic, ensure that the outputs and report identify the changes that need to be implemented to improve the inputs, the expected resulting improvements in the outputs, and the link to the value of your support on the change programme to deliver the quantified benefits. This is about you having a clear ‘Value Proposition’.

 

  1. Building a Community

As you complete multiple benchmarks you will potentially build a reputation for understanding in your area of expertise.  The next step is your ability to move beyond one-off benchmarks to engaging clients in a regular annual review.

Commercially you are likely to be charging $25-50,000 per year, for which clients get to participate in the benchmark (self-assessment), receive a customised report showing their and others’ results, and attendance at an annual event where the results are presented and key industry issues discussed.

Whilst some businesses do operate just on delivering benchmark services – sometimes called roundtables – more often they are part of a consulting business’ revenues that then drive a network of sales opportunities in the area of expertise. A typical model is where 20% of the revenue comes from the benchmarking membership, and then 80% of the consulting revenue from benchmark members.  If what you are doing is valuable and well delivered, then you should be expecting to achieve a retention rate of well over 90% and there should be a halo effect building your reputation in the sector.

 

  1. Community Collaboration

A further step in this three-stage evolution – though it might not make commercial sense to move to a fully ‘collaboration revenue’ model for your business – is the point at which you are seen as the facilitator of working groups, engaging leading players in the industry, to work on areas of mutual importance. Here the participants have evolved from the need for comparisons of historical performance, but instead want to work jointly on issues that they all face and for which the industry will benefit from their resolution. Whilst there will be annual events for the membership, at which the areas for future focus are discussed, there is much more off-line activity supporting working groups set up to  address specific issues of interest to the membership community. Critical mass for membership is achieved when there becomes a Fear of Missing Out (FOMO) feel within the sector, driving companies to want to join and remain.

There will also be a change commercially and in terms of delivery. Firstly, the skill of those running the groups moves on from being the ‘sector experts’, to one of having the ability to facilitate discussions and stimulate conclusions and agreements from the leading professionals in the field. Commercially there is likely to be a step-up in fees, with annual membership approaching $100,000 per year, which can be achieved by consistently quantifying the benefits that members realise from participation. This can enable companies to withdraw entirely from consulting and focus solely on serving the communities they have created.

How far you go is entirely up to you, but there is no doubt that those who have started this benchmark journey, and done it well, have greatly enhanced the success of their consulting businesses.

If you would like to discuss benchmarks and how they could add value to your business then please get in touch on by phone +44 (0) 7860 442 715  or email bruce.ramsay@consultingmanda.co.uk