The Strategy Alignment Model (Part 3): Benchmarking for Competitive Advantage

e’re not getting what we need to out of these real estate benchmarks,” said my client, Scott Weas of SC Johnson, almost 10 years ago. What really bothered Scott was his perception that most of the benchmark information available for our planning efforts had little direct relevance to the core business and the strategies developed by company leadership.

       
This final article in a three-part series on the Strategy Alignment Model focuses on the Benchmarking Component, which challenges many of the commonly held beliefs about best practices research. The first piece (Site Selection, January 2002) featured the Content Component, a tool for directly aligning real estate with core business strategies. The discussion emphasized a methodology for measuring real estate strategies in the context of organizational outcomes, like mission and vision, customers and markets, products and services, distinctive competencies and values and culture.

       
The second article (Site Selection, March 2002) established the Process Component as a flexible framework within which content can be collected, analyzed and communicated. All three components are based on seven guiding principles, which appear in Figure 1. The emphasis of this article is on Principles 6 and 7.

       
Principle 6: Benchmarking should be focused more on strategy-specific issues and underlying qualitative practices and less on typical quantitative, generic, statistical comparisons.

       
Virtually every organization we serve is interested in comparing themselves to other best-in-class companies. Several of the most commonly requested real estate benchmarks are:

• square feet per person,
  
• fixed asset and operations costs per square foot and per person,
  
• churn costs,
  
• percentage of open versus enclosed offices and
  
• number of office standards and the basis for assignment.
  

       
As useful as these and related measures are, they really represent simple indices that only begin to tell a story–actually, the beginning and the end, because most real estate benchmarks are applied at face value with very little, if any, exploration of the core business strategies
and practices that drive them.


       
As an alternative, the Strategy Alignment Benchmarking Component is comprised of a three-step approach that is designed to take people beyond generic to organization-specific best practices. An overview of the three steps is applied to a simplified version of the Process Component in Figure 2.

       
Step one is the traditional comparison of existing real estate resources to external benchmarks, for which we have developed an extensive database from Fortune 1000 companies. This first step establishes a broad baseline on which to build.

       
It’s the second step, though, where the hard, value-added work really begins. On a project for a new headquarters facility, SC Johnson leadership had defined a core business strategy of “engaging customers in product development” (see the January article). One of the key real estate responses was to develop “dedicated customer work areas and tools at headquarters”. Arriving at that solution involved extensive benchmarking of SCJ competitors and other best-in-class companies. Our work emphasized the elements of each company’s published strategy and exploration of how their facilities were designed to support it.

       
In the second step of the benchmarking process, 16 companies were reviewed, with four having comparable strategic profiles. From the four companies, 35 real estate ideas were generated, with seven specifically addressing ways to engage customers in product development. The ideas were not simply borrowed and applied verbatim to SCJ. Instead, underlying practices and processes related to product development, customer satisfaction, sales channels, communication, culture and the like were used as knowledge to help craft strategic criteria specific to SCJ.

       
Once the strategy had been developed, a series of planning alternatives were generated and evaluated, and eventually, a single direction was selected. The third and final benchmarking step involved using best practices to help develop measures for the strategy, which, in turn, became the qualitative and quantitative criteria for selecting a plan to implement. As noted in the first article, several concepts were employed to measure customer involvement in product development, including a 10-percent increase in customer retention, and 50 percent of SCJ’s key customers were to use defined areas at headquarters two to three times per year.

       
From steps one to three, dozens of traditional, generic benchmark indices were refined to a few strategy-specific, focused best practices critical to what SCJ was attempting to accomplish as a business.

       
Principle 7: Benchmarking should be used to achieve competitive advantage rather than to simply copy and catch up.


       
This is not so much a philosophical statement as it is a reinforcement of how benchmarking can best add value to real estate planning processes. Earlier, I questioned the viability of simple comparisons, like sq. ft. per person, unless you understand the core business and real estate components that comprise that statistic.

       
Equally dubious is advocating the universal application of benchmarks that have achieved the status of “cutting-edge” practices or “industry trends”. For example, a frequent discussion at conferences and in numerous publications is a trend toward open office settings. Too often, this concept is discussed as a magical step of competitive advantage for everybody.

       
In reality, nothing could be further from the truth. The need for more or less office enclosure is driven by core business strategy, group workflow, individual job functions, existing real estate resources, entitlement and cultural considerations that are unique to each organization (see Figure 3). Our experience suggests, for example that:

• There are seven core business strategies that are most often associated with being drivers of the degree of enclosure for overall group spaces and individual offices.

• There are eight workflow types that describe how groups of people work with one another, from those that are very separate or independent, to interdependent, collaborative teams.

• There are 16 functional job types that define the individual activities people perform in their offices, including required levels of speech and visual privacy.
  

       
Figure 4 depicts an overview of the eight group workflow types that we consistently find across most of corporate America. Each brings with it specific facility-planning implications and strong suggestions for the degree of office enclosure — especially when considered in conjunction with all of the factors in Figure 3. Together, these qualitative benchmark descriptions serve as process facilitators that help develop an office strategy that yields competitive advantage unique to each organization.

       
In other words, competitive advantage is not about copying the latest “hot” trend, but on applying best practice knowledge to the shaping and measurement of an organization-specific strategy.

       
The three components of the Strategy Alignment Model — Benchmarking, Process and Content — have been developed and refined over the past several years on more than 100 projects. These integrated components can be used on virtually any project to frame the key planning issues in the language of business and define real estate in the context of organizational outcomes.