In defining their innovation strategies, firms must be in a position to answer four questions about their competitors innovate resources compared to their own:
1) How do they compare in terms of size and comparison?
2) How efficiently are they used?
3) How effectively do we learn from their knowledge and experience?
4) How do we maintain our own innovative advantages?
In this context it is important to distinguish knowledge of what technological developments are being undertaken by competitors from knowledge of how the innovations can be made to work in practice. As we shall now see, the former can be obtained relatively quickly through information gathering activities, whilst the latter requires extensive investments of resources and time in benchmarking and learning activities. Finally, in the light of the evidence available to it, corporate management must evaluate the market position of its innovation strategy in the light of intentions and competencies of competitors and of the characteristics of its innovation in particular should it aim at innovation leadership or follower ship?
Large firms are surprisingly well informed about the technological activities of their competitors. According to a study by Mansfield large US firms typically known about rivals product development characteristics and plans within 6 to 12 months. There are numerous methods of obtaining information about competitor’s innovative strategies all of which are imperfect and some of which are of doubtful morality or legality. The sources based on publicly available literature are summarized. The range and ease of access to these and other sources have been increasing rapidly with development of the internet, with sites such as Yet2.com which are used by leading companies such as 3M, Boeing, Hitachi, NEC, Philips, Siemens and Toshiba to show case their technologies and intellectual property and more specialist patent databases such as Deplian.com
Comparison of Effectiveness through benchmarking:
Benchmarking goes beyond the routine collection of publicly available information. It consists of comparisons amongst competitor companies on specific dimensions of corporate performance beyond financial performance with the purposes of identifying and catching up with the best practice. The approach started in the 1980s when US firms found that their loss of market share to Japanese firms reflected underlying deficiencies in both manufacturing and product development. A pioneer was Xerox, who made systematic comparisons with Japanese competitors and found huge deficiencies in performance as measured by the frequency of assembly line rejects, defects per machine and the costs and time required for product development. The improvement resulting from conscious policies to overcome these deficiencies has led to both higher customer satisfaction and higher financial returns on assets.
In some cases groups of firms have funded academics and consultants to make the inter firm comparisons. Probably the best known and most influential has been the international motor vehicle programs at MIT. Its favorable conclusion in the late 1980s about the production efficiency in Japanese automobile companies compared to US and European counterparts had major effects both in mobilizing laggard firms to do better and in developing new concept- such as lean production compared to mass production – which are now common currency amongst both managers and academics. A Similar approach to benchmarking has been applied to the semiconductor industry in a program of studies at Berkeley.
In Europe periodic surveys of performance and problems in manufacturing have been undertaken since the 1980s. And later in 1993, Chris Voss and his colleagues at London Business School made detailed and comprehensive benchmarking surveys of manufacturing and design in companies in Britain and other European countries.
Source: Managing Innovation