By Peter Martin
I’m a big believer in benchmarking. Comparing your business’s practices and performance helps identify strengths and weaknesses. It can empower you with keen insights and guide you to greater success. But the way we normally go about benchmarking is flawed, and it needs to change, especially if you’re thinking about growing your business.
Too often, we limit our benchmarking to our own past performance, our neighbor’s or other farms in our state. We’re comparing our numbers against an average data set—and that’s not enough. Today, nobody can afford to be average. Your operation needs to be the best. Using these data sets can be powerful, but you have to dig deeper to figure out what the top performers’ numbers look like. That’s whom you should focus on.
Looking outside of agriculture to benchmark your operations can also be powerful. The best CEOs I know constantly ask questions. They’re always seeking to understand how other companies operate. Their thirst for knowledge leads them to best practices they can implement.
How can you do that? Identify every step in your business that generates profits, such as planning, planting, buying inputs, irrigating, harvesting and transporting grain. Ask yourself where you can improve performance by evaluating what the very best companies are achieving. Who’s outstanding? Is it a farmer you know or have heard about? Is it a company famous for its effective negotiation skills with vendors, smart use of technology or success with collecting on accounts receivable?
That’s the kind of benchmarking you should be doing: compare your processes against the best of the best and identify ways to adopt their practices. Looking outside of your “average” zone will take some digging. Google phrases such as “companies best at negotiating with suppliers,” “best trucking companies” or “best practices for fuel efficiency.” Your search might take you to companies such as FedEx or UPS to reveal how they manage their trucking fleets. Sure, their business model is different, but is there something you can learn from their processes?
Identifying and researching other businesses and best practices can be time-consuming, but you don’t have to do it all yourself. Engage your team members or key managers to explore ways to optimize your operation.
Progressive, growth-oriented CEOs seek to challenge themselves and their teams in order to break out of the mold and be more like companies that excel. Some people call this process “disruption.” One company in particular illustrates how disrupting a tired business model revolutionized an industry. In 2009, a small group of entrepreneurs launched a new business based on an app, smartphones and a network of drivers using their own cars. The new car-hailing service connected people with reliable rides through the use of data and technology—and it would send the taxi industry into a tailspin. That company, of course, is Uber, now worth an estimated $62 billion.
Uber’s new ideas and technology disrupted a traditional stale business. Its founders looked outside of the taxi industry and found better practices, innovations and networking technology to enhance a system that hadn’t changed in decades. It’s a concept that could work wonders for your farm operation or agricultural business, especially if you’re willing to look beyond your neighbors and the agricultural industry.
This column is not a substitute for financial advice.