Industry Practice – Acceptable or NOT?
The ACCC (Australian Competition & Consumer Commission) recently lost a cartel case against three banks in the Federal Court. ANZ, Citibank and Deutsche were the three involved. As part of the media reporting of the story, many industry pundits were quoted as saying, “the case was against accepted industry practice.”
(*For my international readers, the ACCC is Australia’s competition regulator and national consumer law champion. Its charter is to promote competition and fair trading in markets and help ensure consumer rights. They monitor and regulate industries where there is little competition.)
This article raised an interesting question for me: “Is industry practice a desirable goal, something executives should strive for?”
My contention is no, in fact, it should be the last thing executives strive for.
The fact something is industry practice doesn’t make it right. Just because everyone else is doing it doesn’t automatically mean you should. I’m sure you have given your children similar advice. Does, “just because all your friends [jump off a bridge]/[take drugs] doesn’t mean you should” sound familiar?
I was recently the keynote speaker on a webinar hosted by ZAP (ZAP provides SaaS solutions for data management and analytics and has offices across the globe). The topic was, “Let data make you love your supply chain this Valentine’s Day”. It was essentially about how dashboards, KPIs and metrics can help build resiliency into your supply chain. During question time, one of the attendees asked me, “What role do you feel benchmarking against other companies plays?”
The answer I gave is similar to this industry practice topic as well. My response was:
- Benchmarks are created by surveying a cross-section of companies in different industries. Not every company in every industry replies or takes part in the survey.
- As a result, in general, what you are looking at is the average of the cohort who responded. Yes, you get a best that was achieved by this group but remember the average is made up of a number of participants whose performance is lower than that average number.
- There is nothing to say that there are not a number, potentially a large number, of organisations achieving significantly better results than the cohort surveyed.
- The best action you can take is to agree on the measures you want. Start measuring them and over time work on improving them. A culture of continual improvement is key here. (How to create effective dashboards is a topic for another newsletter.) Who knows, after a period of time of you continually improving your results against those measures, you may very well become the best in class.
This concept of not accepting industry practice also applies to the work I do with ERP systems. The ERP industry is full of accepted industry practices. The trouble is the ERP industry has a woeful success rate when you consider approximately 15% are successful. Following industry practice continually delivers a less than acceptable outcome, if not failure.
Improving the success rate for my clients is the main reason why I developed my proprietary methodologies for those embarking on their ERP journey. (More on this in subsequent newsletters.) It’s the reason I do things differently. If you want to know more about why doing it differently will dramatically reduce your risk of failure, call me.
So industry practice is not something you should strive for; you should strive for something significantly better. After all, isn’t that where your competitive advantage lies?