Reverse Benchmarking

You’re likely familiar with the concept of benchmarking. You look at what your competition does well, and the company that does it best becomes the “benchmark”. If your company isn’t setting that benchmark, it becomes your goal to become as good as your competitor at whatever you’re competing with. 

I first stumbled upon this idea in a podcast about the restaurant industry (think it was Danny Meyer, founder of Union Square Café in NYC). 

An example:

Say you’re opening a high-end restaurant with the aspiration of getting a Michelin star. You’re gonna have to deliver:

• Exceptional cuisine
• A wide range of curated wines, and sommeliers who make custom recommendations
• Ambiente, cutlery, dishes, all the things around it 
• Highly professional servers who bring experience from the best restaurants 

That’s the benchmark. But by just hitting those benchmarks, it’s unlikely that you’ll get a Michelin star – or substantially differentiate yourself from the competition. 

Enter: Reverse Benchmarking. 

Instead of looking at what other restaurants are doing well, you look at what they’re doing badly. 

For instance, if you prefer to drink beer instead of wine, your experience in most fine dining establishments will be rather … boring. Sure, they might have a beer on tap, or 2-3 different types in a bottle. But the beer selection doesn’t compare to the wine selection. 

90% of people won’t care. But the 10% who do care a lot. 

So what you do is to – in addition to the wine pairings – create a beer pairing, with a dedicated beer sommelier.

This is gonna blow a beer drinker’s mind, so when they’re picking a restaurant, they’ll bring their group to your restaurant over and over again. Plus, it’s different from most other restaurants – people will come by to check it out. 

Let’s put it into practice

Like most men, I’d love to have my own bar.

A gritty, down-to-earth bar where you can watch sports, hang out with your friends, in a chill environment.

Most of these down-to-earth bars in Berlin are pretty similar: outstanding tap beer, perfectly draught, old furniture, wood on the walls, lots of smoke inside. 

This is the industry standard. Now, my bar doesn't need to have smoking, but it should serve the general purpose of a down-to-earth bar.

Now, let’s take a look at what they’re not doing well: 

1. Smoking: I don’t smoke, and I’d much rather go to a place where there’s no smoke inside. Step 1: forbid smoking inside. 
2. Bathrooms: most bar bathrooms are disgusting. As a man, I don’t care too much about it, but I’d assume that women care more. Step 2: invest into highly renovated bathrooms that are cleaned every 30 minutes.
3. Male-to-female ratio: usually, there’s at least 80% men in the clientele in these bars. I can only hypothesize here, but I guess women aren’t as fanatical about draft beer, they dislike smoke and dirty bathrooms, and maybe don’t want to watch soccer all day. Step 3: invest into measures to make the place more attractive to women. 
4. Sports selection: I love American Football, but it’s not that easy to find a place that shows it. Most people won’t care, but the ones who do will become great customers with high CLV. Awesome. Step 4: spend on having a lot of programs, and allow guests to stream their own content by hooking up their laptop to the screen if nothing else is on. 
5. Snacks: most bars just offer basic snacks, if any at all. Always carb-heavy. If I’m drinking beer, I might wanna work on my protein consumption first. Maybe that’s just me, but hey. Step 5: partner with a local butchery and a local cheese shop to offer meat-and-cheese boards. 
6. Non-alcoholic drinks: people drink less these days, yet bars are tailored towards people who drink alcohol. You don’t drink? Have a coke. Step 6: have non-alcoholic beer on tap, offer non-alcoholic cocktails, add exotic soft drinks (Wostok Lemonades are great, for instance) to the menu. 

All the sudden, you have your traditional-style pub, without the weaknesses of a traditional-style pub.

Not sure if this would actually work, but this is just an example how you could approach reverse benchmarking this. 

Real-life example: Generalyst 

At my company, Generalyst, I always ask myself: what are others doing badly that I can do well?

Recruiters get a lot of hate, and understandably so: it’s a business that seems incredibly easy to get into, hence it attracts a lot of people who have no idea what they're doing.

But even the good firms who have their processes down have their weaknesses. For example:

• They’re very expensive – 25-30% of first-year salary seems to be the norm. Which is a lot of money. 
• They charge upfront, even if a search isn’t successful. 
• It takes a long time to onboard them, and once you’ve done it, they don’t necessarily produce better candidates than one’s own funnel. 

Let’s dissect those one by one: 

Price

Recruiters are too expensive. OK, cool – how can we reproduce a similar experience at a lower price while still maintaining healthy margins?

One way to do this is to do “bulk search” instead of customized search for each client.

At Generalyst, startups pitch their business to the program participants, which are constantly entering and exiting the program.

This is only possible because we specialize in commercial generalists (ironic, I know) – and don’t take jobs that don’t fit that bill. Since everyone in the program is already looking for a generalist position, and startups only pitch these positions, the model works somewhat. 

Upfront Costs

We’d also have to charge upfront if we did active search. But since we don’t, due to the operating model, there’s no need to charge upfront.

Which is perfect for the business: value is only being captured when it is created (= when a work contract is signed). 

Onboarding

I’m a founder myself; I’ve built and scaled companies before, have hired a lot for generalist positions myself, and have invested in and been on the board of other startups. I think I have an idea of what other companies need.

Whereas most professional recruiters are exactly that - recruiters - as a former founder, I dare say I know better what a startup needs. (There's still a lot to be learned from people who have done this for their entire careers, though.)

Now, of course, you still need to hit the benchmark: tight processes and fantastic candidates.

The reverse benchmark just is what sets you apart.

Apply this to yourself or your business

This concept works for both individuals and companies.

Ask yourself: 

1. What’s the benchmark for my profession / my company? Get there and get the basics right first 
2. What are other professionals / companies not doing very well? Identify these, and excel at those. 

Not only will you be able to differentiate yourself, but also delight at least parts of your customer base. 

All because of reverse benchmarking. 

Hope this was useful to you! If it was, share it with an entrepreneurial friend – it’d mean the world to me. 

And now, back to work. Good time to get after it. 

Happy Monday. LFG. 

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