The Management Science Behind Our Benchmarking Programs


The Characteristics of Industry Peer Networks
How IPNs Help Companies Address Their Limitations
Combating Myopic Tendencies

The authors studied what they call Industry Peer Networks (IPNs) -- groups of companies in an industry that share data and meet regularly to exchange ideas, as is the case with our benchmarking groups. The authors focused on IPNs for industries that are more localized, for example auto dealers, and where the groups are made up of non-competing peers, unlike our groups where members often compete with one another.

Whether a group is made up competing or non-competing peers, the basic reasons for joining an IPN remain the same. In response to a query from us, Professor Zuckerman wrote, "You're 100% correct that there is nothing about IPNs that can't apply to competitors... In some sense, one might say that a competitor is a type of peer... in fact, there is plenty of evidence of competitors sharing data and learning in the way we describe."

Professor Zuckerman also pointed us to a paper by another MIT Sloan Professor entitled, "Profiting from voluntary information spillovers: How users benefit by freely revealing their innovations." In that paper in referring to an innovator firm sharing with its competitors, the authors write, "The second user firm may also benefit from the innovation, but to a lesser extent than the innovator. This effect is due to the fact that the innovator will have optimally tailored the innovation to its own production environment."

In our observation we have seen this to be the case. While member firms gain much useful information from participation in the group, the way it is applied is not to copy other group members, because it is not practical to do so due to each firm having a unique operating environment. Additionally, as noted in the article summary, the net benefit to group members is positive -- the value of information gained from participation far outweighs any negative due to innovation being revealed. The selective admissions criteria we apply, whereby group members must bring value to the entire group in order to join and remain in the group, assures this.


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