Benchmarking, Commodification and Differentiation: What Is Your Strategy?

Image a business strategy based on mediocrity. It might look something like this: benchmark the organization against competitors and aim to be middle of the tier--not the best, but definitely far above the worst. Pay salaries at the 50th percentile, or provide no more nor less in service than the average of the benchmark group. This is exactly that approach used by most large airlines in the U.S. and it is a recipe for creating products that become commodities; that is, essentially interchangeable with each other from source to source. Most importantly, it is a formula for mediocrity.Yet, independent and international schools do this all the time when they plan for their futures. Their boards and administrators seem reassured that salaries are "in line" with the middle of the pack, or that their expenses per student are somewhere below the 80th percentile. Such findings are meant to reassure school governors that all is well, that things are within normal limits. Instead, I increasingly see such findings as a flashing neon sign pointing toward future trouble.The industrial model of education--something almost all independent school educators and customers say they are escaping and that predominates in public education--would have us pare costs to the bone. That is what industrial production does best: drive down costs as far as possible to create goods and services at ever cheaper prices. But following this course is brutal in our sector, as it has been in health care and the arts, the other industries suffering from Baumol's famous "cost disease."The alternative is distinction, being what Seth Godin called a "purple cow." Unique schools can charge a premium and get it, because they offer a value proposition that is not yet commodified. A few customers may leave, but those that remain will be willing to pay substantial premiums for something different from other schools in town. In economic terms, this is called extracting "monopolistic rents." In marketing terms, it is about seeking competitive advantage through uniqueness and differentiation from the herd. Benchmarking may be a step on this path, but beware settling for smug mediocrity rather than setting one's school apart.