“Best practices” are not the best practices

It is a rare firm where managers are not encouraged to seek “best practices” in order to improve operations. But how effective are best practices, really? Such ways to arrange activities might not make the firm quite as competitive as desired.

In this post, I will examine best practices from a resource-based and dynamic capabilities point of view, partially based on the insights provided by Lynda Gratton and Sumantra Ghoshal in their 2005 article, Beyond Best Practice.

Why best practices cannot provide a competitive advantage

Best practices are well-known, effective ways to arrange operations. Companies are able to study them, copy them, and implement them as part of their own operations. Umm, wait.. What does this mean for competitive advantage?

In order to have a competitive advantage, you need to have something that is valuable and not widely available. This is what resource-based view calls VRIN (Valuable, Rare, In-imitable, and Non-substitutable).

Unfortunately, best practices cannot fulfill this condition: they are obviously not a secret, and if there are many companies that are able to copy them, then they cannot be rare or in-imitable either. As such, the best you can ever do by copying best practices is to reach the same level as your competition, not get ahead.

What best practices can do for you

Alas, all hope is not lost! Best practices can still serve a valuable purpose, as long as you have a proper understanding on what they are suitable for.

Best practices can help you to reach the same level as your competition. This is also a good thing! It is difficult to see how a company could tailor each and every part of its operations. You need to pick and choose. For areas that are not the most important parts of your operations, adherence to best practices can keep you from being left behind.

Benchmarking is inherently useful. Even if you choose not to adopt the accepted best practices, knowing what they are does not hurt. It can help you improve your own way of doing things, and it can give you deeper insight into the ways your competition operates.

There is one thing to watch out for, though. Context matters. The scope that you need to adopt differs significantly. Some best practices work in isolation, but some also require that you adopt other practices in order to benefit from them. Even with best practices, it is not possible to mindlessly copy.

Signature processes as a source of competitive advantage

From a capability point of view, the road to competitive advantage lies with signature processes. Signature processes are effective ways to arrange operations that have been created within the company and complement its other practices.

In the end, that is quite simple. Copying can get you even, but it cannot get you ahead.

Other companies may attempt to imitate signature processes (and thus adopt them as best practices), but such efforts may require imitating multiple aspects of a company’s operations in order to be effective, if they are at all possible. Nonetheless, copying of this kind can be useful if it can be pulled off, because it is a potential way to remove competitive advantage from competition.

One word of warning about such copying: Just because a successful company has some unique practices does not mean that all of those practices actually contribute to the success of the company. For a company to be more successful than its competition, it has to be doing something differently that creates this success, but not everything it does is necessarily better.

Thus, again, there is no substitute to doing your own work. Even when you copy something, it is important to understand how the practice in question can contribute to your success. In the best case, you can even take something from others as a base and then create a unique way to apply it in your environment, resulting in a practice that is difficult or even impossible to copy – a signature process of your very own.

Photo: Planking in Gastein by salzburger.land @ Flickr (CC)

Author: Ville Kilkku

I run my own consultancy business, so if you find the ideas on this blog intriguing, contact me at consulting@kilkku.com or call me at +358 50 588 5043 and we can discuss how I can help you solve your business problems. I am currently based in Turku, Finland, but work globally. Google+