Benchmarking
What is Benchmarking?
Benchmarking is a tool that companies use to improve the overall performance of their products and services. It is the process of measuring your company's success against other similar companies to discover if any gaps exist, which could be affecting your overall performance.
Studying the practices and processes of competitors in the industry will highlight the factors which will help your company become a bigger player in the business world.
Benchmarking will help you identify opportunities for improving your company's performance. By analyzing the processes and practices of successful companies, you will be able to figure out what works best and implement those things into your business.
The five steps of benchmarking:
First, you want to identify the product, service, or internal department that you want to benchmark.
Next, you will determine the companies you will benchmark against, these will be the companies who are already doing it well.
Collect data on the internal performance or metrics of these companies.
Compare the data from the organizations to identify gaps in your company’s performance.
And finally, adopt and integrate the effective processes and policies from the successful competitors into your company.
Types of benchmarking:
There are two fundamental types of benchmarking, internal and external. Within external, there are four specific types of benchmarking; competitive, performance, strategic, and practice.
Internal benchmarking
Internal benchmarking is all about comparing metrics or practices to different units, products, processes or departments within your organization. This form of benchmarking is effective because it helps set and meet standards across the board establishing consistency and efficiency within the company.
External benchmarking
External benchmarking consists of comparing metrics or practices to different units, products, processes or departments with other organizations. This form of benchmarking requires access to industry stats or specific company data.
Competitive benchmarking
Competitive benchmarking is a type of external benchmarking that focuses on comparing your processes and metrics against your competitors.
Through competitive benchmarking, you can determine why and how a competitor is succeeding and what is driving customer satisfaction in the industry.
Performance benchmarking
Performance benchmarking is a type of external benchmarking that focuses on comparing your quantitative data against those of your competitors. Through this form of benchmarking, you can identify performance gaps that exist in your company, and the necessary steps to take to fill them in.
Strategic benchmarking
Strategic benchmarking is a type of external benchmarking that allows you to analyze what kind of business strategies other companies use to become successful. Through learning from winning businesses, you’ll learn which strategies you should implement in your company.
Practice benchmarking
Practice benchmarking involves comparing the processes and qualitative information about the activity of your business to those of your competitors. Specifically how an activity is executed through people, processes, and technology.
Why is benchmarking important?
Benchmarking is an important method to learn, because it provides you with real data that you need in order to understand your strengths, weaknesses, opportunities and threats. Read our post on the SWOT analysis to learn more about this concept.
Implementing benchmarking for your business will help you recognize how other companies have achieved excellence, and how you can too. You’ll be able to analyze your own companies processes and systems through analyzing those that have led other companies to success.
Conclusion
Benchmarking (specifically external), is all about comparing aspects of your company to those of high achieving companies, to replicate systems, processes and practices that will lead to more efficiency and success.
Through benchmarking you will be able to understand how and where your company needs to change to improve overall performance. There is a reason this concept is used among all business consultants!
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