Benchmarking is the process of creating, collecting, comparing and analyzing key indicators that measure the performance of the most important processes and functions within a company. These indicators are known as “benchmarks” and serve as a standard of business success.
To compare companies with each other, it is important to determine with which compet
itiveness indicators the comparison will be established, and thus know what impact each of them has on obtaining results.
Previously, the measurement of business competitiveness prioritized or only took into account financial indicators. Nowadays, other aspects are considered: social, environmental and economic impact, innovation, learning, entrepreneurial capacity, management, among others, and other areas are taken into account: production, purchasing, marketing, sales…
Benchmarking is a continuous activity because the market is constantly changing and it is important to know how a company is responding to it, and how the leading corporations in its market are doing so.
On the other hand, it is not a quick and easy job. It is not a cooking recipe book in which you only need ingredients and knowing how to use them. It requires analysis and constant learning.
Nor is it a methodology to reduce costs: benchmarking requires economic, human and technological resources to obtain and analyze the information. Therefore, its execution is not economical, but it can help you take advantage of your working capital in the future.
Likewise, it is not a rigid process: It must be flexible to incorporate new ways of obtaining information.
It is worth noting that A complete benchmarking study is one that evaluates the selected indicators both internally and externally, That is, within the same organization that is developing it, as well as those that are leaders in their market, whether they are competencies or not.
However, it can be divided into three types, according to the purposes that want to be fulfilled or that want to be evaluated.
Types of Benchmarking
Internal benchmarking
It is one that serves to compare the functions and processes carried out in a company with each other.
In this type, it is understood that some processes may be more efficient and effective than others. In this sense, the purpose of internal benchmarking is to identify internal development standards.
Competitive benchmarking
It consists of identifying specific information about the products, processes and business results of your direct competitors, and comparing them with those of your organization.
Below, learn some aspects that you can know about your competition:
- Value proposal
- Social, environmental and economic impact
- Sources of income
- Market size: units per month, week or year.
- Annual sales.
- Main difficulties given the environment.
- Main opportunities.
- Next steps for the company
- Key business activities.
- Main stakeholders.
This analysis requires more resources than internal benchmarking., since in the case of the second, the information is obtained from the company itself.
In this there are two main barriers that hinder the process: the first is the absence of updated and available information about competing companies; The second is the willingness that they may have in providing their data, since according to traditional paradigms, which indicate that competitors are not trustworthy, or are enemies, they hinder communication between competitors.
To overcome these barriers, You need to be honest and transparent with your competitor when requesting information: detail the purposes of your study and the methods you are using.
Regarding this, Spendolini points out: “If you approach a competitor as if they were an enemy, you will get the predictable reaction of distrust. When done honestly and professionally, you very often get an honest and professional response from the competitor.”
Functional Benchmarking
Also known as generic benchmarking, it is one that is applied to companies or organizations that do not necessarily represent direct competition.
Its purpose is to identify best practices in any type of organization that has earned a reputation for excellence in a specific area.
Unlike the competitive one, the functional one is much easier to implement, since the companies to be analyzed, as they are not direct competitors, will be able to give you some data about their business model more easily.
Difference between benchmarking and benchmarketing
Indeed, although they can be used in the same sense, they sound very similar and at their core have many similarities, they are not the same. Benchmarking is the analysis of the competition, considering all the aspects that encompass those of the company to be analyzed, with its own. That includes absolutely everything that has to do with that company.
Benchmarking does seek to compare the competition with ours (or our client’s, being an agency). Knowing these strengths/weaknesses, marketing techniques will be used to place ourselves above this competitor, thus guaranteeing to attract not only its leads but also those who are starting the customer journey of similar products.
What is benchmarking for?
Its main focus is to know the positive and negative aspects of a company; obtain key information for decision-making; Establish realistic strategies and goals according to the company’s capacity and the surrounding circumstances.
For Spendolini, benchmarking serves to create generic excellence among companies, because there are processes that all companies must have in common, either for a legal aspect or for a social standard, whose results are measurable.
For example the billing process. If the preparation of invoices is a common practice in all companies, there must therefore be some generic billing practices that can be observed and measured in any organization.
In summary, according to Spendolini’s perspective, This serves to compare standardized metrics, both internationally and nationally, with the aim of verifying the levels of excellence of one company compared to another.
How to do benchmarking?
To do internal and competitive benchmarking at the same time, we recommend following the following steps:
- Form a team with proactive, creative, analytical people, capable of finding a solution to any problem. This team must be made up of managers and internal workers from your company, who manage, execute and monitor the entire process. As well as, by consultants or external companies that have experience preparing these analyses.
- Educate your office team about the importance, purpose, follow-up, and scope of a benchmarking study.
- Employs internal diagnosis and analysis to establish the need for change. A good starting point can be: customer complaints, observations from managers related to objectives not being met, or comments of dissatisfaction from employees; Each of these aspects must be perceived as problems that can be improved.
- Determines through prior analysis which functions, processes or activities should be improved. Choose those that have a significant impact on your business.
- Determine which indicators will allow you to know the performance of the key processes that you chose for the internal analysis of your company. Analyze the results obtained over time.
- Identify the best companies in your market or industrial sector.
- Establishes the key indicators or metrics that must be examined in the companies chosen for comparison.
- Contact the selected companies or go to secondary sources to extract the data and information you need for the study.
- Compare your company’s metrics with those of your competition and analyze the reasons behind each of them.
- State in the final report how the diagnosed problem should be improved and how other companies have solved similar problems, according to the information collected.
- Prepare a monitoring and evaluation plan to know if the improvement proposals are being met after completing the competitor analysis process.
- Repeat the study every time a problem arises or you consider it necessary.
In conclusion, benchmarking is essential, especially in market research, because it gives you valuable information to make decisions and propose short, medium and long-term strategies.
