Industry Outlook
VICTOR COSTA | January 28, 2022
What Is Benchmarking and How Does It Benefit Companies?
Benchmarking is a continuous improvement model or tool widely used in many companies to facilitate comparisons in different areas, both inside and outside the company, with the sole intention of increasing their competitiveness and efficiency. Benchmark means "reference point," and benchmarking can be translated as "comparative evaluation." When we talk about benchmarking we have to keep in mind that it is not about copying the model of other companies, but learning from the competition to innovate and differentiate our value proposition.
What Is Benchmarking Used For?
When analyzing our company, the competition, and the market, we can discover new innovative ideas applicable to our business.
But the most valuable contribution of benchmarking is the knowledge of our own business, identifying its weaknesses and points for improvement. It also facilitates the development of action plans to incorporate best practices and optimize processes within the organization with the sole purpose of increasing performance in the short, medium and long term.
Main Benefits of Benchmarking
1. Discover where we are compared to the best, in quantitative and qualitative terms of the most relevant areas analyzed.
2. Determine the main gaps and specific areas for improvement in each aspect analyzed.
3. It helps the company to know, with more criteria, its strengths and weaknesses as well as its opportunities for improvement.
4. Adapt best practices in terms of strategy, methods, processes and techniques.
5. Create a sense of urgency in the company so as not to settle for current indicators and establish concrete action plans.
6. Use the results to establish new objectives for those responsible for the corresponding areas.
7. Have an additional source of motivation for the areas involved in achieving the best market standards.
Types of Benchmarking
There are three types of benchmarking:
Internal Benchmarking
Internal Benchmarking is usually carried out by large companies since its objective is to identify in first contact if there are relevant good practices in a specific area and they can implement them in another area, in a different business unit or in another country.
Competitive Benchmarking
In this case, benchmarking is carried out with the purpose of identifying areas of improvement with respect to products, processes, services, or any other area of the company with respect to the leaders of the sector.
Functional Benchmarking
Functional Benchmarking identifies the best practices in processes, functions, operations of a company that is excellent in the area that it wants to improve. It is not necessary that it be a competitor or belong to the same sector.
Benchmarking stages
The complete methodology used to analyze a benchmarking process is as follows:
1. Determine and internally agree on the key indicators to be analyzed in the benchmarking process.
2. Establish the scope and criteria of the process. Reference companies in the market (not only from the competition or necessarily our sector). Confirm the areas and metrics to investigate. Planning of the Benchmarking process.
3. Carrying out the systematic research process (with internal resources or outsourcing), ensuring the availability of the budget (so that it is comparable over time).
4. Analysis of the normalized results and identification of the main comparative practices. Communicate and share internally the information and data about the results of the process.
5. Select and agree on the focus areas for improvement. Establish and implement an action plan to adopt the best practices and processes in each case, assigning those responsible.Include the objectives that we want to achieve.
6. Analysis and measurement of the progress and results achieved in the Action Plan. Learnings. After some time, a new study must be carried out to evaluate the possible advances in each case.
Recommendations to Do Benchmarking Correctly
1. Question everything, avoid copying what "the leaders or the best" do without asking yourself why they do it.
2. Avoid the “they are different from us” syndrome. That's because they do it better.
3. Don't lose perspective. Not all the data is valid for our company.
4. Not selecting what we like and discarding what we don't.
5. Don't focus exclusively on the competition. It is about knowing the best practices in the different areas of different types of companies.
6. Learning from aspects of excellence helps us identify new opportunities to be better, more efficient and effective.
7. It is not worth a " photo.” Analyze it periodically using the same basis.
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