Benchmarking is the comparison of a particular businesses processes and key performance metrics against the best businesses in the industry, or even a comparison against best practice from other industries. With benchmarking we are trying to find the gap between what our business does currently and best practice, so as we can plan and initiate improvement steps to bridge the gap.
The advantage of benchmarking is that it objectively highlights an organization’s strengths and weaknesses. Benchmarks reveal potential problems with an organization and point the way to possible improvements. They also highlight norms across an industry. When these norms are combined with industry trends in best practice, benchmarking can be used to generate new ideas to improve how an organization does things.
There are many types of benchmarking, but the key ones related to business are:
Benchmarking can be defined as comparing one company’s business processes against another. The objective of benchmarking can be defined as answering one of the following questions:
The steps you need to follow in order to perform benchmarking are as follows:
It is very important to realize that benchmarking is not a simple process. No two organizations are identical – products are different, organization structures are different etc. This means that great care must be taken up front to find the right metrics to compare, or to apply explanatory factors. This avoids a “we are different from them” stasis and facilitates objective comparison. For example, five different insurance companies may be entirely different but their IT processes could still be compared.
Benchmarking allows you to rate your company against the world’s best. It thus allows you to understand how good you are at what you currently do, and what steps you should take to improve. If you are a project or program manager then the improvements developed in the benchmarking action plan will often need to be embedded (in part or totality) into your project plan. If you would like to know more about benchmarking then the seminal book is Benchmarking for Competitive Advantage by Boxwell.
TOWS Matrix Analysis
McKinsey 7S Framework
Business Model Canvas Explained with Examples
The Hedgehog Concept
Mintzberg’s 5 Ps of Strategy
Core Competencies Model
Porter Diamond Model