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What is Benchmarking ?

Benchmarking refers to the process of comparing your own business, your operations, or your processes against other companies in the same industry as you, or even wider marketplace. You can take a benchmarking approach for any process, product, approach, or function. The objective of benchmarking is to learn by comparison, figuring out if there are better ways of doing things, better technologies that can be used, alternative ways of reducing costs, interesting methods of strengthening customer loyalty, or more successful means of increasing profits. Benchmarking is a concept of continually improving and increasing quality within your organization.

Why Should Your Business Benchmark?

If you are thinking about beginning a benchmarking process, this could be because you think that something within your business could be improved. However, it could also be because you would like to monitor strategy shifts or changing approaches of your competitors. No matter the reason for benchmarking, it is important to keep an eye on what is going on around you in your industry considering the constant fluctuations we experience in today’s business environment.

There are Numerous Motivations for Adopting Benchmarking Initiatives Within an Organization:

The most common motivation tends to be an internal insight concluding that something within your business must be improved. This could be post-evaluation of internal processes, activities, or functions. These internal evaluations generate valuable insights that identify areas of improvement.

Numerous companies compare themselves to their competitors because they want to identify gaps in their own products or services that could be improved to gain a competitive edge. The insights accumulated in a competitive benchmarking initiative offers valuable insights into the competition’s activities and thought processes.

The term ‘strategic benchmarking’ has been coined to describe a firm’s interest in comparing its performance to that of the best organizations. These organizations are not necessarily in the same field or industry as your company, but it is worth comparing functions that the other industry is reputable for. These are usually specific functions that big companies are known to be very good at; for example, McDonalds and International Expansion.

The Limitations of Internal Benchmarking

Although it is important to measure and evaluate your own performance as a firm, it is also important to keep in mind that you should not lose focus on what is happening externally. Upon concentration of self-improvement, it is easy to lose track of changes in the industry or shifts in consumer demand. It is pointless to improve your newspaper advertising strategy if the world is now advertising online.

Strategic Benchmarking

Looking outside of your own industry has proven to be extremely valuable for improving internal processes. Gaining inspiration and insights from another company’s processes allows you to think outside of the box and stop “reinventing the wheel.” After all, many businesses perform similar functions in everyday activities, so it is worth looking at successful companies globally, and not just at those in your space.

Benchmarking Data Is Often Available for Purchase

There are specific organizations committed to sharing the information required for benchmarking. These organizations publish comparative data that is available to the public. Consumer or Company Reports can be extremely useful for this purpose.

In Conclusion

Benchmarking should be used to encourage the spirit of continuous improvement within your company. However, it is important to remain externally aware. The most successful organizations aim to identify their most important processes and evaluate their efficiency in comparison to competitors or in comparison to leading global companies. Benchmarking initiatives should be purposeful and data-led so that you obtain the most accurate results possible.

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