Competitive Benchmarking

What is competitive benchmarking?

Did you ever demand you parents for the same gadget that your friend had?
Did you parents ever compare your grades with you elder brother or sister?
Ever faced comparison with your peers at workplace to get that much deserved promotion?

We compare and are compared with competitive people around us, all the time.

Now take another aspect of this competition.

When you asked for the gadget, did you ask for an outdated version or the latest model?
When your parents compared the grades with your siblings, did they want you to have a better or lower grade?
When you faced competition with your peers, did your boss compare you with the one better than you?

So not only we compare, we compare with something / someone better in some aspect. We always seek for high quality and performance.

Competitive Benchmarking in simple terms is comparison of performance with the benchmarked industry standards. In a way, it means that to be successful in the industry, you need to know what your competition's performance levels are. The benchmarking is done on Key Performance Indicators (KPIs) and this may be different based on the industry types.

However, whatever industries it may belong to, Competitive benchmarking results are reflected as a function of time, cost or quality. While there are several other parameters, like customer satisfaction, human resources, employee satisfaction, all of them impact of or the other key functions of time, cost or quality.

Robert Camp defined Competitive benchmarking as ‘The search for the industry best practices that will lead to superior performance.’

Importance & Advantages of Competitive Benchmarking

In the fierce and cut-throat competitive environment, it is essential to reduce the operating cost at the same time continue to deliver high performance. Competitive Benchmarking is a planned and structured way of understanding the competition and having a baseline to do comparison. With this study, the business would be able to find the gaps between their performance and that of the benchmarked industry standards. Knowing the gap, benchmarking also provides areas of improvement to bridge the gap by setting achievable and meaningful targets over a period of time. It helps in defining the road map to get closer and go over the set benchmarking standards.

The data obtained by competitive benchmarking is an eye opener and the transformers in organizations find it easy to present the results to the senior executives and suggest a need for a process or strategy transformation to become competitive.

Benchmarking is important as it helps the organization in;

1. The current state assessment
2. Basis for future state and transformation with a defined road-map
3. Continuous improvement to be at pace with changing environment
4. Having a common vision across organization & driving change

Steps involved in Competitive Benchmarking

Benchmarking is a structured process. There are companies who are skilled in carrying out the benchmarking across industries. A lot of tools and resources are available in the market to conduct this study. Benchmarking involves the steps as below:

1.      Planning

a.      What is  to be benchmarked

b.      Define the competition

c.      Understand the data gathering approach

d.      Identify the source of data

2.      Data gathering and validation

a.      Gather the data

b.      Understand the KPIs to be validated

c.      Produce the benchmark results

3.      Qualitative and Quantitative Assessment

a.      Understand Voice of Customer

b.      Review CAT Scores

c.      Determine current performance levels

4.      Review & recommend

a.      Review the gaps

b.      Identify the causes

c.      Put together recommendations

d.      Review and gain stakeholder acceptance

5.      Execution

a.      Develop plan of action

b.      Monitor progress

c.      Recalibrate benchmarks

Types of Competitive Benchmarking

There is a vast variety of competitive benchmarking techniques that is available in the market. Based on the specific need, one of more competitive analysis may be recommended.

1.      Strategy Benchmarking

2.      Healthcare Benchmarking

3.      Financial Benchmarking

4.      Salary Benchmarking

5.      Business Benchmarking

6.      Hospital Benchmarking

7.      Marketing Benchmarking

8.      Logistics Benchmarking

9.      External Benchmarking

10.    Internal Benchmarking

11.    Human Resource Benchmarking

and the list goes on !

What next?

As the environment keeps on changing, the process of competitive benchmarking can never be termed as complete. It is an ongoing process to compare oneself with the toughest competitors to survive and flourish the business. What seems to be a benchmark today would change later and hence for an organization or business to succeed, the competitive benchmarking should be an ongoing process. Recalibration of benchmark should be an integral part of organization processes. Defining the KPIs and comparison with the highest qualitative standards would help in continuous improvement.

If you have carried out a competitive benchmarking study, please share your experience. Look forward to your feedback on this article.