Benchmarking refers to the process of analyzing the practices of market leaders in order to improve its own performance against the competition. The practice of benchmarking or comparative analysis is essential for a company.
What is Benchmarking?
Benchmarking is a comparative method, typically focused on a specific product or service, enabling companies to know how they perform relative to each other. According to David T. Kearns (the CEO of Xerox Coroporation), Benchmarking is the systematic and continuous process of evaluating products, services and work practices and comparing them with those of industry leaders
In summary, benchmarking consists of drawing inspiration from the best players in the sector and adapting their methods and strategies within the framework of legality. For example, it is possible to borrow from another company best practices in customer service.
The Objectives of Benchmarking
We operate in a highly competitive world where companies must continuously analyze how they evolve in relation to what is best on the market. The objective may be to improve in terms of:
Quality level: the value generated from a product, taking into account its price and the costs necessary for its manufacture and sale.
Productivity: companies compare what they produce and what they spend to get that quantity, with the goal of comparing process efficiency.
Different Types of Benchmarking
We will say there are 3 different types of Benchmarking:
Internal Benchmarking: Usually used in large corporations consisting of many departments and / or divisions, and compares the practices applied by different departments of the same structure.
Competitive Benchmarking: used in case of aggressive competition, it allows to compare the company to its most direct competitors or to the leaders of the market, on a specific product. In principle, it is the most complicated type of benchmarking to orchestrate because of the lack of information disclosed by companies on their processes.
Functional Benchmarking: it consists of comparing with companies that do not belong to the same sector of activity; the idea being to obtain more easily the necessary information, by not presenting itself as a competitor of the company concerned.