Benchmarking: Read more about the method used to make your business grow by observing competitors’ practices when building their internal strategies.
The verification of the results of other companies to measure internal processes takes place through benchmarking. This technique was and is widely used by companies from different market segments .
Benchmarking emerged on the American Xerox. In the 1970s the company was already doing research on its competitors and using the data to improve its results. But it was the Japanese who optimized the tool and used it to dominate the auto market in the 1980s.
Today, benchmarking is a widely used concept in the corporate world. Managers at all levels make their use for both strategic and routine activities. Understanding the power of this tool is critical to improving a company’s bottom line.
After all, what is benchmarking?
Benchmarking is the process of evaluating the behavior of other companies for the creation of new internal strategies. With this technique, you can fine-tune your own methods and performances. The idea behind the methodology is to be inspired by what is working and to avoid what has not produced good results.
The use of benchmarking as a management tool can benefit your company with the experience of other ventures. Companies can check who is getting the best performances and put the observed result as an internal goal. It is a very practical way to choose goals, because it is known that the result is achievable.
An example already mentioned above is Xerox, a pioneer in this technique. The manufacturer dismantled the equipment of its Japanese competitors to understand how they were able to get below-market prices.
In short, the process is a detailed research that allows comparing services and methodologies used by competitors. By using this technique it is possible to improve the level of operation. Benchmarks can be established for all types of operations and all sectors can benefit from this tool.
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The types of benchmarks and for which each one serves
There are basically 5 types of benchmarks used as a management tool, each with its specific purpose, they are:
- Internal Benchmarking : This type of benchmark is characterized by the use of the organization’s own standards as indicators targets. As an example, we could use the case of a company that opened a new branch and sets as goals for it the results already obtained in the matrix.
- Competitive Benchmarking : This is one of the most famous benchmarks. In it, the reference point is built from competitors’ results. It is observed who is getting better performance in a given activity and uses its results as a goal.
- Functional Benchmarking : This type of benchmark prioritizes processes, that is, the result of a specific activity. It can be applied within the organization itself to compare similar processes in different areas. An example would be the delivery time practiced by logistics teams within the same carrier.
- Generic Benchmarking : This model seeks to handle similar processes, but in different business activities. An example would be the delivery time of a particular product, the model company being an ecommerce footwear company while the follower is an online electronics store.
- Collaborative Benchmarking : Here the goal is of collective improvement in relation to a specific goal for a group of companies. One example would be the goal of reducing the emission of gases by an association of steelmakers. All will work together to achieve the collectively set goal.
How to benchmarking?
There is no cake recipe for competitive benchmarking , however, a few steps can help you organize and implement it in an assertive way. The main ones are:
- Internal evaluation : Here, business processes and practices are evaluated to understand where the organization is and where it wants to go. At this stage it is also intended to understand how the organization learns, that is, what is the best method of approaching the desired results.
- Identification of companies or processes of excellence : At this stage, a survey should be conducted to identify who is best positioned in the activities considered important by the organization. In the past this process was slow and costly, but today with the internet, you can find lots of quality information for free.
- Identification of the methods of improvement practiced in the market : After identifying the “champions”, it is time to understand how they got there. This can be done with research, simulations, questions and so on.
- Definition of the method of reaching the desired result : Here we study the best way to achieve the result practiced by the “champion”. It is the phase in which the answers obtained in the 1st and 2nd stages are integrated.
- Implementation of a plan of action: Once the method to be used has been identified, a plan of action must be generated to achieve the desired result. The plan should be written with practical activities with dates and responsible.
- Feedback: Following the implementation of the action plan, the result is observed and compared to the goal. If it has been reached, an improvement plan is started. If not, a correction plan should be drawn up.
Is benchmarking possible in markets with little data released?
Until a few years ago, benchmarking was an activity for large companies, as data searches were expensive. Today, with the internet, things have changed, it is possible to do research and get a plethora of data for free. In addition, research institutes have made online content available, making professional information much cheaper.
Therefore, it is possible that companies practice benchmarking at reasonably good response levels, using data obtained for free or very cheaply.
Benchmarking is an excellent strategy for organizations that want to learn from mistakes and successes from other companies. However, it is necessary to understand that good management is made of many tools, this being only one of the very effective ones available today. Not always the results observed externally will give the same result for your company. Therefore, caution and planning is required to use this methodology.