Importance of Benchmarking for Companies
Benchmarking is the competitive edge that allows your company to adapt, grow and evolve through change. Benchmarks are basically reference points that you could use to compare your performance against the performance of others.
With benchmarking you could measure key aspects of your business and compare them to others. You can learn from other companies as well and understand more about important strategies that you could integrate into your company.
Advantages of Benchmarking
With benchmarking you could just use the best practices of other companies and modify them to your needs, without wasting your time and money. Also, technological improvements and implementing changes in your company become easier. You could minimize the competitive gaps between you and different companies as well.
All the activities that companies require for improvement will be based on carefully formulated strategic goals and objectives and will help you to think differently as well. Also with the type of benchmark that could be more suitable for your company, you can improve critical areas of your business. Some companies use several different types of benchmarking together.
With performance benchmarking you can identify the areas of your business that need improvement. In this case, the company’s products, services, and operations are measured and analyzed against other competitors and industry leaders. Companies understand more about certain metrics, like time-to-market, cost-per-unit, customer retention, etc.
Overall performance benchmarking gives companies chance to analyze past performance, compare their capabilities and resources against industry standards, and improve numerous processes, products, and services.
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Best Practice Benchmarking or Process Benchmarking
It’s often used in strategic management, where companies observe and investigate their business processes and performance, but on top of that they are identifying the strength and benefits of one or more benchmark firms.
Best practice benchmarking involves several steps. First of all, you need to identify the subject of benchmarking. Then establish the team that will work on the subject, which could be anything that you are interested in, for example, a project that you were working on. And then you have to clarify the subject to be benchmarked. Then you have to observe a lot, choose specific organizations and get to know them.
Strategic benchmarking can help you determine best practices to reach your organizational goals. In this case, several processes and practices are evaluated, like core competencies, process capability, strategic intent, etc. In order to determine best practices for your company, you are learning more about other organizations’ strategies as well.
You are assessing customer needs, and expectations, collecting information about them and studying market statistics. Also, some companies gather information from their competitors’ customers as well. External elements can be used to set new goals for your company. Basically, you can expand your search for improvement and don’t rely solely on information that you can get from your environment.
In this case, you are comparing units of departments which are in your company. This type of observation will help you determine best practices or methodologies for conducting certain tasks. This way you can understand more about your own inner structure.
For example, the warehousing and shipping of certain products from one branch of the company could be compared to the warehousing and shipping of products from a different branch of the same company.
Competitive benchmarking is the process of comparing your company to several other companies while using certain metrics. This way you can measure the performance of your company and determine how well are you performing compared to your competitors.
You can understand how you are performing on different levels, get a more detailed overview of the company and find ways that will make you stay competitive. Companies understand numerous aspects in more detail with this type of benchmark. For example, they can get a better overview of their pricing policy.
Functional benchmarking provides you with industry trend information, and you have access to quantitative comparisons as well to determine best practices for your company. It’s a comparison of functions against other companies that are within your sector or technological area but aren’t your competitors. Comparing copper mining techniques to coal mining techniques would be a great example of functional benchmarking.
Financial benchmarking is related to financial analysis, which is essential to understand more about the productivity and efficiency of your company. In this case, you can compare the financial analysis that belongs to your competitors to your own. It can help you to conduct different processes in better, faster, and cheaper ways.
Generic benchmarking is analyzing two companies in different industries and comparing their general business functions. In this case, your team can be focused on any features or functions that are common across industries, like website functionality for example.
One of the biggest advantages is that it can show you a broader perspective of numerous aspects of your company. You’ll be crossing the borders of your company to search for additional information, so this process at the very end could help you to get more innovative ideas.
Product benchmarking helps you determine how your product is performing against others based on specific metrics. It can help you to understand more about your products and how can you improve them.
This way you can get an overview of the market and popular trends, and compare your results to your competitors. It will help you make the best decisions based on the data that you’ll have.
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