Benchmark

What does it mean

Benchmark is the process of comparing the performance of your company, products, or services with others, usually those considered the best in the industry. The goal of benchmarking is to determine where your company stands in comparison to the competition and what you can improve to be more efficient and competitive.

More info

It is a valuable tool for identifying weaknesses and opportunities for growth and innovation. There are several different types of benchmarks that companies use to achieve their goals:

Internal Benchmark
In this case, the company compares different departments or processes within its own enterprise. For example, the marketing department may compare the success of different advertising campaigns to determine which one achieved better results.

External Benchmark
External benchmarking involves comparing your company with competitors or industry leaders. This could include comparing sales, marketing strategies, or financial results. This type of benchmark provides a clear view of where the company stands within its market.

Competitive Benchmark
This type is similar to an external benchmark but focuses specifically on a direct competitor. It may involve comparing pricing policies, market share, or the quality of customer support.

Functional Benchmark
It focuses on comparing specific functions or processes between companies in different industries. For example, a healthcare company may examine how other companies manage logistics or improve their internal processes.

Process Benchmark
This type of benchmark analyzes how individual processes within the company (production, logistics, customer support) are set up compared to best practices in the market.

How does benchmarking work?

Benchmarking is a systematic process that involves several key steps:

1. Identifying the Benchmarking Goal
Before starting, it is important to decide which areas or processes you want to analyze. This could be, for example, improving production efficiency, increasing customer satisfaction, or optimizing costs.

2. Selecting Criteria and Measurements
What indicators will you measure? These could include financial statements, conversion rates, customer satisfaction, or production speed.

3. Data Collection
Here, data is collected either internally (from the company's own sources) or externally (from competitors or independent research organizations). The data must be accurate and up-to-date for the benchmarking results to be reliable.

4. Analysis and Comparison
Compare your results with those considered the best in the industry. Find out where you are lagging or where you have an advantage.

5. Implementing Changes
Based on the benchmark results, take specific steps to improve. If you find that some processes can be more efficient, implementing changes can lead to optimization and better performance.

A Simple Example of Benchmarking

Imagine you own an online clothing store and want to improve your delivery service. You decide to conduct an external benchmark and compare your delivery speed with competing online stores. You find that competitors can deliver goods in an average of 2 days, while your service takes 4 days.

Based on these findings, you start looking for ways to speed up the process – you optimize logistics, improve warehouse management, and perhaps decide to change the courier service. After these adjustments, you can reduce the delivery time to 2 days and compete with other online stores, thereby increasing customer satisfaction.