What is Benchmarking, types, how to do it, advantages and examples

To stay strong against the competition, you have to understand what benchmarking is and how to put it into practice.

It is a concept that could easily be described as: a spy on what the neighbor has been doing so that their grass is greener every day.

The analogy is interesting, since benchmarking is still a tremendous opportunity to learn from the best experiences in the market.

Except that its application goes far beyond just seeing.

Among the types of benchmarking, there are lessons that you can take advantage of within the company itself, moving from one sector to another, in the so-called internal benchmarking.

And there is also functional benchmarking or competitive benchmarking, and other methods that vary in terms of focus, but have the same objective.

The idea is always focused on evolving, as you will see in this article.

Throughout the text, I will explain why it is an important technique that can contribute to the development of your business.

I’m going to tell you about its advantages and disadvantages, and also, present you with a diagram that includes a complete step-by-step so you don’t make mistakes.

And to end this our meeting on benchmarking, practical examples will appear and they will all be yours for you to take advantage of.

Are you interested in acquiring that knowledge? So, stay with me.

What is benchmarking?

What is benchmarking

Benchmarking is a comparative performance evaluation process, from which a company seeks to rate its practices and improve its results.

Originally, the concept was adopted in the relationship established between a business and its direct competition, those that operate in the same sector.

However, as the technique has evolved, the meaning of benchmarking expands towards other comparison models.

Today, companies of all sizes use this tool when drawing parallels and looking for good ideas to deal with common situations in various scenarios.

Even making this movement within the organization itself.

The term originates from the English word benchmark, which can be translated for reference.

Its application is understood as the search process for best practices.

At the end of the day, it is not about copying them, but about using them exactly as references, and from them, adapting them to the needs and particularities of your business.

It is worth remembering that, like other administrative techniques, benchmarking has among its main purposes, the construction of a competitive differential.

What would not be feasible, if the strategy were summarized to reproduce what the competition has been doing, even if it is successful?

Thus, when understanding what benchmarking is, it is necessary to look at it from the point of view of the update it provides.

There are always better ways to deal with common business situations.

It is not about innovation outright, but about achieving superior performance, arising from changes in internal processes.

When benchmarking, the entrepreneur is attentive to market opportunities and willing to evolve, without having to use a unique, exclusive and original idea.

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Because it is important?

Because it is important

By understanding what benchmarking is, it will be easier to understand its importance to the company as well.

The truth is, you don’t need to reinvent the wheel, or try every time.

All businesses, whether small, medium or large, face common problems.

They occur in different departments: administrative, financial, commercial, stock, human resources, among others.

Sometimes, they are specific questions, even minimal, that could be resolved with an idea that is not original and that is already being put into practice in another place that is experiencing a similar situation.

The question is this: why think of a new solution to an old problem, if this will not put you in an advantageous position in the market?

It is interesting to consider the classic benchmarking, the so-called competitive, since it is directly related to the careful observation of the competition.

This is a perspective that has its very peculiar advantages.

Just as we have something to teach those who compete with us in the market, there are also quite a few things we can learn from them.

If it is true that the neighbor’s grass is greener, prettier and more attractive, there must be reasons to be, right?

This is what benchmarking sets out to discover.

It is also important so that your business stays updated and does not stop in time.

And of course it should not be the only way to be aware of trends.

But taking a step forward can be the result of an action focused on several players (those who act in a relevant way in the market).

Have you already thought about that?

With benchmarking, knowing how to take advantage of every opportunity, you will be able to develop a unique management.

It is, without a doubt, one of the best ways to optimize processes inside and outside the company.

Types of benchmarking

Types of benchmarking

And now that I have advanced a little more on the matter, I clarified what benchmarking is and why it is important, I am going to talk to you about its different perspectives.

As I said before, classic benchmarking is one that analyzes the competition.

It is not the only one, but it is undeniable that it remains the most used.

I will continue this article talking about him

Competitive benchmarking

What has your competitor done better than you?

Which of your practices are critical to achieving better results, maintaining productivity, and making your business more efficient?

What can you learn from him?

These questions are the backbone of competitive benchmarking, the classic competitive analysis model.

If you are a good observer, you must be feeling a flea behind your ear.

In short, how are you going to find those answers, if you can’t get into a competitor’s company?

That is where your main challenge is.

Companies that perform external consulting, for example, are specialists in this type of market analysis.

Obviously, it requires some type of investment, but if it is planned properly, it can be used very well.

You need to understand that there are reasons why your competitors stand out.

If a certain player corresponds to 50% of the market share, something will be doing very well to reach that place.

For example, speed in logistics, more efficient marketing actions or more productive negotiations with suppliers.

It is up to you to analyze, diagnose and inspire yourself in the success stories.

Functional benchmarking

Functional benchmarking

If direct competition is observed in competitive benchmarking, when the analysis refers to functional benchmarking, it is necessary to broaden the search margin.

It is time to include indirect competitors and others who do not dispute with you in the market.

But who is in that category?

To put the strategy into practice, you must focus on observing functional processes in other companies in various segments.

In other words, what is it that leads certain organizations to reach the top?

Ask yourself what they do on a daily basis that may have contributed to long-lasting and effective results.

The secret is to take a good look at all your work processes and look for sources of inspiration.

For those who work in the service sector, for example, the calculation of labor and the pricing itself, represent significant challenges.

Did you ever think that there are many companies that may have something to teach you in that regard?

Now, if what bothers you is the apparent inefficiency in the customer collection process, see what you can change, starting from who is the reference in the market in that area.

These are just two examples that should not limit your way of analyzing functional benchmarking.

The profits generated through this technique can be where you least expect it.

So pay attention.

Internal benchmarking

I’m going to tell you now about one of the most interesting types of benchmarking, the internal one.

What is so special about it?

The funny thing in this case is that it goes in the totally opposite direction to the classic model.

Instead of observing the competition, you analyze yourself. An introspective look.

To clarify yourself better, your task will be to make comparisons between different areas of the company itself, or between subsidiaries, if there are any.

First, identify common work processes.

Then list the strengths and weaknesses.

Next, reflect on what one can teach the other.

Do you want me to give you an example?

Let’s assume that you are concerned about the results of digital marketing.

On the other hand, you are quite satisfied with what refers to financial control.

Now, think and answer: what could one area teach the other, in the case of different processes?

Perhaps it is the organization of tasks, a work plan that prioritizes productivity or the fact of having a strategic planning, which is always important.

Well, how do you go about generating leads? How do you make a landing page? What is the process that involves the sales funnel at all stages?

Ideas, ideas and more ideas.

Learning possibilities are everywhere. Even within your own business, which is really great.

In that case, to identify them, it is not necessary to look outside the walls of your company.

Collaborative benchmarking

Collaborative benchmarking

As long as the benchmarking is external, there is a bit of difficulty in putting the strategy into practice, in addition to having more expenses in the process.

The exception to that rule is collaborative benchmarking.

As its name indicates, it is the result of a collaboration, which we can also define as a healthy exchange of experiences.

What is it that your business collaborators, such as suppliers, can contribute when they share information?

The main feature here is the incentive for mutual aid.

The idea is that one learns with the other.

Even in cases of indirect competition, it is possible to carry out this type of action, without causing any damage.

In sum, whenever two companies can expand their market, without taking space from each other, collaborative benchmarking acquires great value.

Generic benchmarking

Unlike the other types of benchmarking, when we talk about the generic, its definition may not seem so clear.

At first, it is quite similar to functional benchmarking, since it concentrates on the analysis of operational processes.

But it also has a bit of collaborative benchmarking, since it is usually born from the proximity of companies that collaborate with each other, not necessarily acting in the same segment, but in areas that have a certain relationship.

Let’s go to an example?

Assuming that the time factor is the most difficult point.

You live anguished with deadlines, you think that all your sales stages could be resolved in a more agile way, but you cannot find a solution.

Well, every type of company works with sales, right? Some sell products, other services, but that’s where your billing comes from.

What can your business partners teach you to improve that process?

Do they use a tool that automates tasks? Or do they have their own control method that ensures efficiency?

My advice is that you approach and see everything closely so that you discover it.

Advantages and disadvantages of benchmarking

Advantages and disadvantages of benchmarking

So far I have spoken well of benchmarking, highlighting its contributions as a business strategy.

There are other strong elements of the technique that I can still refer to.

But do not forget that like any administrative tool, benchmarking has its limitations.

So let’s learn more about its advantages and disadvantages.

Advantage

  • It adds efficiency to the operational processes of the company.
  • It allows to adopt practices that worked and work in businesses with different profiles.
  • It broadens the manager’s knowledge about the functioning of the organization itself.
  • Identify how the market moves and what the competition has done to stand out.
  • It generates practical results, such as increased sales and turnover, as well as reduced costs.
  • It serves as motivation for your team to reach the level of maturity of other players in the market.

Disadvantages

  • It is not exactly easy to observe direct competition.
  • Depending on the branch of action, it may require an unviable investment at a certain time.
  • There is a risk that it will be mistaken for a copy and will not generate a real advantage.
  • Contraindicated practices may appear to be advantageous.
  • It can put the very identity of the company at risk.
  • Its internal model has more limitations.

How to benchmark

How to benchmark

The time has come to put your hands in the dough.

To illustrate how to benchmark, I am going to present you a step-by-step that takes the classic model into consideration.

I mean, I’m going to teach you to spy on your neighbor’s grass, the one I mentioned at the beginning.

1. Select the competition

Benchmarking needs to focus in one direction.

Even if your market is large and you have dozens of competitors, you must be selective.

It includes in the action, companies whose initial evaluation indicates that with them there are more learning opportunities.

Direct competitors and large organizations should be on the list.

Do you want a recommendation?

List all the options on a sheet of paper and select until only about three of them remain.

This procedure qualifies the result of your analysis.

2. Establish the qualitative and quantitative indicators of your analysis

To make a comparison it is necessary to have clearly defined criteria, do you agree?

So that should be the second step of your benchmarking strategy.

It is important that these criteria have a qualitative and quantitative perspective.

Obviously, depending on the analyzed process, there will be more or less performance indicators that you can use.

If you are going to evaluate a digital marketing process, it will be much more feasible to measure the return and compare the actions.

Even, because in that case, much of the information is found on the web.

3. Obtain data for analysis

It does not matter if you are going to do the benchmarking alone or through a consultancy. What matters is to ensure that you have reliable data for your study.

This is a definition that depends a lot on the characteristics of your business, the profile of your competitors and the type of process you want to analyze.

Taking the example of digital marketing, there are interesting tools such as Serums, SimilaWeb and Clout.

I am not going to detail each of them here, as it is important that you do your research to identify the one that best suits your needs.

But I anticipate that all of them can provide you with valuable information about internet traffic – yours and that of your competitors.

4. Compare the information collected

This is the most obvious stage, but not for that, the least laborious.

On the contrary, you have to dedicate yourself intensely to the exercise of comparison.

Well, the actions to be carried out from now on will be established taking precisely the analysis as a starting point.

Take what you collected and examine what is useful and viable, separate what is not.

This will help you achieve a more accurate result.

5. Detect highs and lows

At the end of the benchmarking process, you will have a kind of report.

Thus, you are going to distinguish point by point, everything that puts you at an advantage and also what places you behind your competition.

And when I tell you to spot strengths and weaknesses, few tools are as efficient as SWOT Analysis.

I already talked about it here on the blog in an exclusive post, it’s worth taking a look.

Basically, the contribution of the SWOT will be to indicate the opportunities that open as a result of the comparison with other competitors, and the threats they represent for your growth.

Benchmarking example

Benchmarking example

To continue our talk on digital marketing, I am going to give you a quick example of benchmarking that contemplates strategies on the internet.

Let’s assume that you are working on creating an info product.

One of the fundamental stages for your success is in the launch formula.

How will this product be presented to the market? Through what channels? With what investment?

You do NOT need a new method.

Just look at the market to realize that there are many digital entrepreneurs who have excellent practices.

Why not be inspired by them?

Conclusion

Benchmarking conclusion

In this article I addressed what benchmarking is and how this tool is important to qualify the operational processes in the company.

It does not matter what the activity is, or the size of the business.

Now you know that you will have many benefits by adopting actions that have already worked in other companies, whether or not those of your competitors.

How about taking a look at the market then and building a strategy that puts you ahead of the competition?

The information for this you already have.