What is benchmarking, the best strategy for your company’s growth

What is benchmarking, the best strategy for your company’s growth

Franco Brutti

Apr 6, 2023

Apr 6, 2023

Apr 6, 2023

What is benchmarking, the best strategy for your company’s growth
What is benchmarking, the best strategy for your company’s growth
What is benchmarking, the best strategy for your company’s growth

Everyone has an example to follow, a model, idol, or reference, no matter what name you call it: what matters, in the end, is how you take those references from the area you are interested in to create your own style or bring it to your company, and this is when we talk about benchmarking.

Imagine that you want to start in a market that an artist already works in, well, what you can do is perform an analysis in a strategic way to understand what are the practices that have led him to be so successful. 

But is that all we can say about benchmarking? No, this definition, although accurate and simple, is quite superficial, so relax, we are going to explain everything that this analysis strategy involves and how you can use it in your company.

What is benchmarking?

Remember the example of the artist? Let's take it to business. Let's say you are about to start in the technology and telecom sector with a new social network. Let's be honest, almost everything has already been invented. At least that's what was believed in social networking until TikTok came along.

Why do we mention TikTok? Simple, because your project should research this social network to understand what has made it successful (short videos) and, based on that, work to improve your product and polish the performance of your new social network.

If you stop for a moment and think: reels on Instagram were not so frequent before TikTok, and why? Because this dynamic became a trend in a short time and forced other social networks to adopt it. That is, Instagram and Facebook, who introduced reels on their platform, are benchmarked with TikTok and you can do it too.

Why is this practice so important? 

So far, you can see that benchmarking consists of, depending on your area, analyzing your competition, but the truth is that it goes far beyond that. 

You can also look at potential customers, discover possible ideas to innovate your project, and update your entire strategy. 

And yes, it consists of understanding your competitors, but through this analysis, you also focus on what you offer as a company to your customers. Thanks to this benchmarking practice you can understand your position in the market in a better way.

Also, you’ll start to see where you have your major weaknesses compared to your competitors and work on them to strengthen them and be a better option for your target audience.

Imagine that you have detected 2 services that your company does not offer, but your competitors do, thanks to benchmarking. Now you can develop an action plan that will allow you to cover this weakness in the short, medium or long term, although you must take into account its advantages and disadvantages:

Advantages of benchmarking

  • Creates new paradigms in your company.

  • Promotes evolution and change.

  • Analyzes the competition.

  • Generates cooperation in the company.

  • Creates dynamism in services and products for customers.

  • Motivates employees to improve.

Disadvantages of benchmarking

  • There is an investment to be made.

  • You could lose your company's identity in the process.

And what are its characteristics? 

Like any good company methodology for the development and implementation of improvements, it has clear characteristics that you can delimit at the moment of putting benchmarking into practice.

1. Objectivity

Benchmarking is carried out according to specific rules and is characterized by its objectivity; as a result, organizations must be included for a specific reason.

2. Analysis

Constantly evaluates the trends according to market benchmarks for interrelated companies and acts as a guide for continuous process improvement.

3. Practices

Benchmarking has the advantage of focusing on practices to find opportunities for improvement as part of a program that focuses on continuous development that includes feedback processes for companies.

What is benchmarking used for?

We’ve talked so far about various ways to use it, but now we want to talk about what it’s useful for within the company that applies it.

1. Comparative evaluation

Let's start with something essential and no, it’s not the same as a competitor analysis since it’s a more in-depth methodology. 

You should think of benchmarking as a strategy to see what the correct practices are that have produced success in your competition.

Benchmarking goes beyond "copying" or "plagiarizing" what your competitors do. It’s the implementation of everything that is good in your work model. If someone else has already gone down the same path, why not take a shortcut?

2. Increased company productivity

Benchmarking against industry benchmarks also helps increase the productivity of any business by encouraging it to improve its work processes. 

Finding opportunities to improve and adjust the work processes you have already established requires you to be able to recognize your strengths and weaknesses to work on them and create a solid working foundation.

3. Reduce business risk

We all want to avoid failure and in a company that has a monetary investment behind it, even more so. If you decide to invest in benchmarking in the long run you will see the results as it prepares you to solve internal issues.

A comparative evaluation you make with benchmark companies in the sector of your interest can make the difference in decision-making to preserve your brand and increase your efficiency in its development and growth.

What objectives can you achieve through benchmarking?

Benchmarking focuses on the adaptation of successful formulas implemented before by other companies, but knowing, understanding, transforming, and adapting these formulas to the mission and vision of the new company that applies this practice.

If you want to achieve this, you must establish some comparable objectives. In addition, you need to understand the procedures used by some of the best companies in your industry to produce their best results.

These are some of the objectives that all benchmarking process has to achieve:

  • Establish new concepts to analyze.

  • Expand the company's knowledge.

  • Identify which areas of the company are needed and can be improved.

  • Delimit feasible and real objectives.

  • Allow a better understanding of the competitive market.

  • Focus on best practices in the market.

  • Develop new strategy methodologies to outperform the competition.

  • Improve communication.

  • Improve work methodologies.

  • Reduce potential errors.

  • Cost reduction.

3 Types of benchmarking

Yes, so if you want to apply this practice correctly, you must know which type of benchmarking your company needs and why, but we will explain that now.

1. Internal

Benchmarking is only applied in companies that attack your same work sector? Think and read again because you have not been paying attention.

This practice can be applied within the same company, but in different work, areas to know what is working in the marketing department and what is not working in the corporate design department.

It’s as simple as this, but a bit more complex since being the example can be a very big pressure or the other department might not take it in the best way. This is when not only benchmarking comes into action, but also the management and application of this methodology.

2. Competitive

Of course, if you’re going to focus only on your own company you are going to be left with a very reduced vision, not only of your company but of the market. Innovation has always come from interaction, knowledge, and analysis with others, so this is fundamental to your growth.

Competitive benchmarking researches businesses and analyzes them to examine their successful methodologies, as this is the right way to improve your service, procedures, and strategies and be more competitive, as well as identify your weaknesses in the market. 

Do you remember the trend set by TikTok that we told you about recently? Well, that’s the best example of how other companies have had to resort to benchmarking to implement a new methodology.

3. Functional

Who says you have to limit your vision? Inspiration for an idea can come from where you least expect it, and this is when you can and should bring your creativity into play to make your company thrive.

Functional benchmarking focuses on this, as it studies successful strategies from other companies that have no relation to yours: whether your company is in marketing and you take a reference from a sports newspaper, for example. Who says your inspiration has to be limited to the competition? 

3 Types of benchmarking: Internal, competitive, functional

6 Steps to Apply the benchmarking methodology

You have decided to implement the whole benchmarking process for your company, but you don't know how to do it. Don't worry, we will help you in the development of the different steps you must follow to apply to benchmark:

1. Study your business

The first step is to study your own company to know which internal processes are executed correctly and in which work area you could implement them to improve it as well. You can do this through feedback from your customers.

2. Select the type of benchmarking

It’s time for you to choose the type of benchmarking you want to do, whether you want to study companies in your sector or go a little further. Remember that in any case, you must take the aspects that have made that company a benchmark, the success it is at the moment. 

3. Choose the companies to study

Once you’ve established which benchmarking you are going to implement, it’s time to choose which companies you are going to study. 

Nobody said it had to be just one company since you can take several and thus make a more complete comparison of what works in one and what works in another, in order to apply this in your work methodology.

4. Establish the data you are going to collect

It’s time to choose the data you are going to collect during this whole process. Whether you decide to collect data from their social networks, blogs or search engines, these must be delimited to move on to the next step.

5. Study the collected data

It's time to study all the data you have obtained during the previous process to measure the differences it has with your company, so you can have better results and an easier time implementing them in your company.

6. Implement the improvements

Once you’ve studied all the data from your competitors, it’s time to implement the improvements in the different areas of your company that you see pertinent.

Whether you bring innovation from another sector that you think might work in your area of work or you simply fix details in your projects and/or services, you need to implement that data and turn it into tangible facts for your company.

6 steps to apply the benchmarking methodology

What is the conclusion of benchmarking?

It’s a practice that your company can implement at any stage of its development to improve its products and/or services considering two key aspects: competition and target customers.

So you don't have to be afraid of change if it will help you to keep growing in an incredible way. 

Although if you think you can continue learning about benchmarking, why not do it? You can always learn more with us.