You may keep a wary eye on your competitors, but sometimes it helps to look just a little bit deeper. Even if you’re a big fish in your pond, someone a little bigger may be swimming up just beneath you. Being successful means not just being aware of these competitors, but also knowing their approaches and results.
This is when we look into the purpose of benchmarking. By comparing your company with the leading competition, you can identify weaknesses in your business processes, set goals to correct these problems and keep a constant eye on how your company is doing. In short, benchmarking can help your company grow more successful.
The two basic benchmarking methods are:
1. Quantitative benchmarking. This compares performance results in terms of key performance indicators (formulas or ideal financial ratios) in areas such as production, marketing, sales, market share and overall financials.
2. Qualitative benchmarking. Here you compare operating practices — such as production techniques, quality of products or services, training methods, and morale — without regard to results.
You can break down each of these basic methods into more specific methods, defined by how the comparisons are made. For example, internal benchmarking compares similar operations and disseminates best practices within your organization, while competitive benchmarking compares processes and methods with those of your direct competitors.
The specifics of any benchmarking effort will very much depend on your company’s industry, size, and product or service selection, as well as the state of your current market. Nonetheless, by watching how others navigate the currents, you can learn to swim faster and more skillfully in familiar waters. And, as your success grows, you may even identify optimal opportunities to plunge into new bodies of water.
For more information on this topic, or other profit-enhancement ideas, please contact our firm. We would welcome the opportunity to help you benchmark your way to greater success.