Benchmarking business performance is a strategic and systematic process executives use to gauge and compare their performance against the best performers in their industry.
In this context, industry vertical refers to a market niche that specific companies focus on meeting the needs of a particular audience or demographic. This process enables a company to identify gaps in their processes and improve them.
We believe that for (most) businesses, benchmarking is a fundamental. A key technique of setting a company’s performance as a standard and then comparing it with others within the same industry. It involves gathering crucial business-related data and metrics, comparing them with similar businesses or industry standards, and establishing goals and strategies based on the results.
STEPS
The steps to benchmark a business within an a specific vertical are as follows:
- Define what you will benchmark: Identify the areas or processes in your business that need improvement. It could be anything from your customer service, marketing strategies, products, financial performance, or supply chain management. It’s crucial to have a clear understanding of what you want to benchmark to attain relevant and crucial data.
- Identify benchmark partners: After determining what to benchmark, the next step is establishing who to benchmark against. These should be best-performing companies within the same industry vertical considering they are exposed to similar market dynamics. While choosing benchmark partners, the aim shouldn’t be to compete but rather to learn.
- Collect data: Once the benchmark partners are identified, the next step is the collection of data. Collect data on the given parameters you seek to benchmark. This information can be gathered from several sources including from our industry reports, financial reports, databases or directly through surveys. The team at Platform Executive can help you here.
- Analyse the data: Analysing the collected data provides insights into how well you perform compared to others. The analysis should factor in the bigger picture of the industry’s competitiveness as well as the specific strategies employed by various companies. The main aim of this step is to identify gaps and opportunities for improvement in your company.
- Take the required action: After identifying the opportunities for improvement, the next and the most crucial step is to take action. Design an implementation plan that outlines the strategies and steps that the company should follow to boost performance. It also includes a timeline for when the changes should be implemented and the expected results.
- Follow-up: Benchmarking is not a one-off process but rather a continuous one. Regular evaluation and updates are necessary to keep up with the changing trends and dynamics of the industry. Make benchmarking an integral part of your business strategy.
EXAMPLE
To better illustrate this process, consider a UK-based manufacturing business that wants to benchmark to improve its production efficiency.
First, the manufacturing firm identifies what to benchmark. They choose productivity and waste production as these are critical areas in manufacturing.
Next, they identify benchmark partners. Suppose the industry standard for waste production is less than 5%. They would then choose to benchmark against the leaders in waste reduction.
The firm then collects data. This may involve data on the production volumes, revenue, the quantity of raw materials used, waste produced, and other relevant stats.
Following data collection, the manufacturing business analyses the data. When doing this the they discover that their waste production is at 8%, significantly more than the leaders in their space. They spot an opportunity for improvement.
The firm then springs to action, developing an action plan to reduce waste production and increase efficiency. They may implement new machinery or update their production process.
Finally, the manufacturing business continues to monitor its progress, noting any improvements or possible areas of growth.
CONTINUED MONITORING
Continuous tracking, especially of industry standards helps businesses identify gaps in their performance metrics and product or service offerings. It equips them with the insight to effectively strategise and implement process changes, innovation or product acquisition, leading to improved competitive positioning. It also assists in evaluating whether a company’s operations, technology, and practices are up-to-date, efficient, and in alignment with best practices.
The dynamic nature of markets today, with constant advances in technology and shifts in consumer behaviour, frequently leads to the evolution of industry standards. Continuous monitoring is essential to spot these changes early and respond effectively, maintaining competitive advantage.
Regular benchmarking against these standards also encourages a culture of continuous improvement within an organisation.