Benchmarking is an essential tool for your company. With benchmarking you can identify the strengths and weaknesses in your own business model in relation to the competition. This helps you determine the right strategic ambitions in perspective of the market. But how do you draw actionable conclusions from your benchmark?
What is benchmarking and why is it important for your business?
Benchmarking provides companies with an objective measure of their business, by comparing their performance with that of similar companies. Why is benchmarking important? Well, you cannot judge your performance by just looking at yourself. Compare it to a race that you run on your own, without a stopwatch: how do you know if you’ve done well when you cross the finish line? Benchmarking allows you to see in which areas you are doing well as a company, and where you need to focus on improvement by looking at certain key metrics.
Before you start your benchmark, it’s essential to know what you want to achieve with it. During the year, there are certain key moments to use benchmarking. However, in order to ensure the success of benchmarking, it’s critical to integrate the insights gained from your benchmark into your organization and see that they are turned into actions.
What type of actionable insights do you obtain with benchmarking
- The insights help you with your target setting
Turning the results from your benchmark into actionable outcomes comes down to evaluating the strategic ambitions you set at the outset. If your strategic ambition is to increase your market share in a profitable way, but the benchmark shows that you are fifth and not cost-competitive, you can devise a strategic plan for those areas where you can improve. It is important to quantify a goal on a KPI everyone can understand, with milestones along the road to that goal.
- The results help you operationalize your objective
Benchmarking can help companies operationalize their objectives. Instead of saying: ‘We want to grow faster than the market’, a company can say: ‘We want to grow XX% in the next year’; ‘Become cost leader’ or ‘Realize an OPEX of XX% of turnover’. This is something that should be done at Board strategy days and can then be translated into targets for individual departments.
- The insights help you evaluate your performance
Benchmarking can be used to evaluate your objectives and adjust them to changing market situations: if everyone has taken a hit in their growth or margins, it may be necessary to recalibrate the objective. Setting targets using benchmarking thus becomes an iterative process.
- It provides insights into how your competitors' strategic choices affect your performance
Benchmarking can also be used to analyze how strategic choices by competitors have affected performance, and possibly learn lessons from this. If a company has made several acquisitions in recent years, but the figures show that this has put the profitability of the group under pressure, then acquisitions may not be the best way to grow in this market, and other regions or channels should be explored.
Making conscious choices determine the success of benchmarking
The key to success in benchmarking lies in making informed choices, backed by data. Using data in this way as a company is the way to becoming the best in class. With all the data publicly available, competitive advantage is within reach for any company that takes a step toward data-driven work.
In our Whitepaper Benchmarking, we dive deeper into the benefits of benchmarking. It offers a detailed six-step guide, demonstrating where you can get the data from, what to look at, with whom and when, and how to apply benchmarking in your own organization. In other words, it offers everything you need to take the step today that helps your company move forward. Download our guide by clicking on the button below.