How to use this valuable business tool to identify and set goals
A little competition is always a good thing. After all, where would Apple be without Microsoft? Where would Coca Cola be without Pepsi? Where would tennis star Roger Federer be without famous rival Rafael Nadal? Competition leads to innovation – and innovation leads to greatness.
But how do you know who is winning a competition? The answer, of course, is that you measure. In sports, there are points, but in business, it’s called benchmarking – and it’s how all the world’s top companies stay at the peak of their business game.
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What is benchmarking?
Benchmarking in business is the process of comparing how your business is doing against the performance of other leaders in your industry. You can apply benchmarking to your business operations, sales and products. Measurements that are typically used include cost, quality, time and customer satisfaction. For example, if you ran a technology company and wanted to see how your sales compared to industry benchmarks, you’d most likely run your numbers against big companies like Google or Apple.
Companies use benchmarking to improve their own processes and operations. By examining how industry leaders have been able to accomplish their goals, you can identify gaps in your own processes and sales. Nearly every business, in every industry, uses benchmarking as part of its strategy for constant and never-ending improvement.
How to use benchmarking in business
Benchmarking can provide the stimulus your organization needs to make strides when it comes to internal growth. You can determine how to improve customer loyalty, streamline your processes and reduce costs. Closely studying benchmarking examples can also be useful when it comes to finding new ways to increase profit and learning how to deal with crises like economic downturns or employee retention issues.
The smartest business owners even look beyond their own industry when it comes to benchmarking. Analyzing the approaches and systems of related industries can provide new ideas and inject creativity into your own operations. The process looks something like this:
1. Determine the general subject of your benchmarking study
2. Determine the specific process you want to study
3. Define how you will measure the process
4. Define your comparison companies
5. Collect and assess the data to identify differences
6. Determine the causes of the differences
7 .Set and implement a specific improvement initiative
8. Report on the results and identify further improvements
9. Repeat until there is no longer a gap
In the end, what is benchmarking, really? It’s another opportunity for you to innovate and provide more value than anyone else.
If you own a business, you can use benchmarking – period. Here are five benchmarking examples from diverse industries to get you thinking about this valuable strategy:
1. A software company benchmarks the speed of its algorithms against what it knows about the competition’s algorithms.
2. An online women’s dress retailer benchmarks its average delivery time and order accuracy against that of competitors.
3. A brick-and-mortar dress shop benchmarks sales per square foot against its industry rivals.
4. A maker of lightbulbs benchmarks their energy-efficiency against that of competitors.
5. A pizza restaurant benchmarks its order time against other pizza restaurants in town.
Beyond benchmarking: Five strategies for a thriving business
Identifying and setting goals is crucial, but getting so wrapped up in how you measure up against others will never be helpful. This is where benchmarking sometimes becomes harmful to entrepreneurs. You must also continue to focus on finding ways to improve your business and achieve your own mission.
1. Get back to basics
What got you into your industry in the first place? It wasn’t that you wanted to knock out Google. You had an idea that would provide real value to the lives of your clients and you found a way to turn that passion into a business. And to make your business talkably different, you need to find your purpose – and your passion – and align your company with the values that you live every day.
As a business owner, you should never forget that your motivation and goals are unique and the comparison that is inherent in industry benchmarks can make you lose sight of that. Before you even think about benchmarking, you must create an inspiring vision for the future. This is likely not the same vision your competitors have, nor should it be. Your company vision cannot be benchmarked. It’s what makes you unique. It’s the reason you can offer your customers something no one else can – and that’s what really keeps them coming back for more.
2. Focus on the customer
Instead of using benchmarking as a way to compare yourself to other companies in the industry, use it as a tool to help yourself provide more for your customer. What are other brands doing to successfully retain current clients and attract new ones?
Marketing guru Jay Abraham states in his Strategy of Preeminence that the key to success is falling in love with your customers. This involves getting to know them as fully as possible and understanding their hopes, dreams and pain points. When you take the focus off benchmarking and increasing profits and put it solely on those you serve, you improve your probability of success and feel more fulfilled in the process. Once you dig deep into your customer’s lives, you can then craft the ultimate customer experience.
3. Lead with compassion
Once you truly understand your customers, you can anticipate their needs – sometimes even better than they can. Jay’s Strategy of Preeminence states that great companies always strive to provide leadership to their customers. They demonstrate a definitive belief system and an absolute conviction in their point of view that convinces their customers that they can provide greater results or happiness through their products or services.
This type of servant leader mentality eclipses any type of marketing or other methods of gaining profit share. When you run your company with your customers’ or clients’ needs in mind, you make clients so happy that they will end up doing much of your marketing for you. Before you know it, you’ll become the company that others are benchmarking themselves against.
4. Stay true to your mission
For an emerging technology company, Apple will always serve as a point of inspiration. However, you didn’t launch a company to constantly talk about how Apple is incredible – you did so because you want to make your own strides in the industry. Instead of using benchmarking as a way to compete with companies like Apple, use it as a springboard to create new and better customer experiences.
When you find yourself spending too much time thinking about what doesn’t serve you, you lose valuable time that you could be using to better your own company. Connect back to your original purpose – how can you build the life you dreamed of by making your company run more efficiently?
5. Be the change
Benchmarking can be useful if taken at face value. That is, measuring your present success by how the industry is performing today can prove useful. But what industry benchmarks don’t account for is the changing nature of any business sector. Every day, the needs and desires of humans can change.
If Henry Ford had modeled his transportation company after the success of the railroad, then would Ford cars even exist? Instead, he looked ahead and found new ways to provide reliable transportation. Market expectations can shift in an instant. Be aware of current customer expectations, but be knowledgeable enough to anticipate the changing needs of your target audience so that you can strategically innovate and continue to meet your customers’ needs in the future.
When you answer the question of “What is benchmarking?” you’ll see that it can prove useful in many ways. Remembering why you started your business in the first place, staying true to your brand identity and always putting your clients and customer needs first allow you to utilize benchmarking without letting it disrupt your mission.
Discover how to effectively use benchmarking
As with most business strategies, benchmarking can be helpful if you learn to use it in the right ways. You should not disregard the positives simply because you are worried about the negatives. Learn methods to systematically optimize your business through methods like benchmarking with Tony Robbins’ complimentary Entrepreneur Accelerator Toolkit.