Benchmarking: what it is, types, benefits and examples

Why do some companies always come out on top, even in competitive markets? The answer is that they use a strategy called benchmarking.

This technique helps to optimize the company's performance.

Benchmarking involves comparing other companies' practices to improve your own.

There are several types, such as competitive and internal. This strategy helps to find areas for improvement and validate new ideas.

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Main Points

• Benchmarking is a strategy that seeks to optimize a company's performance by analyzing the best practices in the market in which it operates.
• It involves the comparative analysis of competitors in search of successful strategies that can be adapted for the company itself.
• The practice can be classified into several types, such as performative, internal, competitive, cooperative, generic and functional benchmarking.
• An effective benchmarking process requires collecting concrete data from multiple sources.
• Companies such as Gol Linhas Aéreas and Nubank have achieved success using benchmarking practices.

What is benchmarking?

O benchmarking is an important method in business.

It involves seeking out and understanding the best practices of successful companies to improve performance.

A benchmarking definition compares a company's standards with those of competitors or known practices.

This method helps companies find and use market practices effective.

This brings valuable insights for continuous improvement.

O benchmarking can be used internally or competitively, in different segments.

The benefits are many. They include improving performance, finding best practices, stimulating innovation and increasing customer satisfaction.

It also helps to have a better competitive vision and develop effective strategies.

A table can show how the benchmarking is used for different business purposes:

Benchmarking Type	goal	Main Benefit
Internal	Compare departments within the same company	Internal performance improvement
Competitive	Analyze direct competitors	Strategic development
Functional	Compare similar roles in different industries	Process innovation
Generic	Compare generic processes or functions	Adaptation of best practices
Cooperative	Collaborate with other organizations	Reduction of operational costs

Using the benchmarking definition, a company understands how its operations compare to the market practices.

She makes the necessary adjustments to achieve operational excellence.

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What is the purpose of benchmarking?

Benchmarking is a powerful tool for improving processes.

Its main objectives are to increase performance and optimize operations. It also aims to adopt successful practices from other companies.

Companies that use the competitive benchmarking analyze competitors' processes.

This helps to gain an advantage in the market. Internal benchmarking is common in large companies and serves as a first step.

Generic benchmarking seeks companies with similar processes. This creates an external reference base, independent of the market segment.

A fundamental objective of benchmarking is to better understand the company's processes.

This technique helps identify strengths and weaknesses. This makes it easier to improve processes.

Functional benchmarking is used for common processes such as customer communication.

Helps identify and promote effective practices.

Cooperative benchmarking involves collaboration between companies.

This generates productive results, allowing the exchange of valuable information.

Xerox, for example, dismantled competitors' equipment to understand their strategies.

Benchmarking Type	Description
Competitive	Analysis of the processes of the main competitors in the same segment.
Internal	Applicable to large companies, used as a first step towards a broader plan.
Generic	Look for companies with similar processes, regardless of the market, as a reference base.
Functional	Used for processes common to several companies, aiming to identify effective practices.

Benchmarking emerged in the United States in the 1970s and spread to Europe in the 1980s.

It is essential for several industries. It allows you to compare products, services and practices with competitors, reinforcing the search for operational excellence.

Importance of benchmarking

A importance of benchmarking lies in its ability to drive innovation and competitiveness.

This process involves comparing companies in the same industry. This helps to find areas for improvement and measure progress.

Nowadays, benchmarking is easier thanks to digital channels.

This makes information easier to access.

Corporate events are also great for this practice.

For example, Consulting House helps bring leaders and executives together, facilitating benchmarking.

The American Society for Quality (ASQ) says that benchmarking is comparing a company to leaders.

This could include team management, prospecting, or recruiting.

“Benchmarking emerged in the 1970s, introduced by XEROX.

Participating in corporate events can broaden your strategic vision of the market and help accelerate business growth.”

The process has four steps: planning, analysis, integration and actions.

Companies that do not change with the market may go bankrupt. That is why benchmarking is crucial to have competitive advantage and excellent performance.

Characteristics	Average of the top 150 companies
Profit sharing	89
Physical security of the work environment	96

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What are the types of benchmarking?

You types of benchmarking there are many and each one has its purpose.

They help analyze strategies by showing how companies perform in comparison.

The main ones are competitive, internal, functional and generic.

O competitive benchmarking compares directly with competitors.

It helps you see what your company does well and what it can improve. According to the Harvard Business Review, this practice can increase performance by up to 20%.

Internal benchmarking analyzes different departments within the same company.

This helps to exchange good practices and continuously improve.

McKinsey & Company says this can make a company run much better.

Benchmarking Type	goal	Expected Result
Competitive	Compare with direct competitors	Adopt best market practices
Internal	Analyze internal units/departments	Continuous process improvement
Functional	Learning from companies in other sectors	Apply innovative approaches
Generic	Identify practices applicable to various areas	Adopt broadly effective methodologies

Functional benchmarking compares you to companies in other industries that are excellent at something.

Companies like Toyota and General Electric use this to innovate.

They want to use the best ideas from elsewhere.

Generic benchmarking looks for practices that work everywhere.

Focuses on methods that are generally effective, such as total quality management (TQM).

With so many types of benchmarking, companies can choose the best one for them.

This improves efficiency, productivity and competitiveness.

How does benchmarking work?

O benchmarking process helps companies stay competitive.

It involves several steps, from planning to benchmarking implementation.

In e-commerce, it is crucial to compare performance with competitors and make decisions that improve results.

The process has several important phases:

Stage	Description
Planning	Define the project and choose the companies for analysis.
Data Collection	Obtain relevant data and establish analysis methods and indicators.
Analysis	Compare and interpret information to identify strengths and weaknesses.
Adaptation	Discuss with the areas involved, define goals and improvements based on the findings.
Implementation	Implement the improvements and maintain the benchmarking process in constant operation for continuous adjustments.

Type	Description
Competitive	Direct analysis of competitors in various aspects such as products, services and organizational structure.
Internal	Comparison between different departments or units within the company itself.
Functional	Comparison with organizations or sectors that perform similar functions.
Generic	Comparison with leading companies in general aspects, regardless of the sector.
Of Process	Focused on evaluating and optimizing specific processes, seeking efficiency and cost reduction.
Performance	Evaluates the company's overall performance against industry standards.

O benchmarking It is a continuous process, adaptable to market changes.

To be successful, it is essential to analyze not only quantitative differences, but also practices and strategies.

This allows the company to adopt best practices and improve its performance.

What are the pillars of this strategy?

You pillars of benchmarking are essential to ensure effective and ethical practices.

They ensure that the benchmarking principles are applied in a transparent manner.

This enables organizations to gain valuable insights and implement continuous improvements.

These pillars include:

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Pillars	Description
Legality	Ensure compliance with all laws and regulations during the benchmarking process, avoiding any illegal or unethical practices.
Transparency in Data Collection	Collect information openly and honestly, ensuring that data sources are reliable and methodologies are clearly explained.
Ethics in Information Requests	Respect the confidentiality and rights of other companies when requesting information, avoiding espionage practices or obtaining data through fraudulent means.
Contact with Market Professionals	Engage with experts and other industry professionals to exchange experiences and share knowledge that can benefit both parties.
Sharing External Insights and Experiences	Disseminate findings and results so that others can also benefit, promoting a culture of continuous improvement and innovation in the sector.

These pillars of benchmarking are essential for companies to be able to carry out accurate diagnoses.

They enable in-depth research, efficient data compilation and interpretation.

Furthermore, significant optimizations are possible.

Follow the benchmarking principles ensures that the analysis conducted is not only effective, but also ethical and legal.

This provides tangible and continuous improvements.

Performance Benchmarking

O performance benchmarking helps compare performance metrics with competitors.

It allows businesses to see strengths and weaknesses. This helps improve strategies and operations based on effective data.

In manufacturing, manufacturers use benchmarking to measure quality, time and cost.

They look at total manufacturing cost, cycle time, and unplanned downtime.

These metrics help you control operations and make continuous improvements.

O performance benchmarking has several phases, such as planning, analysis, integration and action.

Each step is important to find opportunities for improvement.

Shopify, for example, improved its online checkout by up to 36% using effective benchmarks.

Below is an example of how measurements of KPIs can be compared:

Indicator	Company A	Company B	Company C
Total Manufacturing Cost	20%	25%	30%
Manufacturing Cycle Time	15 days	18 days	20 days
Machine Downtime	2%	3%	5%

Maintaining a consistent level of benchmarking and using appropriate solutions is essential.

This provides valuable insights into the effectiveness of processes.

The method not only reveals strategies for improvement, but also promotes continuous improvement in business.

How to do benchmarking?

To benchmark effectively, follow the steps carefully.

First, clearly define what you want to achieve. This will help you choose the best method for your business.

There are several types of benchmarking, such as competitive and internal.

Each has its advantages and challenges.

For example, the competitive benchmarking analyzes competitors, while the internal benchmarking is ideal for large companies.

To do good benchmarking, it is essential to map the processes.

It is also important to normalize the KPIs.

These indicators can be content formats, reach, engagement and campaign performance.

After collecting the information, analyze it well.

This helps to find opportunities and improve processes. Remember, the benchmarking guide can change according to your company's needs.

With the knowledge acquired, you can find new trends and justify investments.

Benchmarking is an ongoing tool. Review your steps regularly to maintain process effectiveness.

Mistakes to avoid

Benchmarking helps a lot in improving a company, as shown by the American Productivity and Quality Center (APQC).

But, common mistakes can negatively affect results.

Many people are faced with setting the wrong goals and choosing the wrong competitors for analysis.

It is crucial to follow the Code of Conduct. Failure to do so could make benchmarking illegal, such as industrial espionage.

Additionally, comparing companies of different sizes can skew the results.

Effective practices in large companies do not always work in small companies.

Choosing the wrong benchmarking partners can lead to very low targets.

To avoid this, it is important to focus on improving performance in the long term.

It is also essential to adapt the observed practices to the needs of your company.

For improvements to be effective, it is necessary to measure the results.

Not measuring results prevents assessment of benefits.

Avoiding these mistakes can make your business run better and achieve better results.

Advantages of benchmarking

Benchmarking brings many benefits to your company.

It helps you get to know the company better, identifying strengths and weaknesses.

This leads to continuous improvements and helps in long-term growth.

Companies that use benchmarking are able to innovate.

They adapt successful practices from other businesses. This keeps them competitive in the market.

Benchmarking also increases employee engagement and motivation.

They see that the company is improving and that motivates them.

Transparency in the goals achieved also creates a more productive work environment.

Process optimization is another great advantage of benchmarking.

When comparing with other companies, you find more efficient methods.

This improves productivity and can reduce costs.

For example, in e-commerce, benchmarking helps establish important metrics.

In healthcare, it is possible to improve waiting times and the quality of care.

In short, the benefits of benchmarking are many and varied.

It helps to innovate, engage employees and optimize processes.

This improves the overall performance and competitiveness of the company.

By using benchmarking strategically, your business will grow and prosper.

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