Implementing meaningful competitive benchmarking involves understanding and avoiding certain pitfalls to gain that differential advantage in the market…..
Starting a business of your own is indeed an exciting and a significant accomplishment, but then comes the larger challenge which is maintaining and running it successfully. And undeniably, one of the critical step to success for any business is conducting competitive benchmarking – that is, the process of comparing your company metrics against competitors and the overall market you are operating in.
And, certainly the next question that ponders the mind is “Why”? Well, because competitive benchmarking essentially helps in keeping up, outdoing the competition and having that strategic edge coupled with enhancing your Key Performance Indicators (KPIs). To simply put, it is a method through which businesses are able to evaluate their internal progress, understand their competition, ascertaining best industry practices, defining the best processes / practices and integrating them into business activities to keep an edge over the competition. And of course, all this eventually leads to growth of greater profits, which is the primary goal of any business and gauge your success rate in business.
“All successful companies are constantly benchmarking their competition. They have to know what they match up with day-in and day-out-if their company is going to be successful – James Dunn
Let us now consider an example which will help you in understanding the concept and relevance of competitive benchmarking. Suppose your business process takes one hour to manufacture your product. But, you do not know that one hour time taken is good or bad. So, the only way for you to know is when you compare this estimated time taken against the time taken by your competitive company in manufacturing the same type of product. If your competitive company is able to manufacture the same product type in less than an hour, then you can use their time and process as a benchmark for assessing your own processes to understand where you are lacking, and thereby improving your functionality in future.
6 Pitfalls to Avoid While Using Competitive Benchmarking
Though irrefutably competitive benchmarking provides your business with compelling insights you’re your performance level and gradual improvisation, however, it needs to be kept in mind that you can get the most out of it only if you keep in mind to avoid the common downsides or pitfalls that comes with it. In this article, we will point out the various potential mistakes or pitfalls, which businesses end up overlooking, thereby failing to get the most out of this process.
- Absence of context – The first downside to mention is that at times the competitive benchmark data being compared is confiscated from its short and long-term context. This basically means that though it tells you ‘what’ your competitor has achieved but it does not take into consideration with regards to information as to ‘how’ they achieved it. This in turn makes it problematic in identification of meaningful areas of improvement.
- Lack of finding significant data – Though in today’s digital era, it has become relatively easier in finding data about a lot of your competitor companies. However, it might happen that some of your competitor companies might not have shared data which in turn will leave you in comparing against companies from outside of your target market, which of course, will not much of your relevance. But, this can still be worked out by seeking an expertise consultant company that can guide and help you in getting the right and informative data of your competitor companies.
- Focusses on past than present or future – One of the issues with competitive benchmarking is that it focuses on letting us know what has already happened, and does not provide information regarding what is happening in real time. Rather, at times it also fails to provide indicators of future KPIs. And, we all know that past performance is no assurance of future results. Thus, you need to be sure that whenever you are undertaking this process, it provides you with some relevant data with regards to the present and future performance as well.
- Lack of finding authentic data – In this information age that we are living, there are numerous open sources / sites providing an easy way to access competitive benchmark data. For example, builders/Property Dealers can use 99 Acres.com or hotels can use Booking.com in order to perceive how customers rate their competitors and their products. Nonetheless, the issue in hand is with regards to the authenticity of this data which at times is dubious. Moreover, it is not possible to find open sources / sites for every industrial vertical.
- Lack of Understanding – It is seen that many at times the companies adopt benchmarking for the sake of an activity to be done or just because their competitors are undertaking it, rather than understanding the entire concept and finding out the necessity of undertaking it. Thus, the end result is the entire process of competitive benchmarking goes in vain without providing the company with some relevant data to optimize its performance. This can even lead to losing opportunity in further growth of their business. And but of course, “One person’s loss is another person’s gain”.
- Irrelevant Comparison – As we know that competitive benchmarking involves a comparison between two or more companies belonging to the same industry vertical and manufacturing the same type of product. But at times, the companies make irrelevant or incorrect comparison resultantly it leads to poor benchmarks.
Level up your Competitive Benchmarking by getting it right!
The goal of any business is to grow, improve processes, increase quality, reducing costs, and ultimately leading to revenue generation. And, certainly competitive benchmarking is one such tool that can be practiced as part of any continuous improvement model used for your business. Rather, as per various studies, 62% of companies undertaking competitive benchmarking see a positive revenue growth. Only, thing to keep in mind is considering and avoiding the pitfall or downsides of competitive benchmarking when you are implementing it.
Have you ever been conducting competitive benchmarking? Do share your input with regards to any pointer you think can be added in our list of pitfalls while conducting such benchmarking? Please share in the comments below.