Benchmarking involves comparing the key metrics of an area of your business or business with those of your competitors.
The importance of benchmarking lies in the fact that it offers us an immediate context of comparison with our peers (direct and indirect competitors), allowing us to know if we are doing things well or if we have room to improve them.
It is also a perfect exercise to detect possibilities, threats as well as weaknesses and strengths that arise from our competitive environment.
From this dynamic, benchmarking is perfect for extracting vital information about our situation, our competitors and knowing their strategies in depth.
As you can see, it is a management weapon with great chances.
The importance of benchmarking in competitive intelligence
Benchmarking is a perfect tool to better manage a company's efforts.
Best practice analysis enables you to quickly identify the best competitor in the market in different areas. Thanks to the Internet we can superbly control:
- The financial results of each entity
- Competitor digital marketing results
- R&D results
- And even the results of your hiring policy
For each of these areas, benchmarking will tell us which are the weaknesses of your competition that you can try to exploit and especially which are yours. That way, using this information well, you can make decisions about how best to invest your efforts and then measure the results.
For this, it is essential that you correctly define your KPI's in each area where you perform your benchmarking.
KPIs are the secret to good benchmarking
The best kept secret for good benchmarking is to select the area in which we are going to search to make comparisons with our competitors. But especially, attributing to the selected area the key indicators that we are going to measure, in other words the KPIs.
Different KPIs correspond to each area (financial, marketing, R&D, production, etc.).
You can compare each of the areas, but for each company or organization there are some areas that are more important than others.
If it is a startup With a strong Internet presence, you are most likely interested in starting with an analysis of good practices on innovation or digital marketing issues. If you work in a productive industrial sector, the productive or financial part may be more important.
Either way, it depends on the type of industry you work in and your situation.
Anyway, the ideal would be to be able to cover all areas. But if you can't, the best thing to do is start with those critical areas and set the KPIs for each of them. Then there will be time for others.
Defining KPIs for your benchmarking
This is undoubtedly the most important part of any benchmarking. More than the collection and entry of the information itself.
It is essential to create good KPIs. For this we must pay attention to two things:
- A kpi must be easily measurable and relevant
- The information to create the KPI must be available
Fortunately, the information needed to create a best practice analysis is very achievable. We can do and automate competitive analysis to promote KPIs and thus make tedious work much more enjoyable, efficient, and productive.
It is more difficult to find and establish a relevant and measurable KPI at the same time. We may have the information at hand, but the KPI we have defined is irrelevant to what we are looking for.
Unfortunately, I am not an expert in the field of KPI definition. Still, I know of a few who can serve as a guide. But it's a complex world, so don't take them for granted. Here are some of the KPI I use but of course there are more and they can be established better.
Any expert in this field could give you a better definition of the KPIs to use. Here is a post about how to set your KPIs.
Decidedly, once you have gone through the trance of setting your KPIs, you will need to feed them to get the information that will validate your Benchmark. Depending on the chosen KPIs, this task will be easier or more difficult, but whatever the case you will start to get the information you were looking for and you will be able to compare yourself to take measures and make the necessary adjustments and changes in your tactics.
Finally: Why Analyzing Best Practices in Your Industry is Essential
Benchmarking in a company helps a lot in the following points:
- Find new possibilities: identify the channels or tactics in which your competitors are performing and identify new channels where the potential may be high
- Optimize your strategy / tactics: After identifying your competition's weaknesses, you can develop a cohesive strategy and apply it to see results.
- Report and share easily: the creation of reports based on the defined KPIs and the information obtained is much easier and more manageable. From this dynamic, information can be disseminated and shared in a standardized way, facilitating its application and allowing administrators to make decisions.
Analyzing best practices will allow you to gain a deeper insight into your competitors' businesses, better understand how your efforts translate into results, and discover the best ways to increase your results compared to your competition.
In essence, it is the importance of benchmarking that enables you to capitalize on the success of your competitors and avoid their failures.