As the business competition gets stiffer each day, competition is very important in today’s business world. One of the best methods of attaining this is benchmarking. But is benchmarking helpful to business analysts? This post will look at what this topic is all about and why it is considered important, its utility, or real-life uses.
What is Benchmarking?
Benchmarking is a management activity of measuring one’s organization’s performance, and the practices and processes it uses against the industry’s best for the same business. It works towards enhancement, evaluation of performance, and putting into practice standard and successful patterns. Benchmarking, as seen by business analysts, is a rather formal way of establishing and evaluating the organization’s performance.
Benchmarking as a Tool for Business Analysts
Performance Measurement and Improvement
Through benchmarking, business analysts can minimize instances where they may end up estimating the performance of their organization based on skewed assumptions as made by benchmarking exercises. Whenever the analysts have an opportunity to know their weaknesses and areas of possible inefficiency, they can consider what possible remedies could be undertaken. This is according to the benchmarking study conducted by the APQC that shows firms that engage in benchmarking processes record a 69 percent better performance than firms that do not.
Informed Decision-Making
Analysis of business is all about identifying high-quality and vital data and using it as the basis of decision-making. Benchmarking is very useful since it offers the analysts very crucial data and information that they need to make the best decisions. For example, by benchmarking KPIs with the best performers in the industry, analysts can spot trends, predict future trends, and make correct changes in this regard.
Competitive Advantage
Competitive monitoring is one of the necessities in business and organizations more often motivated by the need to find out more about the activities and performance of the competitor. Benchmarking also helps the business analysts to identify information regarding the strength and weaknesses of the organization’s competitors. On this basis it could be stated that it is possible to work out more and hinge strategies which would be sufficiently competitive and helpful in terms of attaining a market share higher than other rivals.
Best Practices Identification
Benchmarking assists in the determination of the best strategies most organizations in the industry are applying. Through observation of processes and practices in the work of organizations that become leaders in their fields, business analysts can incorporate these practices in their workplace. This results in high levels of productivity, lesser expenditures, and optimization of organizational performance.
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Types of Benchmarking
Internal Benchmarking
Internal benchmarking entails the use of comparisons that are made within an organization. It can entail the comparison of the organization with other firms or companies to develop heightened benchmarks or improvement of the efficiency and productivity of its departments or units.
Competitive Benchmarking
Competitive benchmarking is therefore based on the comparison of the performance of the organization with that of its rivals. This strategy of benchmarking offers the organizations an understanding of the competitors’ plans while looking for the organization’s competitive edge.
Functional Benchmarking
Functional benchmarking entails the process whereby functional activities in an organization are compared to activities in organizations belonging to other industries. It is this kind of benchmarking that assists in the identification of best practices that could be adopted for better performance.
Generic Benchmarking
Comparative benchmarking involves comparing a firm’s processes and practices with those of another firm from a different industry. This type of benchmarking is useful in identifying the best practices that can be used in any area within the organization.
Challenges and Considerations
As much as benchmarking proves to be informative as well as beneficial, it also has its difficulties. There remain certain difficulties, and one among them is the data collection challenge whereby it is difficult to come across correct and credible data. In using benchmarking, business analysts need to be sure that the data they are using are accurate and current. Furthermore, benchmarking should be considered as an ongoing activity whose implementation should go on infinitely in the cycle of improvement.
Real-world Examples
Xerox Corporation
During the 1980s, Xerox realized stiff competition from Japanese producers who were manufacturing good photocopying machines cheaper than Xerox’s. This gave Xerox its previous position in the market and therefore they launched the benchmarking strategy. They were able to match themselves with competitors in strategies of manufacturing, quality of their products as well as customer care services. Therefore, Xerox was able to identify spheres with high potential for change and upgrade, thus narrowing down the areas for best-practice implementation, which brought the production costs down, and overall product quality was enhanced.
Toyota
Toyota is famed for its lean production approaches which have to a large extent been attributed to its benchmarking activities. The company constantly compares its operations with other production companies in the industry through benchmarking. This practice has assisted Toyota in the development of what is now known as the Toyota Production System (TPS) that central on minimizing wastage, boosts the quality of products, and enhances productivity. Many other companies have referred to this concept and adapted it to their organizational systems, and today the TPS is regarded as a reference model in the automotive market.
Starbucks
Benchmarking has also been applied effectively in the case of Starbucks, to improve the customer and visitor experience. Conducting a study on the customer service delivery of Starbucks with those established by other hospitality organizations helped Starbucks to realize areas of improvement for their delivery of this service. They were able to formulate training programs for staff and brought out new changes as advanced technologies in the market. These changes have benefited Starbucks Corporation to remain the market leader in the coffee industry.
Benchmarking can be considered one of the most effective techniques for business analysts since it offers important information and materials to achieve qualitative change. Benchmarking enables organizations to meet their strategic objectives through the assessment of performance, the discovery of superior practices, and the securing of advantage. Thus, with a constant change in the business environment, benchmarking will remain one of the crucial factors for business analysts.
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