Business benchmarking is a strategy that involves understanding which organizations within an industry are setting the standards that all participants in that industry must meet in order to remain viable to consumers and competitive within that industry. By identifying the standards as well as who is setting them, companies can begin to identify ways in which to not only meet those benchmarks to the satisfaction of consumers, but possibly also how to exceed them and be the means of establishing a new benchmark for the industry as a whole. Engaging in business benchmarking requires a firm grasp of what is happening in the industry, how certain standards came to be regarded as benchmarks, and understanding how to use those benchmarks to best advantage.
The process of business benchmarking can take place in any type of industry and profession. Benchmarks may have to do with the quality of goods produced, the range of functions and features consumers considered acceptable, and even the type of pricing that is applied to different goods and services. These types of standards do not emerge in some sort of vacuum, but tend to develop over time, usually due to the policies and practices of companies that are considered leaders within their industries. In order to compete with those reputable and well-established companies, the competition must find ways to match those features and characteristics that consumers find appealing, and then move on to offer some type of additional value that prompts customers to switch allegiance to the new provider.
As part of the business benchmarking process, the company will identify one or two of the leading companies within an industry and explore every facet of those operations. This will include any data that may be obtained from a public source, such as where those companies obtain raw materials for the production of goods and service, the published pricing for those products, and even how those companies organize manufacturing and administrative functions to best advantage. By learning how those industry leaders continue to remain successful, newer companies can develop their own operational and administrative structure in a way that is likely to result in products that can compete and possibly lure away enough customers to make a profit.
It is important to note that business benchmarking is not a static event, but an ongoing effort. Over time, the companies that set standards within an industry may change, as well as the practices and range of products that command the interest of the buying public. For this reason, companies must constantly evaluate what currently constitutes standards within an industry, using the new data collected from the business benchmarking process to make changes and possibly move on to become one of those industry leaders.