Practical Application: Using Competitive Benchmarking to Bring Innovation

Instructor: Angela Janovsky

Angela has taught middle and high school English, Business English and Speech for nine years. She has a bachelor's degree in psychology and has earned her teaching license.

Competitive benchmarking can be a very useful tool for analyzing your company. Here, you will learn the seven steps associated with the process and see how they can be utilized by a hypothetical company.

Competitive Benchmarking

How can you measure how your company stands in relation to your competition? One way is to use competitive benchmarking, a process for comparing one organization's practices and performance with its competitors.

The seven steps in competitive benchmarking allow you to see how your company measures up to a specific standard. Successful competitors represent that standard.

Seven Steps of Competitive Benchmarking

Step 1: Decide which areas to benchmark. Use cost, importance and potential for changes to guide these areas, looking only at those areas where changes are realistic.

Step 2: For each area from Step 1, identify the factors and variables. Consider abilities, resources, goals and strategies.

Step 3: Select companies for benchmarking. Identify your competitors and narrow them down to those that are successful, according to the areas you want to benchmark. They can include companies with the lowest costs, highest profits and highest levels of customer satisfaction, among other areas. These are the companies you aim to imitate.

Step 4: Measure the performance of the companies selected in Step 3 for each benchmark. Consider the factors and variables from Step 2.

Step 5: Measure the performance of your company using the same benchmarks.

Step 6: Compare your results from Steps 4 and 5. Determine the platforms or actions that will allow your company to improve upon its weaknesses. Look to meet or surpass your competitors in those benchmarks.

Step 7: Implement a plan based on the results from Step 6. Set specific targets and deadlines. Develop a monitoring process for reviews and updates. Use this process to modify future benchmarking studies.

Fictional Scenario

Let's use an example of a fictional company to see how its executives used the 7-step competitive benchmarking process to improve upon and innovate their business practices.

Fuse is a technology company that sells smartphones and computer software. Orange and GatesCo, two other technology companies, dominate the industry and make it difficult for other companies to compete for business. Fuse executives are looking for innovative ways that will help them successfully compete with these industry giants. They decide to use the 7-step process of competitive benchmarking.

Step 1: When marketing and selling their new smartphone, Fuse executives narrow down the two areas they want to benchmark: customer service programs and overall customer satisfaction with the product.

Step 2: Next, the executives identify the factors and variables within these two areas. First, they focus on customer service. The factors include:

  • Hours of operations
  • Online options (chat/email)
  • Response time (email turnaround time, hold time and number of automated menus)
  • How often an interaction resolves an issue

Step 3: Fuse executives choose Orange and GatesCo as the competitors to which they'll benchmark.

Step 4: Next, they measure the performance of Orange and GatesCo. Fuse executives call Orange and record the number of automated menus it takes to reach a live person. They also record how long they are on hold, how long it takes for someone to reply to an email, and how long they have to wait for a response during an online chat. Finally, they note how often an issue is resolved. Then, they follow the same procedure for GatesCo. They record the results several times over the course of a few weeks, in order to get an average for each variable.

Step 5: Now the executives measure how Fuse performs. They ask family members and friends to call the company and record their experiences in the same customer service areas.

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