Framework library · Competitive and market analysis
Competitive benchmarking
Competitive benchmarking measures the business against named rivals on the few dimensions that decide customers' choices, scores each on a common scale and weights the dimensions by importance. The total matters less than the gaps behind it: where you trail the best performer on something customers weigh heavily, and what that rival does differently to get there.
Use it when
- You are losing deals or customers and need to know on which dimensions you trail the competitors who win them.
- You are setting performance targets and want them anchored on what rivals achieve rather than on last year's figure.
- A board or investor asks how the business compares with its peers on the things customers value.
Avoid it when
- Customers' choice criteria are not known. Ask customers first, or you will benchmark what is easy to measure rather than what decides the sale.
- Competitor figures would be guesses. Score only where there is evidence, such as published terms, mystery shopping, tender feedback or regulator data.
- You want to learn one process in depth. Process benchmarking with a willing partner, often outside your industry, teaches more than a scorecard.
How to run it
Choose the competitors customers compare you with
Take them from lost deals and tender results, not from a list of the industry's largest names. Three or four is enough.
Pick the dimensions that decide the choice
Take them from customer interviews or tender scoring sheets. Rename the dimensions and weight each by how much it matters to the customer.
Measure before you score
Find a figure for each competitor on each dimension and note its source. Then convert each figure to the 1 to 5 scale, where 5 is the best anyone achieves.
Read the gaps, not only the total
Look for heavily weighted dimensions where you trail the leader by two points or more. Those are the gaps worth closing.
Find out how the leader does it
For each gap, identify the process, asset or policy that lets the leader perform better. That is the part to learn from.
Set targets and score again
Turn each gap into a target with an owner and a date, and repeat the benchmark at least once a year.
Work through it
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Mistakes to avoid
- Scoring from impressions. Without a measured figure behind each score, the benchmark repeats what the team already believes.
- Weighting dimensions by what the business is good at rather than by what customers value.
- Comparing with the competitor you beat rather than the one customers choose instead.
- Stopping at the scorecard. The value is in finding out how the leader gets its result.
Where it comes from
Benchmarking as a management practice is usually traced to Xerox, which began comparing its costs and processes with those of Japanese copier makers in 1979. Robert C. Camp of Xerox set out the method in Benchmarking: The Search for Industry Best Practices that Lead to Superior Performance (ASQC Quality Press, 1989). Source.
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Further reading
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