Question

Many company’s use benchmarking, or the comparison of key metrics (scope of services, costs, delivery options, technology etc.) of companies within the same industry which are considered best in the industry, in order to identify areas for improvement for their company. Benchmarking is used to gather information on the competitive landscape in a specific industry. How useful do you think benchmarking is in strategic planning? How could benchmarking be used in your current, past or possible future place of employment or entrepreneurial endeavors? What do you see as the advantages of utilizing benchmarking in strategic planning? What might be the challenges?

Answer 1

Benchmarking strategy planning is an external environment focused approach to an organization’s strategic planning. It looks at the industry standards and attempts to match or improve upon those standards. While this is a good approach when an organization is performing below industry standard, it is not a good tool if the organization is ambitious. This is because, the benchmarking approach focuses on matching at least the minimum criteria. However, it does not take into consideration the company’s internal strengths, weakness, and possible competitive advantages.

Benchmarking will be useful in an entrepreneurial venture. This is because when we start a venture, we usually are not very sure about our own capability as an organization. However, once we achieve the industry benchmark we should look towards ways to exceed that expectations and cross the benchmark limits. In fact our numbers should be better than benchmark numbers at all time. Without this, the company cannot be considered competitive.

The advantage of using benchmarking system is that it can be considerably easy to collect the benchmark data. Various research groups and industry experts may provide the data easily. On the other hand, the challenge is that while the benchmark data is easily available it may not be clear how the companies are achieving these benchmark. As a result, the company may still need to undergo considerable trial and error. This also means that the benchmark data merely serves as an indicator and nothing more.