Benchmarking – We’re on to the final instalment in our series about strategic planning tools. So far we have looked at useful models such as Porter’s Five Forces, SWOT analysis and PESTLE analysis and looked at how businesses can employ them to create robust, workable and accurate strategies.
Now, we’ll turn our attention to Benchmarking – which again, is a tool rather than a strategic method in its own right. However, like the other tools above, it offers real value and is easy to apply and develop at a practical level within your company.
What is benchmarking?
There is a tendency for organisations of all kinds to be inward-facing in their views. But of course, seeking to improve business results year-on-year only tells part of the story. Yes, a 15% sales increase within a core product line could indicate real progress. However, if your competitors are growing their sales by 20%, then it’s time to worry! This same situation applies to a whole host of other key factors too, for example, new technology introductions or changes to customer satisfaction.
To really know if you are competing in an effective way, it is necessary to benchmark – or compare – your organisation’s performance against the industry. And, ideally, you will pick the very best performers within your industry to truly understand how your own organisation is doing next to the most successful in your field.
By doing this, benchmarking provides an extremely useful and valid reference against your own performance, contextualising it against competitor performance for a more objective and rounded view.
Finding the right competitors to benchmark
The obvious benchmark will be the most successful business within your own industry. However, there are situations when it makes more sense to look at an aligned industry, rather than the one that your business sits within.
The beauty of benchmarking is that it can be done in a variety of ways that might be formal or informal. If you take a formal approach, it will usually require you to buy a published benchmark report or source or to commission research from a specialist benchmarking organisation. The output from this type of activity is likely to be high-quality in nature and to deliver excellent insights. However, by its bespoke and quality nature, it will be expensive and it can be time-consuming to commission.
Informal benchmarking will also require some degree of research, but it can be taken forward by internal subject matter experts who are able to apply their knowledge and experience to the topic, carry out desk research and facilitate guided sessions.
Benchmark brainstorming sessions
These are a great approach to taking benchmarking forwards in an immediate and effective way, and the Strategy Canvas is a highly useful tool to maximise outputs. At Intrafocus, we often facilitate these kinds of energetic and interactive brainstorming sessions, which tend to result in plenty of creative, insightful and valuable outputs.
The Strategy canvas
Developed as part of the Blue Ocean Strategy theory, the Strategy Canvas is a tool that delivers benchmarking insights whilst flagging up differentiated add-ons to products or services. The Blue Ocean Strategy says that lasting business success only comes from creating a largely uncontested market space – rather than seeking to build and maintain a sustained advantage in a competitive marketplace (especially a price-sensitive one, where prices will invariably push downwards).
The strategy canvas is presented in the book as a simple visualisation methodology. It doesn’t flag up new markets or available spaces, but does create a visual map that can trigger a creative brainwave in the strategy process! It basically looks like a line graph that maps factors and functions against their important for a company and then overlays industry or competitor benchmarks to them. The resulting information can be fed into a competitive strategy.
The South West Airlines case study
South West Airlines are perhaps the best-known case study for applying this tool. The airline looked at industry standards and the car rental industry to apply a degree of differentiation. It assessed key areas such as price, lounges, meal availability in-flight, service, speed and departures. You can see an example of how this looked in practice here: Strategy Canvas
By choosing the car rental industry, South West Airlines was able to look in a fresh way at what a competitor in a similar industry was doing to delight its customers, and to factor in things that other airlines were not benchmarking at the time. The result was a broader base of insight that the management team used to create competitive advantage.
Find out more
For more information on strategy canvases, Blue Ocean Strategy or strategic development as a whole, please contact the Intrafocus team who will be delighted to assist.