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Seven Steps to Effective Competitor Benchmarking

When it comes to Competitive Intelligence, there are a few simple tools that can provide for sophisticated comparisons of business functions between organizations that can help firms "benchmark" the constituent processes of the company with direct or indirect competitors, allowing a company to gain the upper hand in a marketplace. But, what is the process for setting the metrics, methodologies, milestones and comparisons which might be used to measure the success of a CI/benchmarking function, or the success of a Strategic Planning department as a whole?

Benchmarking is best used and described as a framework for strategic planning in that, once elements of study are identified, metrics can be applied to the key success factors (KSFs) of the industry or marketplace and these measures or "benchmarks" are then used to develop future quality and market initiatives for the firm to enhance its overall competitive position.

It is generally considered that there are seven steps to this process, as explained below. However, this analysis of intra- and sometimes inter-industry competitors can form the foundation for future competitor analysis when the emphasis is placed upon the goals and financial capabilities of the competitor. This becomes a question of how will the competitor compete with their particular set of resources and culture?

The body of work surrounding business benchmarking has identified seven unique steps in this benchmarking process, many of which may offer some insights on the question of metrics.

Seven Steps in the Benchmarking Process:

1. Determine which functional areas within your operation are to be benchmarked -- those that will benefit most from the benchmarking process, based upon the cost, importance and potential of changes following the study.

2. Identify the key factors and variables with which to measure those functions -- usually in the general form of financial resources and product strategy.

3. Select the best-in-class companies for each area to be benchmarked -- those companies that perform each function at the lowest cost, with the highest degree of customer satisfaction, etc. Best-in-class companies can be your direct competitors (foreign or domestic), or even companies from a different industry (parallel competitors with replacement or substitute products or services; latent competitors which might backwards- or forwards-integrate into your market; or, out-of-industry firms with whom you do not compete, but which have best-in-class areas to be studied such as FedEx or Wal-Mart in logistics).

4. Measure the performance of the best-in-class companies for each benchmark being considered -- from sources such as the SEC, companies themselves, articles in the press or trade journals, analysts in the market, credit reports, clients and vendors, trade associations, the government or from interviews with other organizations willing to share their prior research or "swap" it with you.

5. Measure your own performance for each variable and begin comparing the results in an "apples-to-apples" format to determine the gap between your firm and the best-in-class examples. Always feel free to estimate results, as exact measures are usually disproportionately difficult to obtain and often do not significantly add value to the study.

6. Specify those programs and actions to meet and surpass the competition based on a plan developed to enhance those areas that show potential for compliment. The firm can choose from a few different approaches -- from simply trying harder, to emulating the best-in-class, changing the rules of the industry or leapfrogging the competition with innovation or technology from outside the industry.

7. Implement these programs by setting specific improvement targets and deadlines, and by developing a monitoring process to review and update the analysis over time. This will also form the basis for monitoring, revision and recalibration of measurements in future benchmarking studies.

Since most of the measures in a benchmarking process fall into one of two categories, financial resources and product strategy, this understanding can often be used to simplify the framework of analysis.

It remains my gut feeling that, regarding the success of the process itself, ROI is only really measured in documented "wins", for example we can describe success terms of contracts won due to a CI success. This can therefore be thought of in terms of new business signed and the profitability of that new business, a problem solved or costs contained or reduced by the implementation of the CI/benchmarking process.

Arik R. Johnson is Managing Director of the Competitive Intelligence (CI) support bureau and consultancy Aurora WDC, where he gives advice to business leaders and teaches about CI for clients in the Healthcare, Financial Services, Telecommunications, Information Technology, Media & Entertainment, Energy, Construction, Transportation, Industrial Manufacturing and Retail/Wholesale Trade sectors. He's earned degrees in International Business, History, Political Science and International Relations from the University of Wisconsin-Madison and teaches about business in the UW system. Arik serves on the board of directors of Madison-based software house Fuse Technologies, Inc. and is the Wisconsin State Chapter Chair of the Society of Competitive Intelligence Professionals (SCIP). He is a sought-after speaker at events on enterprise knowledge engineering & competitive intelligence and a contributing editor to publications in the field. More information is available on the Web at

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