Business industry performance benchmarking
Contrary to popular belief, those people who make a success of their businesses don’t do so particularly because of what they know – they do so because of what they seek to know!!!!! In other words, successful business owners are ALWAYS looking for new and better ways of doing things – learning more about their industry…their customers…their competitors…and their relative performance! It never stops. To stand still in business is to be run over by your competitors!
As a business owner, have you ever wondered just how one business becomes a real success story and others in the same industry struggle and fail – continuously? As a ‘business doctor’, a business owner and manager and a business writer, I see and read stories and case studies from all over the world of business owners that seem to always ‘strike it lucky’ when they start up a new venture. Just what is it that separates these ‘business entrepreneurs’ from the ‘pack’ of also-rans who constantly struggle to make money and stay in the ‘black’? Firstly, there is no magic bullet! Successful businesses just don’t continue to be lucky!
As the saying goes, “Luck is the residue of design!”
Benchmarking is the process of comparing one’s business processes and performance metrics to other companies in the same industry, of comparable size and market focus and within a similar range turnover range. Companies in the same industry with vastly different revenues have different financial metrics – thus it is better to compare like with like as far as industry data permits that comparison to be made. Many industry benchmarking systems either do not have full financial year data for 3 consecutive years or do not have data that is up-to-date – i.e. within the last 5 financial years. More than that far back it is likely that all industry and economic metrics have changed significantly.
In the process of best practice benchmarking, management identifies the best firms in their industry, or in another industry where similar processes exist, and compares the results and processes of those studied (the “targets”) to one’s own results and processes. In this way, they learn how well the targets perform and, more importantly, the business processes that explain why these firms are successful. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to improve their practices.