Whom to benchmark?

About a year ago Bain & Co. published a study on the management tools used by some 1400 senior executives at corporations around the world.  Benchmarking had jumped into the number one management tool.  In their report, they pointed out that benchmarking becomes more important during economic downturns.

And it got me to thinking about some of the challenges we face when benchmarking.  To me it seems that selecting the right companies to benchmark is one of the greatest challenges in for success of the tool. (Another day we will discuss the puzzle of how to benchmark the role of luck or good fortune in the success of a company or brand).

A good way to illustrate this is perhaps a real world example of the challenge in picking the right companies to benchmark.  Please note, all of the telling details have been removed except for the reference to Google.  Here is the situation:

You are a senior marketer at a large software company that provides specialized online services to business customers.  Think of your company like a Bloomberg.  Almost all B2B, only a small amount of consumer facing.  You have a large group of subscribers which has been growing steadily over the years as the category grows.  They sign up, you give them classes on how to use the services and provide regular phone and online support when they have difficulty with the system.

Overtime you see that your brand reputation is beginning to erode, there are clear signs in your measures that the category is being disrupted.  You look through the research to see which competitor is creating the disruption.  You look at the benchmark scores and discover that there is nothing to discover.  Nothing has changed in your benchmark scores vs. the competition.  Yet scores on “easy to do business with” have dropped and everyone is now being perceived as out-of-date, cold and aloof.

What has happened?

You speak to frontline people.  You speak to customers.  And you hear over and over again that Google is transforming your industry.

Google?  They aren’t our competitor!  We aren’t selling advertising online or search services.  How is Google transforming our industry?

By listening to sales people and customers you learn that Google has transformed expectations of the online and software user experience.  They have raised the bar.  All of your customers are balking at your training sessions.  “It should be as easy as using Google,” they say.  When evaluating your brand they are now comparing you to Google.

As the example above shows, it’s not always so easy to know the right companies to benchmark.

It certainly has its uses  Benchmarking is a great way to keep an eye on the competition.  It gives us a way to measure how well we are performing on key metrics.  If we are a relatively new company or looking to leapfrog the competition, benchmarking shows us how others have done it.  We can learn by analogy.

Of course that assumes that we are benchmarking the right companies.  In fast changing markets, knowing who to benchmark becomes a little like betting on the oscars the night before the Academy Awards.

And if we are the category leader, it is even harder since we are setting the standard which others are benchmarking.

And when we reach the status of one of the world’s best companies it becomes even more of a challenge to pick the right companies to benchmark.  At that point, when we are planning our future moves, benchmarking is even less useful.  It is a marker for where we have been but not the path to where we are going.

After all, we can’t benchmark our way to the future.

2 Responses to “Whom to benchmark?”

  1. 1 oroaline May 5, 2011 at 9:20 pm

    I find your comments on whom to benchmark very useful in my research. FYI, I’m fadzline from Malaysia doing a research on malaysian furniture branding. in the end of my research I would like to have benchmarking as my important study. although after some reading i find it hard for Malaysia to benchmark in the branding of the furniture industry. Italian to me is to high-level for them as they are more into luxury furniture. Malaysia is at the same level as China as there is a need for differentiation. low cost and cheap labour has been found a disadvantage to them as more countries are competing fiercely. what is your comment on this?
    Thank u.

  2. 2 Randall Ringer May 9, 2011 at 7:06 pm

    Yes, that is a challenge, finding the right companies to benchmark.

    Here are a couple of suggestions:
    1. Go ahead and benchmark the Italian brands, it never hurts to have insight into how the market leaders are thinking and acting. After all, the point of benchmarking is to look ahead, to have an understanding of what others went through to get to their position in the market. Understanding the gap gives you a concrete metric for assessing the progress as the branding improves. If you are benchmarking brands too close to yours, they may not have as much to teach you (although they may).
    2. Consider benchmarking brands that are outside of the furniture category but meet certain criteria such as they have faced similar challenges that your brand is facing. This lateral approach is always very useful in broadening perspectives. When you benchmark only within your category, you may fall into the problem I presented in my post — you may miss a big upheaval coming from outside the category.

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