Quick answer: Benchmarking compares a firm’s processes and results with the best performers. Advantages: it reveals performance gaps, brings in proven practices, sets realistic targets, improves competitiveness and customer focus, supports decisions, drives continuous improvement and breaks complacency. Disadvantages: practices may not fit, data is hard to compare, it encourages copying, erodes differentiation, costs time and money, creates short-term focus, meets resistance and can miss disruptive change.
| Point | Detail |
|---|---|
| Origin | Xerox, 1979 |
| Main benefit | Exposes performance gaps |
| Main risk | Copying rather than innovating |
| Cautionary case | Nokia vs iPhone |
In 1979, Xerox took apart copiers made by its Japanese rivals and found something alarming: competitors were selling machines at roughly what it cost Xerox to make its own. That study kicked off the modern practice of benchmarking, which Xerox manager Robert Camp later wrote up in his 1989 book on the subject.
Benchmarking means comparing your processes, costs or results with the best performers, inside or outside your industry, and adopting what works. It is powerful, but it has real limits. Here is a balanced look at both. For the different approaches, see types of benchmarking.
Advantages of Benchmarking
1. Shows Where You Fall Behind
Hard numbers reveal performance gaps that internal reviews miss. Xerox’s cost gap was invisible until it measured rivals.
2. Brings in Proven Practices
You learn from what already works instead of inventing from scratch. Southwest Airlines studied Formula 1 pit crews to cut aircraft turnaround times.
3. Sets Realistic Targets
Goals based on what others actually achieve are more credible than guesses.
4. Improves Competitiveness
Closing gaps in cost, quality or speed helps the firm hold its market position.
5. Strengthens Customer Focus
Comparing service levels shows what customers now expect elsewhere.
6. Supports Better Decisions
Investment and improvement choices rest on external evidence, not internal opinion.
7. Drives Continuous Improvement
Regular benchmarking keeps teams looking for the next gain, the core idea behind Total Quality Management.
8. Breaks Complacency
Seeing that others do better is often the jolt an organisation needs to change.
9. Focuses on Processes, Not Just Results
Good benchmarking studies how others achieve results, which makes the lessons transferable.
Disadvantages of Benchmarking
1. What Works Elsewhere May Not Fit
Different size, culture, customers or regulations can make a borrowed practice fail.
2. Data Is Hard to Get and Compare
Competitors guard their numbers, and different definitions can make comparisons misleading.
3. Encourages Copying Over Innovation
Matching the best only brings you level; it rarely puts you ahead.
4. Can Erode Differentiation
If everyone adopts the same best practice, firms start to look alike.
5. Costs Time and Money
Studies, visits, consultants and data purchases add up, especially for small firms.
6. Short-Term Focus
Chasing easy-to-measure metrics can distract from long-term strategy.
7. Resistance From Staff
“That will not work here” is a common reaction, and forced adoption breeds resentment.
8. Misses Disruptive Change
Benchmarking against today’s leaders can blind a firm to new entrants with a different model. Nokia measured itself against other phone makers while the iPhone changed the game.
How to Get the Benefits Without the Pitfalls
| Do | Avoid |
|---|---|
| Benchmark processes, not just numbers | Comparing headline ratios without context |
| Look outside your industry for ideas | Only watching direct rivals |
| Adapt practices to your situation | Copying wholesale |
| Involve the people who do the work | Imposing changes from the top |
| Repeat regularly | One-off studies that gather dust |