Industrial Benchmark ing for Competitive Advantage

ABSTRACT This paper deals with several different aspects of the concept of benchmarking in order to give the audience a basic understanding of what benchmarking is, how it is done, and what it can give in terms of improvement results. The main issues covered are definitions of benchmarking and the core concept of comparison for the sake of improvement, explanations of the different types of benchmarking that exist and what implications these have, both in terms of improvement potential, difficulties, and suitability. Furthermore,
ethical and legal aspects linked to benchmarking and the benchmarking wheel, a benchmarking process model explaining the phases and steps of the benchmarking study. A relatively large portion of the paper will be devoted to explaining how to carry out a benchmarking study and various pitfalls that might be encountered. The remainder of the paper will discuss the improvement results that companies that have used benchmarking actually have achieved. These range from phenomenal successes to downright failures, and
the paper will explore conclusions derived from research on the topic.

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Many view benchmarking as a method for comparing key figures, often financial key figures, for the purpose of ranking the organization in relation to competitors or the industry average.This might have been the main application of benchmarking earlier, but today it is a far more powerful tool much more widely applicable. The core of the current interpretation of benchmarking is:

• Measurement, of own and the benchmarking partners’ performance level, both for comparison and for registering improvements.
• Comparison, of performance levels, processes, practices, etc.
• Learning, from the benchmarking partners to introduce improvements in your own organization.
• Improvement, which is the ultimate objective of any benchmarking study.
Four main issues that support and advocate the use of benchmarking in an organization
striving to improve are:
1. Benchmarking helps the organization understand and develop a critical attitude toward its business processes.
2. Benchmarking encourages an active learning process in the organization and motivates change and improvement. 
3. Through benchmarking, the organization can find new sources for improvement and new
ways of doing things outside its own environment.
4. Through benchmarking, reference points are established for performance measurement of
business processes.  
Compare against whom:

• Internal benchmarking, comparison against the best within the same organization or
corporation, often called benchmarking within your own class.
• Competitive benchmarking, comparison against the best direct competitors, which then
can be termed benchmarking against someone in the parallel class.
• Functional benchmarking, comparison against organizations that are not necessarily
competitors, but that performs related tasks within the same technological area. In the
school analogy, this will be benchmarking against someone from another school, but of
the same type.
• Generic benchmarking, comparison against the best, regardless of industry or markets,
which can be said to be benchmarking against someone from a totally different school.

Looking at these types, the further down the list we go, the further away from our own little