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How To Measure Competitive Advantage

        posted by , May 30, 2013

What Is It?

Benchmarking is the practice of measuring your competitive advantage and disadvantage.

It's a strategic planning activity that identifies strategic gaps.

Definition: Benchmarking

Benchmarking is a strategic planning activity that compares your business performance indicators with your competition.

So What?

The goal of business strategy is to achieve business results such as revenue and build competitive advantages.

If you can't measure your competitive advantages or disadvantages its difficult to improve them.

Benchmarking is a critical activity that tells you where your business stands.

Examples of Benchmarking

If you've got the data, it's possible to benchmark any aspect of your business. For example:

  • Product Benchmarks
    Cost, quality and time to market.

  • Technology Benchmarks
    Technical benchmarks such as the speed of your services.

  • Process Benchmarks
    Cost, efficiency, speed and quality of your processes.

  • Experience Benchmarks
    How does your customer experience stack up against the competition?

  • Market Benchmarks
    Looking at key marketing areas such as brand awareness.

  • Culture Benchmarks
    How does your corporate culture compare?

  • Financial Benchmarks
    Comparison of key financial indicators.

  • Change Benchmarks
    A look at the agility of your organization. For example, your time to market for programs, projects and initiatives.

  • Sustainability Benchmarks
    Triple bottom line factors such as energy efficiency, waste and emissions.

How To Benchmark

Benchmarking is garbage-in-garbage-out. It can be difficult to find reliable industry data. For example, your competitors aren't likely to share their process benchmarks freely.

Consultants are typically used as intermediaries.

You may compare yourself to an industry best practice. Alternatively, you may want to compare yourself to a handful of specific competitors that lead in the target area.

The following steps represent a high level benchmarking process:

  1. Identify Key Performance Indicators
    Decide what measurements are critical to your competitive advantage.

  2. Measure
    Measure your own KPIs.

  3. Measure The Competition
    Identify the current leading measurements for the target area.

  4. Identify Gaps
    Evaluate your performance against industry leading performance in the target area.

  5. Strategic Planning
    Benchmarks feed into your strategic planning process.

Next: Strategic Drivers Explained

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What Competitive Advantage Really Means A business with competitive advantage is like a star professional athlete: they're in a league of their own. They're not necessarily good at everything but they do a few things very well.

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