Benchmarking can be used to compare an organisation’s strategic capabilities with itself over time and with other organisations at a given point time. There are three commonly used approaches to benchmarking:
  1. Historical benchmarking
  Organisations consider changes over time in their performance on a set of strategically important indicators in order to identify opportunities for improvement.
  A potential disadvantage of historical benchmarking is that it may lead to complacency for a firm that shows improvement over time. It is the rate of improvement that is important to compare with that of competitors as competitors may improve at a faster rate.
  2. Industry/sector benchmarking
  Using a set of performance indicators, organisations may gain valuable insights when they compare their performance to other organisation.
  Firms must benchmark against competitors in all industries in which they compete. Competitive activity and industry convergence have resulted in blurred industry boundaries.
  3. Best-in-class benchmarking
  Best-in-class benchmarking compares an organisation’s performance against “best-in-class” performance across industry lines and therefore seeks to overcome the limitations of other approaches.
  The overall importance of benchmarking lies not so much in the detailed “mechanic” of comparison but in the effect that these comparisons might have on behavior. It can be used as a process for gaining momentum for improvement and change.

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