Benchmarking and Market Analysis · Business Analysis Notes

What it is#

The BABOK® Guide combines two related activities:

Benchmarking: comparing the organization’s practices with best practices found at competitors, in government, or through industry associations, to assess and improve performance, including compliance with standards.
Market analysis: studying customers (what products they need or want, what drives their buying decisions) and competitors, to support decisions such as when to enter a market, whom to partner with, or what to buy or sell.

Andersen’s book gives the most practical account of benchmarking. He stresses that it is not just comparing numbers: the point is to learn how the better performer achieves its results. He classifies benchmarking in two ways.

By partner: internal (another unit of your own organization), competitive (direct competitors), functional (organizations in a related field doing similar work) and generic (the best anywhere, regardless of industry).

By object: performance benchmarking (numbers only), process benchmarking (how results are achieved) and strategic benchmarking (higher-level strategic choices, used rarely).

In Andersen’s view, the strongest results usually come from generic process benchmarking: studying a similar process in a very different industry. His examples include comparing hospital patient admission with hotel check-in, machine changeover with a racing pit crew, and concrete delivery with pizza delivery.

When to use it#

When you need improvement targets grounded in what others actually achieve.
When the current state is described and you want an external reference point.
When defining a future state, a product strategy, or the timing of a launch.
When assessing solution performance against others.

When not to use it, or what to add: benchmarking reproduces solutions that already exist somewhere; it will not produce breakthrough innovation on its own, so pair it with Brainstorming or other idea generation. It takes time, and the organization may lack the experience to interpret results. Market analysis can be slow and costly, with delayed results, and without market segmentation it can give a misleading picture of competitors.

How to do it#

The BABOK Guide outlines the steps for each part. For market analysis: identify customers and their preferences, find opportunities to increase value, identify competitors and study their operations, look at trends, growth and profitability, decide which strategies are acceptable, gather market data, and draw conclusions.

For benchmarking, Andersen’s four-phase “benchmarking wheel” adds useful detail:

Plan. Choose the process to study; form a small team (Andersen suggests three to eight people); document your own process first; define the measures you will compare.
Find partners. Set criteria for an ideal partner, search through your network, experts, industry associations and published sources, and select a few (Andersen suggests three to five). Offering to share your own data increases the chance of a yes. He describes a “pyramid of ambition”: the higher the class of partner you aim for, the fewer are available, so it is often wiser to step up gradually than to aim straight at world-class.
Observe. Collect three levels of information: performance (what results the partner achieves), practice (how the work is done) and enablers (what makes the practice possible, such as skills, tools or culture). Without the enablers, a copied practice may fail at home. Questionnaires and phone interviews give limited data; a site visit gives access to all three levels.
Analyze and adapt. Check data quality, normalize it (adjust for size, market or regulation), find the performance gaps and their causes (with Root Cause Analysis or by comparing flowcharts), then design your improved process, set targets and plan implementation. Send the final report to your partners as thanks.

Mind the ethics. Andersen’s rule of thumb: treat partners as you want to be treated, and if in doubt about legality or ethics, don’t. With competitors, avoid exchanging information on prices, marketing plans, capacity or other commercially sensitive matters, as this can breach competition law.

Example#

The Workshop (a fictional chain of 12 bike-repair shops) wants customers to know the status of their repairs without phoning.

Generic process benchmarking: the team compares its repair-status process with how parcel delivery services keep recipients informed. At the practice level, they note proactive messages at each stage and a single tracking link. At the enabler level, they note that couriers scan every step on a handheld device, which suggests The Workshop’s mechanics will need a quick way to record status at the bench.
Internal benchmarking: one of the 12 workshops already has far fewer status calls. Observation shows its manager texts customers personally when parts are delayed.
Market analysis: a review of three competing repair chains shows that two offer online booking and none offers status tracking, which supports making transparency a differentiator.

Common mistakes#

Comparing numbers only → study practices and enablers, or you will know the gap but not how to close it.
Aiming at world-class partners first → step up through more reachable partners.
Copying form, not substance → check that the partner’s process really performs better, not just differently.
Skipping normalization → adjust for size, market and regulation before drawing conclusions.
Asking competitors for prices or plans → keep to process topics and stay within competition law.
Market analysis without segments → analyze customers and competitors per segment.

Checklist#

The process or market question is clearly defined.
Our own process and measures are documented before contacting partners.
Partner criteria are set and partners are realistic for our level.
Data covers performance, practice and enablers.
Data is normalized before comparison.
Gaps have identified causes, not just sizes.
Ethical and legal limits were checked.
Partners received the final report.

Sources and further reading#

IIBA. A Guide to the Business Analysis Body of Knowledge (BABOK® Guide), version 3. International Institute of Business Analysis, 2015. Technique 10.4 “Benchmarking and Market Analysis”.
B. Andersen. Business Process Improvement Toolbox. ASQ Quality Press, 1999. Section 10.7 (types of benchmarking, the benchmarking wheel, ethics).