What is benchmarking and how can it inform strategic choices?

• A. Setting internal targets based on historical performance.
• B. Copying competitors' products.
• C. Comparing processes, performance, and practices to best-in-class to identify gaps and improvement opportunities.
• D. Assessing only cost structures within the firm.

Answer: (C)

Benchmarking involves comparing your organization’s processes, performance, and management practices to those of best-in-class performers. The point isn’t to copy what others are doing, but to understand how top performers achieve superior results, identify gaps between your current state and that level of performance, and translate those insights into practical improvement opportunities. This gives you a clear basis for strategic choices: you can spot which capabilities are differentiators, decide where to invest or redesign processes, and set informed targets to close performance gaps.

Internal targets based on historical performance look inward and don’t reveal external benchmarks, so they can blind you to what’s achievable. Copying competitors’ products is a shallow approach that may overlook your own context and what truly drives value. Focusing only on cost structures misses broader dimensions of performance like quality, speed, innovation, and customer experience, which benchmarking helps illuminate.