Benchmarking and Market Analysis
The BABOK v3 guide groups two external-study techniques under the title benchmarking and market analysis. Benchmarking compares the organisation's performance or practice against an external reference, a peer, a leading performer or a published standard, and it measures the gap. Market analysis studies a market's demand, its segments and its competitors to inform a positioning decision: to enter, grow, reposition, partner or exit. The guide gives the pair a single purpose: to improve organisational operations, increase customer satisfaction and increase value to stakeholders. Each of the two delivers an evidence base that informs the sponsor's decision without taking it. The question on the table decides which one to run: benchmarking needs an internal measure or practice to set beside the external reference; market analysis needs none.
Goal
Benchmarking and market analysis follow the same approach: compare an internal practice or an intended position against an external reference, then turn the comparison into evidence. The guide files them under a single catalogue entry and states one purpose for both, yet its description gives them two separate objectives.
Usage
When to use it
- Strategic framing ahead of requirements (both): locate the organisation or its market before committing the investment.
- An improvement objective to be costed (benchmarking): the gap to an external reference sizes the expected gain.
- An entry, tie-up or exit decision (market analysis): the guide files partnering, merging and divesting here.
- Compliance with a published standard (benchmarking).
When not to use it
- No external reference within reach: no comparable peer, no published standard, no usable market data. Measure performance internally and run a process analysis.
- A reversible, low-stakes decision: a pro versus con analysis is enough.
- Market and performance level already settled: move to elicitation and requirements-definition techniques.
What the two techniques share
The two techniques share their first piece of work. The guide opens both element lists with a scoping task: identify the areas to study for benchmarking, the customers, the opportunities and the competitors for market analysis. That scoping governs the rest: a badly scoped study is not rescued by the rigour of the work that follows. In both cases the effort sits up front, in that scoping.
Which one to choose
An organisation that has never sold into the market it is studying can analyse that market in full; it has no internal measure to compare. The test comes down to two points, in that order: how well the existing operation performs, then which market to choose. A compliance check falls under the first case, the reference being imposed there.
| Technique | The question it settles | What it requires of the organisation | Deliverable |
|---|---|---|---|
| Benchmarking | Are we good at what we already do, compared with others? | An existing measure or practice, comparable once normalised. | A gap analysis and the improvement target that the gap justifies. |
| Market analysis | Should we be in this market, in which segment and with which offer? | No internal measure: the study can be run before the first sale. | A market dossier and the positioning recommendation that closes it. |
Combining the two
The two studies complement each other in a set order: market analysis sets the target position, benchmarking measures how far the organisation stands from it. A market analysis may conclude that the winning position in a segment rests on a premium service sold at close to a discount price. That conclusion describes a target. What remains is to establish whether the organisation's cost structure, lead times and service practice can support it and how far the organisation trails the peers that already hold that position.
Efficiency in a market whose structure rules out profitability is still a bad position. Run on its own, market analysis errs the other way and picks a position the organisation cannot yet hold.
The pitfalls in the choice
The first pitfall is to run a benchmark to answer a market question: an organisation can be the most efficient player in a market it ought to leave. The mirror pitfall costs more: sizing a market and mapping its competitors when the problem is a process gap commits the organisation to a strategic study where a performance comparison would have answered.
The second pitfall is to read the result of one as an answer to the other's question. A favourable gap analysis says the practice stands comparison; it says nothing about the market's attractiveness or the segment's growth. A green light from market analysis says the segment is reachable and its demand sized; it does not prove the organisation can hold the position it would have to occupy there.
The third pitfall concerns the way the data is obtained. Benchmarking data is exchanged between consenting partners, under reciprocity and confidentiality, rules set by APQC and the Global Benchmarking Network in their Benchmarking Code of Conduct; market analysis observes competitors from the outside, with no exchange and nothing given in return. Treating a competitor as a benchmarking partner or extracting performance data from it under cover of a market study conflates the two data-access regimes.
Sources
- IIBA, A Guide to the Business Analysis Body of Knowledge (BABOK Guide) v3, §10.4 Benchmarking and Market Analysis: the purpose the two techniques share, the description that separates their two objectives and the element lists that show the shared scoping discipline.
- APQC and Global Benchmarking Network, Benchmarking Code of Conduct: the regime for exchanging benchmarking data, legality, reciprocity, confidentiality and use limited to improvement.