Freek Vermeulen

Benchmarking is by definition where companies look at the best-performing companies in their industry. What companies don’t look at is the bottom-performing ones. Companies therefore are inclined to imitate the practice and strategies of the top 10 performing companies — whichever they pick in the benchmarking exercise. But of course different strategies and practices are often associated with different risks. Some strategies may, on average, result in worse outcomes, but because they are high risk a very small minority of these companies will actually have good performance due to sheer luck. Therefore, these companies that are benchmarking take too much into account companies that simply got lucky.

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