Introduction
Comparative analysis (CA) is a method used in strategic decision-making to evaluate two or more alternatives in relation to each other. Most frequently used during the process of product or service selection, comparative analysis involves placing two or more options side-by-side to assess the differences in features, performance and deliverables. A well-executed CA will inform the financial feasibility of a decision or assist in predicting future outcomes based on existing data.
A component of so-called “business intelligence,” comparative analysis is a powerful tool for managers, policy makers, and business people alike. In the dynamic and ever-changing business landscape, executives should never assume any two options to be identical-- they must do their due diligence to understand the full impact of their choices. As well, comparative analysis can help guard against “the survivorship bias” - the phenomenon when people mistakenly attribute success to a process without considering the possible rejections and failures inherent in any given initiative. By having a systematic comparison of all the likely alternative outcomes or options, the “survivorship” bias can be avoided, so that optimal decisions are made for the long-term success of an organization.
Comparative Analysis Description and Process
Comparative analysis is an organized way of evaluating alternative products or services a company may implement. It requires a structured approach that contributes to the process of making an informed decision. In other words, the decision-maker should strive to build a clear comparison with multiple criteria served to score the alternatives against each other.
Comparative analysis is based on the collection and interpretation of data. Before even beginning the comparison, a decision-maker should have a clear understanding of the goal, the desired end state, and any internal or external parameters. These parameters should be set in order to establish some form of standard that can be measured at each step along the way.
The analytical process should begin with extracting relevant data from each competitor; this should include evaluating product or service features, delivery methods and response rates, customer service reviews, previous successes or failures from competitors, and financial data. It is important to understand the motivators, both internal and external, of each competitor. Once this data is collected, it should then be structured into a matrix for further comparison.
The scoring system should also be established ahead of time and it is here that the decision-maker should define the criteria to be weighed during the comparison process. The outcome of the comparison should be determined by the overall score or average of all the criteria being evaluated.
Benefits of Comparative Analysis
The primary benefit of comparative analysis is the clarity and depth of the insights it can offer. By providing a structured comparison of data points, an executive or decision-maker can gain a better understanding of each option and its potential implications on the company.
Comparative analysis also serves as an objective comparison tool. It prevents subjective bias when making decisions, providing a more level playing field to consider each alternative.
Finally, the structured criteria used in a CA can also influence the future performance of an organization itself. Defining clear criteria and weighing options objectively will help to ensure the long-term success of an organization.
Conclusion
Comparative analysis is a powerful and often overlooked tool for business decision-making. This method offers the ability to compare and evaluate two or more options objectively and accurately. By establishing effective criteria and gathering relevant data, comparative analysis can inform financial feasibility and equip leadership with the confidence to make the best decision for their organization’s future success.
