Turbocharge Your Decision-Making with External Benchmarking

As covered before, the modern world – and your organization – is awash in data. However, it’s only as useful as your data management strategy allows – and today’s topic, benchmarking, should be a critical part of that strategy.

First, it’s important to remember that any given piece of data is simply a snapshot in time. Data becomes exponentially more valuable when the same metrics are consistently tracked over time. This allows an organization to identify trends in their data, build insights around those trends, and ultimately make better decisions. And that’s what benchmarking is: collecting and analyzing data from different points in time to objectively measure the change in performance.

Organizations can benchmark against themselves (i.e., internal) to track key performance metrics such as sales data. Equally as important, organizations can benchmark externally to compare performance against their competition. It’s critical when formulating an external performance benchmarking strategy that an organization chooses competitors that are similar in some respects. For example, while a 50-person tech company and Apple may have the tech industry in common, just about everything else is happening on a different scale.

So, as a leader you want to be intentional about the types of organizations you’re benchmarking against. Make sure they’re in a similar industry, similar in size, similar in mission, and similar in the types of work they do. At its most basic, you want to find an organization that you can look at and say, “Are we doing as well as them? Are we doing better than them?” And that gives you an external reference point to pair with your internal metrics.

A readiness assessment utilizes data-driven analysis to evaluate and measure an organization’s preparedness and capabilities in order to make informed decisions and optimize its potential for future challenges.

Leveraging External Benchmarking to Drive Decision-Making

When I think about this kind of question, I don’t start with the data. I start with the end question: what is it I want to achieve with this data? For example, what is the decision I want to inform?

Once that objective is identified, I begin the process of thinking about what I’m going to measure, determine the right KPIs, and decide who I want to benchmark against. With that set, I then determine where I can get the data on those metrics, both internally and externally.

Digging into finding that data can get tricky, especially when it comes to competitor metrics. Just like you protect your organization’s data, it’s likely your competitors are doing the same. However, many industries have data services you can subscribe to find the metrics you’re looking for. In the hospitality industry, for example, STR compiles and sells hotel performance data, allowing both individual hotels and global chains to benchmark against their direct competitors.

Once you’ve got your data ecosystem humming, the fun really begins: using your data to identify opportunities and inform decisions. Here are two examples.

• Competitive Advantage Analysis: I may see in my analysis of performance against the benchmarking organizations my organization has an edge in a particular area that seems to be a real competitive advantage. Uncovering this allows me to make an informed decision to really leverage that advantage. Using STR data and hotels as an example, imagine I discover my hotel enjoys significantly higher brand awareness than my competitor hotels. That knowledge may allow me to optimize marketing spend by shifting advertising dollars from upper-funnel awareness-driving media (which data shows my hotel needs less help with) to direct-response advertising (critical to my bottom line).
• Lagging Indicator Analysis: I may observe my organization is falling behind in terms of a specific performance metric. However, that doesn’t seem accurate. Looking at the data, it seems like we should be able to perform just as well as the other organization. So, what’s the insight? Maybe something else is going on that’s dragging performance down. Let’s say one of my organization’s key strategies is to hire, train, develop, and keep high-level talent. But what I find in the benchmark data is that my level of employee churn is way higher than my benchmark organizations’. I’ve now identified my organization is not achieving its strategic objective as well as it should. From there, I can dig further into the data to try and understand what’s driving the issue.

Telling Your Benchmarking Story

Even good, clean data can be intimidating and confusing if it’s not presented well. Most of us don’t respond well to a lot of numbers; however, we do respond well to stories. Remember, we started the benchmarking process by asking ourselves what do I want to achieve through the use of data. In effect, we framed it as the beginning of a story. We continued that story with our analysis. Now, let’s write a great conclusion (i.e., present our findings).

This is where data visualization techniques come in. What is data visualization? This definition from IBM sums it up nicely.

“Data visualization is the representation of data through use of common graphics, such as charts, plots, infographics, and even animations. These visual displays of information communicate complex data relationships and data-driven insights in a way that is easy to understand.”

Using these visual elements allows you to tell a compelling story, intuitively explain the insights you’ve uncovered, and steer your stakeholders to a decision. To do that, there are two items critical to data visualizations. First, the time element, showing how your organization is not only performing now, but over time. Second, the comparative element – or how your organization is performing against your benchmarking organizations over that time period.

Example of data-based storytelling in action.

We began with the statement that our world – and organizations – are awash in data. We’ve now covered some ways to effectively use that data. However, we’ve only scratched the surface of the possibilities for usage. I believe the best way to harness the power of your data is to find the right data-driven thought partner. At The Clearing, we’re helping a number of clients with establishing, developing, and analyzing the metrics critical to their success – including how they benchmark against their competition.

If you’d like to discuss your organization’s data strategy and how you can use benchmarking to improve performance, I’d love to chat. You can reach me anytime at rob.stewart-ingersoll@theclearing.com.