As a vendor of a strategic planning platform, we often receive requests from companies to anonymously compare their performance with industry peers. Let’s discuss whether such benchmarking makes business sense—and what better alternatives might exist.
The Rationale of Competitive Benchmarking
The typical rationale behind competitive benchmarking is to better understand the broader operational landscape of the industry, and more specifically, to define the scale of measurement—such as what counts as low or high performance.
For example, a company’s conversion rate from sales-qualified lead to customer might be 30%. How does that compare to similar products on the market?
- If we learn that others are at the 10–15% level, we can congratulate our sales team and start scaling to other regions.
- If others typically convert at 60%, it’s time to take a closer look at what competitors are doing better—and revise our approach.
That’s the ideal picture of how benchmarking is supposed to work. In practice, there are many nuances…
The Limitations of Competitive Benchmarking
If we want to compare our performance to the competition, the indicators in question must meet two key requirements:
- A clearly defined measurement standard shared by the companies being analyzed
- Performance data that is publicly available or accessible as anonymized data
These conditions limit benchmarking to a very narrow overlap of two segments:
- Financial metrics, which have established standards shared across organizations (for example, banks follow strict regulatory reporting frameworks)
- Public companies, which are required to report their performance, or companies participating in anonymized data exchanges
At the same time, there’s plenty of less useful data available online. For example, it’s easy to find the number of subscribers to a competitor’s YouTube channel. That gives some idea of their activity on that platform—but the challenge is putting this observation into the context of your strategy.
Measurement Standards Are the Real Challenge
As a platform vendor, we could potentially address the technical challenge of anonymously comparing performance data, but it wouldn’t make much sense due to the lack of consistent measurement standards.
To illustrate, take “turnover rate, %” as an example. Some companies publish this metric, but the measurement standards can vary—especially when it comes to counting internal transfers, returning employees, freelancers, etc.
What if we try a more strategy-relevant metric, like “Turnover rate among high performers, %”? That adds even more uncertainty to the standards, making competitive benchmarking unreliable.
Benchmarking of Trends Is Easier and More Relevant
One key reason for benchmarking is understanding the operational landscape. Are clients taking longer to approve enterprise subscriptions—or is this part of a broader trend? That’s the kind of informal benchmarking we often do when meeting industry colleagues at conferences.
In this context, looking at competitor indicators in terms of trends, rather than static values, is more effective.
We focus less on the absolute value of a metric and more on how it behaves over time. This information still needs to be interpreted in context, but it moves us in the right direction for understanding the business environment and broader trends.
Historical Benchmarking Instead of Competitive Benchmarking
Given the limitations of competitive benchmarking, a practical alternative is to benchmark against your own historical data.
This aligns well with the original goal of benchmarking: to understand what qualifies as low or high performance. Returning to the conversion rate example—why look at competitors when you can review performance data across different offices and define best practices others can follow?
Focusing benchmarking efforts on your own company is generally more practical:
- You have full access to the data—not just lagging financial metrics
- You can maintain consistency in measurement standards
Automation of Benchmarking with BSC Designer
Depending on the type of benchmarking you wish to automate, the BSC Designer platform can support the process.
Organizing Benchmarks in Scorecards
For both internal (historical) and competitive benchmarking, organize the KPIs involved in a dedicated functional scorecard.
For internal benchmarking across business units, consider using evaluation scorecards with a synchronized set of assessment criteria. This approach ensures consistency, even if the benchmarking criteria evolve in the future.
Aggregating Data
Group data by quarters or years to observe changes over time. For accurate grouping, adjust each indicator’s aggregation interval according to its type. For example:
- Sales indicators can be summed up
- Customer satisfaction can be averaged
Visualizing Benchmarks
To visualize benchmarks, use Time or Bar charts on the dashboard:
- For comparative analysis, select multiple indicators to show them on the same chart
- For historical benchmarking, define the visualization period
- Activate trend lines on the charts
Using Benchmarks in KPI Targets
If part of your strategy involves using benchmarks as targets, you can do this via formulas. In this case, the target of an indicator can be set as the value of a benchmark indicator.
Contextual References to Benchmarks
If you maintain competitive benchmarks in a separate scorecard, link them contextually to your actual indicators. Use the comments function to reference the benchmark and discuss change plans.
Accessing Benchmark Data
Some performance data is available from open sources—such as social media. Consider using data connectors to automatically fetch data from those platforms.
Conclusions
- Focus competitive benchmarking on trends rather than absolute values.
- For internal benchmarking, implement mechanisms to enforce consistency in measurement standards by using automation software.
- Combine benchmarking with other analytical methods for better results.
Alexis is a Senior Strategy Consultant and CEO at BSC Designer, with over 20 years of experience in strategic planning. Alexis developed the “5 Step Strategy Implementation System” that helps companies with the practical implementation of their strategies. He is a regular speaker at industry conferences and has published over 100 articles on strategy and performance management, including the book “10 Step KPI System”. His work is frequently cited in academic research.