Benchmarking Software Will Make You A Better Manager
I was on a call the other day with a customer who was telling me about his past struggle with data dashboards. In the past they've gone through a number of different tools that displayed their data but his team was never sure what questions to ask of the data once they had it setup. We concluded that one of the biggest issues across the business intelligence and dashboard industry is the lack of actionable insights a dashboard actually gives you.
In the vast majority of tools, you plugin your integrations, you configure your KPIs, you get your graphs looking nice, you share it with your team, maybe toss it up on a TV, your team says, “wow this is beautiful”, and you’re off to the races...
But once you take your seats from a post-setup-celebratory-high-fives, a familiar phrase is muttered:
“Now what?”
What questions do you ask of your data? How do you ask the right questions? What does it mean you should change? Are you doing well? Are you doing poorly? How do your competitors stack up? I’m moving up to the right on a few of these KPIs but is that actually helping me achieve my goals?
The fact is, data transfer and data visualization are only two parts of the business intelligence equation. The third part, and the largest missing piece, is what you do with this information - how you gain actionable insights. The first step to understanding the difference between where you are and where you need to be is finding the benchmark.
Enter, benchmarking, and more specifically, benchmarking software.
What is benchmarking?
Benchmarking is a way of discovering the best performance being achieved for a given metric and setting a baseline goal. This helps you to define best practices, identify improvement opportunities, and create a competitive environment within an organization. Humans are naturally competitive, benchmark data gives us an incentive to come up with new, creative ideas for beating the average.
“Benchmarking helps you define best practices, identify improvement opportunities, and create a competitive environment within an organization.”
Why is benchmark data important?
Incorporating benchmark data into your goal setting means you’re shifting from a reactive approach to a proactive approach. Benchmark data allows you to anticipate issues in your strategy before they arise.
It’s important to gain an independent, unbiased perspective into your growth. Your company is your baby. It’s easy to be overly optimistic or overly pessimistic when setting goals because you’re emotionally attached to your company. Benchmark data gives you raw insight into how you’re actually doing, not how you or your stakeholders think you’re doing.
Mark Twain said “It is wiser to find out than to suppose.” Mark’s a pretty smart guy. You can use benchmark data to validate or disprove assumptions while clearly identifying areas of opportunity.
Not only does benchmarking create a healthy, competitive environment, it promotes teamwork and drives concrete analysis of data, not intuition or gut feeling. Often someone’s gut feeling might dissuade a team to working on the wrong tasks. Benchmark data keeps everyone on the same page, working toward a clear goal, in a competitive environment, as a cohesive team.
How to go about benchmarking
First you have to set the right metrics. The right metrics are different across different teams and business models, so make sure you’ve chosen the ones that make the most sense for you, your stage of development, and your industry. We have a few posts on finding the right metrics and avoiding vanity metrics worth a look.
Once you have a good understanding of your current KPIs, you need to decide which are the best to benchmark and compare to other businesses. This is an important step because it’s easy to get distracted by benchmarking data that might not be pertinent to your current stage. For example, in the very early stages of developing your business, it's less important to focus on user growth and more important to focus on retention, activation, and usability metrics. As your company starts to hit those marks, start focusing on conversion rates in your sales and marketing funnels to optimize for growth.
With the right metrics in place to benchmark, you need to understand where you have the biggest room for improvement. Are companies in your space typically converting from free to paid plans more efficiently than you are? Time to focus on activation steps and conversion funnels. Once you have that nailed down, it’s safe to move on to improving web traffic - how much more do we need to grow to beat the average?
Develop a plan to close gaps between your metrics and the benchmark. Each week review sub-metrics that need to be completed to make that gap smaller, and each month review your progress to make sure you will meet your goals and beat/exceed the benchmark. Monitor this progress with Malartu and continue to iterate until you beat the average across your key metrics and you know you’re in good shape.
Who is this important to?
Virtually every business benefits from good benchmarking data. In few cases are KPIs truly unique to a specific business (we see this mostly in research-based companies ie. life sciences). The fact is, if you’re selling a product or service, you can benefit tremendously by setting clearer goals with benchmark data (hell, that’s why we built Malartu).
It makes the most sense to focus on gathering the best benchmark data when you’re focused on improving internal programs, reducing costs, improving your operations, undergoing a management change, starting a new venture, rethinking existing strategies, or under pressure from competitors.
Talk to us about how we benchmark company data and how we can help you
Pretty simply, benchmarking improves your team’s understanding of the real opportunities and their priority levels, minimizes resistance to change, fosters a spirit of enthusiasm to do better than the average, and promotes discussion based on data rather than discussion based on assumptions.
If that’s something you'd like to look into, check out how Malartu gathers benchmark data on companies and what that means for you.