28251617599327450149023185

Sunstone Communication
  • Home
    • Tartan in Tallinn
  • Blog
  • Free Downloads
    • Sunstone Financial Information Survey 2017
    • Sunstone SaaS SWOT Analysis Tool
    • The Book of Business Plan Ephemera 2014
    • SMB SaaS Unit Economics Calculator
    • How technology is killing the CIO
  • About
    • Kenny Fraser
    • The Legend
    • Community >
      • Mallzee
      • Appointedd
      • SaaS Group
  • Financial Model

How Can A SaaS Startup Learn From Benchmarks?

22/11/2015

Comments

 
Benchmarks are a popular approach to business improvement. They provide an insight into how peers and competitors are performing. And identify areas for potential improvement. But they are an average. They highlight the status quo and undervalue innovation. The metric driven nature of SaaS makes it a great model for benchmarking. Think of this data as useful insight. You can learn from how others perform but don’t copy it.
 
This is another in my series exploring how ideas used by large enterprises might be of value to startups. In this post I am going to explore Benchmarking. Benchmarking or comparison shopping is a popular technique. Many enterprises us it for business performance improvement. It is a big business in its own right. With a subscription model just like SaaS. Gartner and Hackett are built on benchmarking as a service. Every large consulting firm has offered the service at one time or another.
 
The basic principle is simple:

  • Find a bunch of companies with similar characteristics. This could mean they operate in the same industry or target the same customers. It even works for bits of companies. For example, comparing finance functions or IT costs.
  • Measure their performance on a set of criteria. The key skill here is to find a common and consistent basis for the metrics.
  • Create a set of standards for comparison. A typical benchmark study involves an average - either median or mathematical. Then performance is grouped around quartiles. Or deciles. Or best in class. Or some similar standard.
  • Map where each company stands against it peers. Then offer other organisations the chance to make the same performance comparison.

Key Takeaways

The potential to add value for a startup seems clear. Often founders have little or no data about the market they are entering or their competition. Limited networks and experience create open minds. But they are no substitute for experience of the sector or the business. Used well benchmarking can offer:
 
  • A picture of how your business is performing and which areas need improvement.
  • Looking at the benchmark structure offers a useful insight into which metrics are important. 
  • Using benchmark data can be a mechanism for setting operational financial performance targets.
  • If benchmarks are being made public, a good score can be a potential marketing boost.

The Not So Useful Stuff

This all sounds great. But in my experience benchmarking is no more than a way in. It provides an interesting snapshot but not a yardstick or a basis for measurement. I used to have a global client that spent millions every year on industry specific commissioned benchmarks. They cancelled after a few years because they could discern no performance improvement. 
 
There are several reasons for this. It is worth thinking about the following whenever you look at a benchmark or similar report.
 
  • No two businesses are the same. A whole lot of known and unknown factors will affect performance on any measure. Benchmarks do not capture or analyse these things.
  • Benchmarks undervalue innovation. The method looks at the past. And needs a past which many companies share. This reinforces incumbents and undervalues or misses innovators.
  • Standardisation may lead to missing some key metric or insight that is vital to your specific business. Or a new pattern of behaviour that provides an opportunity for disruption.
  • Using benchmarks encourages you to spend time thinking about internal challenges. This diverts from focus on the customer.
  • Unless you spend a ton of money on details and tailored analysis, benchmark data is based on surveys. The quality and reliability is poor as a result. Verification is non existent.

Next Steps

There is an emerging industry in SaaS around benchmarks. The metric driven nature of the business model lends itself to this approach. I would suggest a startup pays little attention to this stuff. It is nice to see something and think you are doing better than the competition. But after the warm glow its adds no value.
 
The best way to view this is like an insider blog post. Useful background and a point of view but not the absolute truth. Learn from benchmarks but don’t copy them.
 
If you are entering a market with established competitors it may be a handy way to learn about the competition. But don’t pay for it. Money is scarce and this will not be a good use.
 
Focus on finding the metrics that drive growth and development in your startup. Work to improve on those measures and the competition will not be a problem.
 
For more of the best business thinking for SaaS, subscribe to our newsletter. 
Comments
comments powered by Disqus

    RSS Feed

    Categories

    All
    Book Selections
    Building A Team
    Common Business Concepts
    Enterprise SaaS
    Financial Information
    Leadership
    SaaS
    Saas Metrics
    Scotland
    SMB SaaS
    Strategy
    Technology Opportunities
    The Funding Jungle

    Author

    Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.

    View my profile on LinkedIn

    Archives

    September 2020
    October 2018
    September 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014

Learn more

Home
Blog
Free Downloads
About
View Kenny Fraser's profile on LinkedIn

Contact

Get in touch
Listing
Follow Kenny Fraser on f6s
Blogorama - The Blog Directory
Blog Directory & Search engine
Terms and Conditions                       Privacy Policy
©Sunstone Communication Ltd 2016
  • Home
    • Tartan in Tallinn
  • Blog
  • Free Downloads
    • Sunstone Financial Information Survey 2017
    • Sunstone SaaS SWOT Analysis Tool
    • The Book of Business Plan Ephemera 2014
    • SMB SaaS Unit Economics Calculator
    • How technology is killing the CIO
  • About
    • Kenny Fraser
    • The Legend
    • Community >
      • Mallzee
      • Appointedd
      • SaaS Group
  • Financial Model