Benchmarking the benchmark tools


Analytics are all the rage. The Red Sox adopted a variation of "Moneyball" with Sabermetrics. And for decades, big companies have leveraged sophisticated data analyses to develop performance metrics and competitive comparisons.Like most things, these capabilities are now available to the small business community. But are they valuable tools? The answer is yes, and no.One new entrant in the business of benchmarking is Startup Compass, which gives fledgling companies the ability to compare themselves to roughly 17,000 other startups in areas such as revenue model, how customers are obtained, and the makeup of the founders. To obtain the automated report a company is required to anonymously provide the requisite information on itself.A similar service offered by G-Score ranks businesses in the same industry on a scale from one to four in seven categories.For over a decade, CompStudy has been providing comparisons of executive compensation. Run jointly by recruiting firm Park Square Executive Search and the Harvard Business School, in 2008 the company made the data available to anyone willing to fill out the CompStudy survey.Using 10 multiple-choice questions, BOSI offers a personality test that categorizes entrepreneurs into one of four personality types that include innovator, builder and opportunist. It then identifies the behavioral tendencies inherent with each personality.As you would imagine, many in the academic community have chimed in regarding the benefits of such benchmarks. I always find their comments insightful.Take, for example, this pearl by Steve Blank, professor of entrepreneurship at UC Berkley and investor in CompStudy:"If you don't understand where you are, it's hard to tell where you are going."That's why Steve makes the big bucks.Can you relate?I've never taught a course in entrepreneurship at UC Berkley, but I did stay at a Holiday Inn Express once. I've also spent three decades in the business world working with companies that ranged from startups to Fortune 500 enterprises. So let me take a stab at whether availing yourself of one of these services is a good idea.The simple answer is: only if you know how to interpret the data. Doing that requires a certain skill level, and perhaps more importantly, experience. Don't get me wrong, I'm a data wonk. I've never seen a spreadsheet I didn't like. But data by itself is useless unless you know what information is truly important and how it relates to your situation. In many cases, that's where there is no substitute for experience.Macroeconomics is a good example. Data on the global economy comes in all shapes and sizes from a plethora of sources. A lifetime can be spent sifting through it all. But to effectively leverage the data you need to understand a) which data is relevant, b) what the inherent strengths and weaknesses are of any given data source, and c) how the data relates to future outcomes.The problem with these "one size fits all" analytic services is they assume that everyone is interested in the same answers. In fairness, the law of averages dictates that some of the data will be useful. However, that begs the question: How does one know what is valuable and what is not?With that, let me try my hand at offering a pithy quote: Anyone can find the answer to a question. The real trick -- and value -- is in knowing what questions to ask.Bottom line: these services can offer another useful data point, but first you must focus on understanding the true keys to achieving your own business objectives.Author, professor, entrepreneur, radio and TV commentator, Tony Paradiso of Wilton is a marketing, management and macroeconomic expert. His website is
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