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Summary
Despite the fact that most corporate strategies focus on goals such as “increase market share” or “maintain competitive advantage,” executives spend most of their time looking at information and metrics that are not concerned with that. Ventana Research’s benchmark research shows that companies do a good job of collecting their own high-level financial and operational data, yet at the same time they do a poor job of monitoring their markets, their competitors and their customers. For example, almost all companies’ monthly reviews stop at comparing their results against their own forecast and last year’s results. In the past, it might have been more trouble than it was worth for companies to incorporate intelligence about the outside world into their business processes and internal reporting. Today, information technology makes it practical to include this information. Ventana Research believes that an important way to improve an organization’s performance is to adopt a more externally focused approach to information analysis and reporting, and to planning and budgeting as well.

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At its core, business is about competition and customers, yet most companies collect and use remarkably little information about these crucial aspects of what they do. Most of their data is “us-vs.-us” in nature, not “us-vs.-them.” For example, a major focus of the typical company’s planning and budgeting cycle is to compare this year to last, rather than addressing in any meaningful way more important questions such as, How well are we doing compared to the market?, How do our costs compare with those of other companies like us? or How are our customers doing?

Organizations generally do well in collecting information about their own operations, but our research finds the vast majority do not provide their managers and other employees with adequate information about the world outside the company. Ventana Research has conducted several research benchmarks covering planning, budgeting and financial reporting. The picture that emerges consistently is that most companies do a reasonably good job of presenting internal financial data but a poor job of systematically collecting and presenting information about their competitive position and how well they are performing in comparison to similar companies.

In our work on planning and budgeting, we have found few companies that use benchmarks of external performance in setting their objectives. For example, almost every large company establishes specific sales quotas that are based on their own prior years’ performance (such as planning to grow sales 10 percent), even though most executives would say their objective was to increase market share. Fixed performance targets limit how well a company does and may force employees to pursue objectives inconsistent with a company’s long-term interests. We assert that it is more valuable to set targets that measure performance relative to that of comparable companies (not necessarily just the competition). For example, if the sales organization delivers 15 percent growth after setting the goal at 10 percent, is that good performance? Not if the market grew by 20 percent; the company will have lost market share. Similarly, if sales grow only 5 percent, that isn’t bad performance if an industry-wide slowdown in demand left the market flat for the year. Moreover, even if operating margins are in line with industry norms, only by benchmarking comparable companies will corporations gain the data they need to fine-tune their spending structure and ensure that they apply resources in ways that support their strategic aims.

Admittedly, in the past it has been difficult to get accurate data about competitors and the outside environment. Usually, only the largest companies could invest the time and money in these efforts, and even they had problems sharing the data across the enterprise. Benchmarking was a special event, undertaken only in response to a corporate crisis.

However, that is much easier now, and in the future it will become even easier to collect and use data about competitors and the business environment. Much information is available in the filings of public companies in the U.S., and it will become more readily accessible as SEC-mandated XBRL tagging goes into effect over the next several years.

Assessment
Business is not a game of solitaire; it’s high-stakes poker. Companies must recognize that information about the world outside their own four walls is readily available and important to know. Quantitative information about competitors and customers can and should be incorporated into business processes such as planning, budgeting and situational analysis. Most companies already have information portals, dashboards and other automated reporting systems through which managers and employees routinely can look at this intelligence. Because, after all, finance organizations are the source of much of the data and analysis about the internal workings of the company, we advise senior finance executives to expand their horizons and extend their charter to the outside world.