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In the 1950s, Japan was emerging from World War II with a fledgling manufacturing industry. Japanese automakers like Toyota and Honda had little presence in the global market, while American car companies like Ford and General Motors reigned supreme.
But Japanese manufacturers were unfazed by this daunting challenge. They had something tried, tested, and powerful on their side: a commitment to continuous improvement, known as kaizen, and a keen eye for benchmarking.
In the 1960s and 1970s, Japanese automakers began closely studying American cars, literally taking them apart and measuring everything from fuel efficiency to production costs and customer satisfaction.
By the mid-1970s, they weren’t just keeping pace with U.S. manufacturers—they were starting to surpass them. Japanese cars became known for their reliability, fuel efficiency, and affordability.
By the 1980s, Japanese automakers had overtaken American car companies in market share; Toyota, Honda, and Nissan held nearly 25% of the U.S. auto market by the end of the decade.
American cars averaged 12 miles per gallon in the 1970s, while Japanese cars boasted around 20 miles per gallon. Japanese manufacturers also cut production costs by up to 20%, a feat that allowed them to offer high-quality vehicles at lower prices. Toyota, which produced only 500 vehicles per year in 1950, was manufacturing over 2 million vehicles annually by the 1980s.
Within just three decades, Japan had gone from a relative nobody in the automotive industry to a global powerhouse.
Grounding KPIs in industry standards allows businesses to set goals that are both ambitious and achievable.
Benchmarking not only defines what ‘good’ looks like but also provides the path to reach ‘great,’ making the difference between merely meeting expectations and outperforming the competition. Historical resources, such as the 1975 Fuel Economy Guide, demonstrate the dramatic transformation during this period.
Why Benchmarking is the Key to Supercharged KPIs
Let’s face it: tracking KPIs (Key Performance Indicators) is essential for any business that wants to stay on track and achieve its goals. But here’s the twist—KPIs are even more powerful when you pair them with benchmarking.
Think of it this way: tracking KPIs without benchmarking is like running a race without knowing how fast the other runners are going. Sure, you might cross the finish line, but wouldn’t it be better to know the pace you need to keep up—or beat—to stay ahead?
Understanding how others perform gives you the insights to not just participate but thrive.
Now, don’t get me wrong—KPIs are deeply personal to each business. They reflect your unique goals, challenges, and vision. But when it comes to positioning yourself in the market or thriving in a competitive space, benchmarking is a must. It gives you critical context: how your performance stacks up, where you can innovate, and what it takes to be a leader in your industry.
The Power of Benchmarking in Action
When used correctly, benchmarking can be just as transformational today as it was during the 1950s automotive revolution.The same principle holds true across industries today. A study by the Financial Times revealed that companies leveraging industry-leading benchmarks achieve significantly faster revenue growth than those that don't.
Benchmarking keeps businesses agile, enabling them to spot trends and act on them in real-time. But it’s not just about the metrics—benchmarking builds confidence. When you set KPIs based on what’s both possible and achievable, you’re not guessing. You’re creating targets grounded in proven success, ensuring your business moves forward with clarity and purpose.
How to Set Supercharged KPIs Using Benchmarks
Now that we’ve seen benchmarking in action, let’s explore how you can apply these principles to create high-impact KPIs for your business. Follow this step-by-step guide to integrate industry benchmarks into your KPI strategy:
1. Identify Key Metrics that Matter
Start by choosing KPIs that directly align with your business goals and define success for your organization. These should be metrics that drive impact. For example:
- eCommerce: Conversion rate, average order value (AOV), and customer acquisition cost (CAC).
- SaaS: Churn rate, monthly recurring revenue (MRR), and customer lifetime value (CLTV).
2. Research Industry Benchmarks
Next, gather benchmark data for the KPIs you want to track. Understanding how your industry performs helps you set realistic, yet ambitious, targets. Here's where to start:
- Use Industry Reports: Leverage resources from firms like Gartner, Deloitte, or sector-specific reports.
- Engage in Competitive Analysis: Use tools like SimilarWeb, SEMrush, or social media analytics to gain insights into competitor performance.
- Consult Trade Associations: Many associations, such as the National Retail Federation, publish benchmarks tailored to their industries.
3. Analyze and Set KPI Targets
With benchmarks in hand, assess where your business stands and establish KPI targets to close the gap—or surpass industry standards. Remember to balance ambition with feasibility:
- Example: If your customer retention rate is 80% and the industry benchmark is 85%, set a goal to reach 85% within six months, then aim for further improvement.
4. Implement Actionable Strategies to Meet Your KPI Goals
A great KPI target is only valuable with a plan to achieve it. Work with your team to develop strategies based on the improvement areas revealed by your benchmarks. For example:
- Customer Retention: Introduce loyalty programs, personalized email campaigns, or improve support response times.
- Sales Growth: Create upselling and cross-selling opportunities or refine your pricing strategy.
- Employee Productivity: Invest in training, enhance workflows, or adopt new technology to boost efficiency.
5. Monitor Progress and Adjust as Needed
KPIs and benchmarks are not static—they evolve with your business and the market. Regularly review performance and compare it to updated benchmarks. Adjust your targets to reflect industry shifts or your own progress.
- Example: If your SaaS company initially set a first response time KPI at 1 hour but discovers competitors now aim for 30 minutes, it may be time to revise your goal.
By embedding benchmarking into your KPI process, you’ll create a strategy that’s both aspirational and grounded in reality. Not only does this approach help you stay competitive, but it also ensures your team is working toward meaningful, actionable goals.
Turning Standards into Success
In a competitive market, relying only on your internal data can leave you short-sighted. Benchmarking gives you the context you need to set KPIs that not only measure performance but also inspire growth. It’s about using proven standards to push boundaries, just like Toyota, Honda, and Nissan did decades ago.
So, take a moment to reflect on your own KPIs. Are they rooted in ambition and backed by data, or are they just hopeful guesses? By weaving industry benchmarks into your strategy, you’re doing more than setting goals—you’re building a roadmap for leadership, innovation, and success.
Remember, greatness doesn’t happen by chance. It takes a combination of data, determination, and a clear vision. With benchmarking in your toolkit, you’re not just keeping up—you’re setting yourself apart.
by Stuart Kinsey
Stuart Kinsey writes on Key Performance Indicators, Dashboards, Marketing, and Business Strategy. He is a co-founder of SimpleKPI and has worked in creative and analytical services for over 25 years. He believes embracing KPIs and visualizing performance is essential for any organization to strive and grow.