Only a decade ago, most industries were dominated by a few leading companies, mighty icons bent on preserving the status quo. How quaint that now seems. Today’s marketplaces teem with rivals; everything is in flux. Fierce challengers hungrily exploit the latest innovations, while seeking to vanquish the ruling class with killer apps and radical business models.

In this competitive fray, how do you spot the true leaders and shapers of the digital economy? And, critically, how do you know how your company stacks up among them in the ever-more difficult battle for elusive customers?

Traditional ways of measuring your company’s performance and market clout—such as its size, its profitability, or its appearance on most-admired lists—can be deceptive. Those measures heap adulation on feats befitting a bygone era, while overlooking up-and-coming leaders that are revolutionizing the way we will do business in the 21st century. You also can become deluded by looking at your company’s rapid growth or efficiency gains in the abstract. Before you celebrate, ask what your rivals have been up to. They may have advanced even more than you did.

To consider how performance evolves, remember Eric Heiden, the U.S. speed-skater who won five gold medals in the Lake Placid Winter Olympics in 1980. In 1998, at the Olympics in Nagano, Japan, every one of the top 25 finishers in the 5,000-meter race beat Heiden’s record-smashing time by at least 12 seconds. Gold medalist Gianni Romme of the Netherlands covered the distance in six minutes, 22 seconds, beating Heiden’s time by a staggering 40 seconds.

Such big improvements couldn’t have been achieved without breakthroughs in skate technology. Still, any skater oblivious to these innovations would simply fail to qualify for the race, no matter his prior record or how much he improved on his old time.

A similar lack of awareness may blindside executives who size up performance in traditional ways at a time when digital commerce is changing the competitive arena far more than skates have changed speed-skating. We need to rethink how to measure progress. That is why I devised a new and objective way of judging performance. You may well be surprised by the results when you apply it to your business.

I focus on two vital criteria: sales growth and stock-market valuation. After tracking 5,009 companies worldwide for the six-year period ended May 31, 2000, I found that these criteria provide a very robust way of assessing performance.

First, I look at multiyear sales growth. I picked this metric because it speaks volumes about a company’s ability to win additional or new business, not just serve existing customers, and to do so for a sustained period.

To level the playing field, I compare each company’s growth record (adjusted for mergers, acquisitions, and divestitures) against that of a peer group of 20 similar-size companies that compete for the same customers. In other words, I have bantamweights square off against bantamweights, heavyweights against heavyweights.

Because I compare companies of similar size, it is appropriate to measure sales increases in dollar terms, rather than percentages. That also allows inclusion of companies that didn’t exist or had a very low sales base six years ago.

Strikingly, I have found consistently that leaders manage to increase their sales more than twice as fast as the average sales growth of their peer group. That points to a critical imperative: Unless you are growing at double the average pace of your peers, you risk falling behind in the race for market leadership.

Challenging as this may seem, exceptional sales growth is what marks pace setters such as computer-networking company Cisco Systems, retailer Wal-Mart Stores, Japanese consumer-electronics concern Sony, electronic equipment manufacturer Solectron, and energy company Enron. Sales at each increased by more than at its four closest peers combined, thereby putting enormous pressure on its rivals.

This revenue-growth comparison alone cannot tell the full story. After all, growth may come at the expense of profitability, or might be built on an unsustainable business model. That is why I use market value as the second criterion, treating it as a proxy for a company’s outlook.

By dividing each company’s market value by its sales for the latest 12 months, I put a price tag on its customer franchise: The resulting number effectively shows how much a dollar of a company’s sales is valued by investors.

Again, to maintain a level playing field, I compare each company’s number with that of a peer group of 20 similar-size businesses competing for the same customers. Newcomers such as Internet services company Yahoo! that are richly valued are compared with other richly valued newcomers, which casts their sky-high market values in a more realistic perspective. Likewise, larger, established businesses are compared with their equivalents.

Comparing companies with their peers has the added advantage of damping the influence of stock-market gyrations, just as all boats rise and fall with the tide.

On average, my research found, each dollar of sales of market leaders is valued at more than double that of its peers. Clearly, investors expect leaders to extract a superior earnings stream from their sales.

It may seem awfully hard to maintain such a sizable market-value differential, yet this is what distinguishes the leaders. Highly valued shares and healthy earnings give them the means to acquire other businesses, and to make investments that solidify their position in ways not affordable to less-blessed rivals. Hence the second critical imperative: Unless your market-value per sales dollar is more than twice the average of your peers, you will impair your prospects for gaining and sustaining the lead.

Many companies talk about being leaders in their markets, yet by my definition just one in eight deserves the right to make that claim: Only 640 out of the 5,009 companies I tracked surpassed their peer-group averages on both the sales-growth and market-valuation measures.

There are several surprises among my top 100 performers. For instance, Yahoo is ranked fifth, confounding doubters who question the future of dot-coms. Yahoo derives its success by appealing to independent-minded change-seekers in a focused way. It effectively turns these nomads into repeat customers. EMC is ranked 15th even though the market for data-storage equipment is hypercompetitive. EMC’s forte is catering to business customers who want top-notch dependability above all. United Parcel Service, once regarded by some as an unexciting delivery company, landed in 35th place. Why? Over the past decade it has morphed itself from a one- size-fits-all supplier into a high-technology powerhouse that collaborates closely with customers to develop tailored solutions.

In each instance, the leader outgrew its peers by being keenly attuned to customers’ changing priorities, while building a highly valued business model.

Do you know how your company measures up?

Wiersema is a business strategist and author whose action-provoking insights continue to push the envelope of market leadership. He can be reached at fdw@wiersema.com.