One of the first decisions to make when starting down the road of digital transformation, is how you are going to measure your progress.
Tracking and measuring business results is not a new skill: every business uses KPIs. But traditional business metrics have no place in measuring digital transformation. You need to think in completely new ways.
According to Forbes 70% of all digital transformation initiatives fail. This is a startling statistic, but unsurprising when you realise that these failures are mainly due to the kind of silo mentality that prevails in most large organisations. Recent reports by Gartner back this up: they state that almost 50% of CEOs have no metric for digital business transformation. Such old-school thinking prevents business leaders from being able to measure performance at a company-wide level, so their digital transformation initiatives are rightly doomed from the start.
The role of new digital transformation metrics: A better understanding of your business
If you are going to make a success of digital transformation, then you need to un-learn everything you ever knew about tracking and measuring performance. By its very nature digital transformation crosses departmental boundaries. So centralised reporting is absolutely crucial, and business leaders need to move away from using directorate-level operational efficiency metrics. For most organisations this is a new experience, placing divisional heads well outside their comfort zones.
But good digital transformation metrics aren’t exactly rocket science. All it takes is the ability to set each measure in a business-wide context rather than a narrow departmental one. This gives you a wider audience and a much more accepting one, from the Board down. And by simplifying the KPIs it’s much easier to influence the key decision makers, getting them onside and keeping them there.
Plus, if you’re doing it right, your digital transformation plan will be continually evolving as you respond to fluctuating customer requirements, technology changes and market pressures, which renders traditional business KPIs ineffective anyway.
This is how you build your case for defining a new set of metrics. You can create a much greater understanding of not only digital impact, but overall business performance which is ultimately the key outcome of all company efforts.
The 4 things to remember when defining digital transformation metrics
Your digital transformation journey is unique to your business and your industry, so you will require a unique set of measures. But whatever you use, you need to not only measure progress against the plan but also the value your transformation projects are delivering.
State the ambition, specific outcomes and expectations, linked to the ultimate objective. This makes it easier for others to realise that the usual KPIs are not fit for purpose
Make sure your KPIs are common to all departments involved in the digital transformation initiative, shared with and agreed by the department heads
Make sure they are quantifiable and actionable; don’t fall into the trap of “vanity metrics” that are nice to have but ultimately don’t teach you anything
Include your key stakeholders at the earliest opportunity. Recognise that they all have their own agendas — at least at the start of the conversation — so you will need to adjust to their varying needs and levels of understanding
Measure only what matters
Digital transformation best practice is to link your measurement framework to the overall business strategy and objectives. We recommend the following headline KPI themes, all of which should be easily identifiable and measurable:
Customer satisfaction and experience
Return on investment
Productivity and agility
Net revenue and profitability
Employee satisfaction and productivity
You could argue that none of these are exactly new to your business, that each one is already being used somewhere by somebody. The difference here is that they are ALL being combined to measure your digital transformation, to create a unique holistic view of the impact you are making on the business as a whole. And we’re willing to bet that’s a first for your organisation.
Be prepared to move with the times
Above all, remember that traditional KPIs cannot be effective indicators of your ongoing digital transformation efforts. They provide only a narrow view of performance. Your new digital transformation metrics should span the impacted business functions and provide a continuous view of what’s working and what’s not.
You are breaking new ground here and reporting on your business in exciting and innovative ways that may never have been considered before. As you learn more about the performance of your initiative and the value it is driving for the organisation, you should leverage your unique position by constantly recalibrating your digital models and objectives.
So if business requirements change, you will have a rich library of results and learnings to draw from to keep your project on track.
If you’re interested in discovering how to measure digital transformation in your business, get in touch today.