As the concept of Digital Transformation comes to the fore in an organisation, it can raise uncertainty, doubt and speculation for both customers and stakeholders.
How will this change bring in revenue, will it cause mass job disruption, will it confuse clients while potentially losing business footfall? These are just some of the questions possibly on people’s mind.
Educating, informing and developing a well thought-out strategy will alleviate some anxiety and will lift the faith in the transformation. However, the conceptual reality that digital transformation is a journey, not a destination still needs to instil itself in the framework of change for many organisations.
Nevertheless, without the correct measurable metrics, digital transformation is only a conceptual motion. The necessity of exact metrics is vital for business digitalisation. Tracking is an essential lever of digital transformation through organisational transparency.
According to a recent Gartner’s survey, only 4% of organisations have no digital initiative, yet, another Gartner survey found that almost half of CEOs have no metric for digital business transformation.
As a rule of thumb, KPIs that are more outcome centric instead of output based, will tick the box for most digital transformations. However, a well thought through detailed process, transforming a company while measuring both the journey and the impact is imperative to help with course corrections.
Leaders embarking on the journey of digital transformation need to understand that the process is made up of two distinct parts which have different KPIs. The first part of the process is just before ‘critical mass’ is achieved – before a vast majority of products and processes become digital. The second part of the journey is after critical mass is achieved.
Also, it is important to make the distinction between measurements of the transformation process – designed to show if the transformation is on track. And outcome metrics – designed to track to the results of the transformation.
Part One: The Visionary Phase (before critical mass)
Uncertainty is an inherent part of the digital world as well as the transformation process. The best way to prepare for is to understand the risk looming ahead. Many organisations without a robust digital strategy often suffer from one or more of these eight early-stage failure patterns, and the right new digital KPIs can help avoid such unproductive contexts:
Source: World Economic Forum / Bain & Company
Setting the stage for complete digital transformation before critical mass, sees an initial increase in cost as a result of investments in infrastructure and capability development. Also, in the initiation phase, we can expect disturbances in customer engagement, as legacy solutions migrate. At the same time, disturbances in KPIs around employee engagement vary as they will start fearing job loss, plus the entire transformation will create a general climate of uncertainty.
But even here, there are some leading KPIs that can help leaders understand if their transformation is heading in the right direction or not. Such as:
- Number of internal initiatives/processes on the transformation journey as a percentage of the total
- Number of products/services on the transformation journey as a percentage of the total
- Percentage of employees trained
- Transformation approval ratings
- Time it digital (how long does it take to migrate a process or product to digital)
The use of metrics such as the ones above, can guide and stabilize the uncertainty with facts, figures and knowledge on how this digital transformation will succeed.
It is highly important to gain the support of each senior executive responsible for a new digital KPI, to co-design the KPI definitions and agree how much and how quickly things can get digitalised. Here is a comparative framework for digital business KPIs aimed at optimising the current business, with relevance for Chief Customer Officers, CMOs, COOs or even CHROs:
Leaders committed to the digital transformation of their respective companies need to place more emphasis on the process metrics than outcome in this stage before critical mass is achieved. The focus will only shift once critical mass is achieved or it will shift only for the products, services and processes which have made the transition.
Part Two: Transformative Growth (after critical mass)
After the initial disruptive phase comes transformative growth with critical mass adoption completed. Overall crowd, consumer and broader adoption of digital enhancements have reached a large scale. From a metrics perspective, we can expect the following in phase 2:
- Higher Revenue resulted from (new) digital business models
- Customer experience scores and NPS
- Customer satisfaction improvements
- Cost savings
- Number of new customer touch points
- Efficiency increases indicators
- Margin metrics
- Market share
As with anything else in the corporate world, things need to be kept simple; otherwise there is a high risk that the organisation will sooner or later reject the new set of digital KPIs. Most corporate executives are already overwhelmed with various systems of tracking their work, from traffic light lists of deliverables to heatmaps and complex balance scorecards. A staunch ally in deploying a new organisational-wide set of digital KPIs could be a digital roadmap dashboard built on a simple, user-friendly interface requiring minimum input effort.
Measuring digital transformation in some way is the natural part, the real challenge actually comes from restructuring organisational mindsets (e.g. highlighting that failure is now encouraged; otherwise managers might report artificially positive KPIs), carving new pathways of management culture which transcends both customers and employees. It’s important to understand that different KPIs come into play along the path to full digital transformation as the business/services upgrades. Adapting to more digitised models of metrics ensures measurable statistical coverage that conforms to digitalisation, speeds up the adoption rate internally and externally for a successful business overhaul into the world of digital.
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