These days, if your company isn’t engaged in or at least thinking about digital transformation, you’re in a distinct minority.
The trend toward digital transformation was already well under way by the time the 2020s rolled around — but the arrival of the COVID-19 pandemic at the beginning of the decade made it more urgent than ever, and greatly accelerated the shift.
- A survey of more than 2,500 enterprise decision-makers by Twilio found that 97% of executives said the pandemic had accelerated their company’s digital transformation.
- Given the increased pressures on business and supply chains, and the need to adapt technologically, it’s not surprising that 79% of those respondents also said that the pressures of COVID had resulted in increased budgets for digital transformation.
But succeeding at digital transformation can be harder than it might appear — and it’s not enough to just invest money in new technology. Many companies don’t succeed at their goals because they don’t have the right understandings in place at the outset.
Successful digital transformation requires careful planning, realistic goal-setting and continuous assessment. In fact, one of the single most important factors in determining the success of digital transformation is understanding how to correctly measure that success.
So first, let’s talk about what we mean when we talk about digital transformation. And then we’ll look at how to effectively measure the success of your efforts.
Defining Digital Transformation — And Why It Matters
Digital transformation means more than just investing in a new ERP system or moving your data to the cloud. True digital transformation is always driven by a higher sense of purpose. It involves changing the way your company uses technology to fulfill its goals — and achieving this transformation may entail cultural shifts, as well as new technology.
To better understand that, let’s consider the purpose of digital transformation. Why do you need to transform digitally? Because it ensures business growth and helps you stay ahead of your competitors.
Sticking to legacy systems won’t help you in an accelerated digital landscape. You need the latest digital tools in your arsenal — not just to keep up with the digital Joneses, but to make sure you can set the kind of aspirational goals that fuel real growth.
Companies don’t pursue digital transformation for the fun of it. Transformation, after all, is a slow, amplified version of change — and change hurts. Businesses pursue digital transformation to avoid financial ruin.
Because those who fail to modernize will, in due time, fail to win and retain customers. And where will all those customers go? To competitors who have modernized and are delivering experiences that meet modern expectations.
Why Measurement Matters: Keeping the Pot Boiling
Digital transformation isn’t a one-and-done kind of thing. It’s a continuous process and to reap the benefits, you need to continually monitor your results.
In fact, with the increasing rate of innovation in tech and business, it can be difficult for a digital transformation strategy to stay relevant beyond a few years. For this reason, you must reassess your strategy every two to three years, to avoid investing in a strategy that may have already become obsolete due to a sudden disruption in tech or organizational workflow processes.
Think of your digital transformation as a pot of water you need to keep boiling — and that won’t happen unless you continually apply heat so it doesn’t cool off. Maintaining a state of equilibrium and keeping your momentum up doesn’t just happen on its own — it requires energy and effort. Otherwise, you’re looking at entropy.
So how do you know whether the digital transformation is working at your organization? Establishing the right metrics and continually monitoring them is how you know if the pot has stopped boiling — so you can figure out what needs to be done about it.
How to Measure Success in Digital Transformation: Creating Metrics That Matter
Here are some guiding principles and insights that can help you keep your digital transformation at a rolling boil.
First, you need to establish metrics that matter. What do we mean by that? The metrics must reflect the goals of the organization. You only want metrics that will drive your company in the direction you want it to go.
It’s also important to avoid unreasonable expectations. Make sure the goals you’re setting are realistic and achievable. Remember that your team members have day-to-day responsibilities, and their time is finite. Ask yourself if you’ll be able to dedicate the number of people you need to implement your digital requirements.
Some other helpful considerations you may want to keep in mind, based on what we’ve learned from previous engagements:
- The data presented by the metric should be actionable. If a metric isn’t performing as it should, we want the dashboard to call attention to it so that you can do something about it.
- The metric should be current and accurate. If the data supporting a metric isn’t current or doesn’t accurately represent the state of your business, it won’t help you. If your high-level business reviews happen monthly, for example, that means metrics that update less often than once a quarter may not be useful to report.
- The metric should be easy to understand with a clear definition. It helps to focus on metrics that are concise and don’t require further extrapolation or a reference card to explain what they stand for.
- The metric data should be valid for at least one year. Brief trends and small aspects of a business come and go. But in many cases it’s better to focus on capturing the important business data, the things that would last.
- The metric needs to have a clear target for value and timeline. You’ll want to identify goals for the metric and determine a timeline for achieving those goals. If you can’t establish an accurate timeline to improve an underperforming metric, it probably doesn’t belong on your leadership dashboard.
- The metric should have a single owner. A single owner encompasses three aspects for the data: a single definition of the metric, one way to obtain the data, and one expert to consult on how you can best use the metric on the leadership scorecard.
Troubleshooting Your Metrics
Here are a few possible challenges you might encounter with your metrics, and how to overcome them.
- Too many metrics. For large enterprises, the sheer number of metrics and the broad nature of your business may make it difficult to select the most important metrics. For one of our engagements, we initially presented around 80 metrics, considerably more than the 35 asked for. We continued to work with leadership and metric owners, examining and comparing metrics until we could settle on the 31 that appeared on the initial CSEO Scorecard.
- Maturity in the metrics. Many of our metrics for that engagement didn’t use complete or correct datasets or were not as updated as often as we wanted. We had a lot of aspirational targets, but we needed them to be realistic. We worked with metric owners to improve data quality and determine realistic targets for the metrics.
- Overcoming the reluctance to share information and contribute. In some cases, we found metric owners were reluctant to share their metrics. They feared further inspection of their business units. So, it was necessary to reframe, through action and our communications, how the organization perceives unfavorable metrics.
Data now fuels our digital transformation, rather than being just a measurement of where something is passing or failing. Metrics are indicators of areas that need attention and improvement. In response we began reinforcing, through our CSEO Scorecard review, that our goal was not to subject teams to criticism — unfavorable metrics simply reveal opportunities for improvement. This approach results in the ability to assign resources to address issues, ultimately leaving the metric owner with a better, more efficient process or system.
Examples of Metrics to Measure Digital Transformation
Here are a few examples of metrics you may want to track, depending on your goals:
Active usage metrics: Successful digital transformation requires sustainable technology adoption. A great KPI to measure is how actively your digital assets are being used. Compare the number of licenses purchased to the number of users actually using the software. If more than 85% of users are using the software, you can assume the software adoption is successful, for example.
User engagement and participation level: Some metrics that describe employee engagement could include – Net Promoter Score, Exit Rate, Employee Satisfaction Index and Bounce Rate. A McKinsey report says that organizations with a Chief Digital Officer are 1.6 times more likely to ensure success than others.
Workforce productivity: Employee productivity is a common goal with digital transformation. Workforce productivity is the value or volume of output an employee can deliver relative to time.
Cost of digital initiatives: Between 2020 and 2024, direct investments into Digital Transformation are projected to reach $7.8 trillion. Successful initiatives can create more revenue thanks to your digital investments.
Want to learn more about how Columbus can help your company plan and execute an effective digital transformation, and then measure your success? Get in touch with us today.