Digital Transformation KPIs

How To Measure the Success of Digital Transformation Efforts?

By now we know that digital transformation (DX) is not only challenging but also changing many of our conventional views. In one of our earlier articles on DX investments, we saw how traditional ROI calculations do not apply to DX investments. One needs to adopt a different kind of evaluation formula for it.

Similarly, we cannot use the traditional KPIs to evaluate the efficacy and performance of digital transformation efforts. In fact, the traditional KPI measures will give you a single dimensional view of the impact of the DX efforts. Moreover, digital transformation creates cross functional impact which cannot be measured by the traditional KPI measures.

So, what to do?

We always tell business leaders to put on their thinking caps when it comes to digital transformation. They will have to broaden their approach and understanding of DX to measure its success. In a nutshell, they will have to design custom metrics to measure DX success.

Custom Digital Transformation KPIs

Just like everything else, digital transformation requires you to think differently when it comes to performance and success.
When we are assisting business leaders through their DX journeys, we always tell them to think of impact and not just output. The three major areas where you will notice the DX impact are:
1. Operations
2. Customer experience
3. Finance
Let’s see how DX impacts each one of them.

Digital Transformation & Operations

One of the core objectives of digital transformation is to change the way enterprises do business. It aims to disrupt traditional business models and processes to make way for a new way of existence. This means it impacts the operations of the business. So, what you can measure is the operational improvement.

Many enterprises are embracing the concept of continuous improvement. This improvement gets reflected in the quality of operations and their efficiency.

So ideally the metrics that you can track in such cases are the time taken to complete the process, number of errors, resources required to finish one process, points intervention in each process, etc. You can also track how each process utilizes resources available and optimizes them.

When you start seeing an improvement in these metrics you can say that your digital transformation efforts are paying off.

Digital Transformation & Customer Experience

Many CMOs believe that some of the most popular marketing metrics are feel-good metrics. They make you feel good but fail to give you an understanding of how healthy the business is.

We have already seen the paradox that digital transformation creates by pushing customers away from the enterprise. It is changing the fabric of customer relationships. So, the traditional metrics of customer retention or acquisition do not suffice.

We help business leaders develop metrics that track the experience of the customers as they navigate through the complex ecosystem of modern-day business. Each touchpoint is evaluated for its importance and use and points are assigned accordingly.

We also design metrics that help marketing teams showcase their impact across the different stages of a customer’s lifecycle and not just the top of the funnel. Since DX rehashes the customer lifecycle altogether, using custom metrics make more sense for marketing teams.

We know that omni channel plays a big role in digital transformation. In such scenarios, we feel that metrics like number of calls or average call time of a customer are again unidimensional metrics. Instead what you should be considering are aspects like reason for seeking human interaction, type of inquiry, etc. But you should also remember that these metrics will mean different things in context of your industry. For telecom industry, increase in call center calls will mean more complaints but the same increase may mean possible sales opportunities in insurance industry.

So, you need to use custom metrics that are contextual to your business.

Financial Implications of Digital Transformation

Like every other initiative, digital transformation also impacts the bottom line of the business. But using traditional ROI measures does not work here. Similarly, you cannot use profit numbers as a measure of DX success.

Instead what we advise business leaders is to use tailor-made metrics that track the financial implications on an incremental basis. These metrics will also consider the change in business model if any, the change in infrastructure, etc.

Sometimes, it is better to calculate the value and not just ROI from DX investments. Then there are times when popular metrics of recurring revenues, profit margin, cost of customer acquisition and retention, etc. can be used.

Financial metrics will change based on your strategy and approach of digital transformation.

To know what type of KPIs and custom metrics you should use to measure your DX success, you can talk to our digital transformation consultants. We will analyze your strategy, objective, approach, efforts, and then recommend what metrics will give you a realistic view of your DX success.

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