In a time of accelerated digital disruption, the urge to embrace data, and analytics is widely understood, but its link to business value is not.
Executives often struggle to quantify DX impact and instead point out a wide set of ongoing initiatives to ensure their transition to digital such as building new technology platforms, investing in infrastructure, or rolling our new products. But while they might report substantial progress on these initiatives, it does not necessarily mean revenue, profitability or market share have changed or increased. Organizations that pursue digital transformation excellence need engaged leaders to drive actual gains by prioritizing initiatives, insisting on fast minimally viable results, and of course measuring and tracking the impact and value creation of all digital initiatives.
Read more: Not familiar with DX? Find out what digital transformation really is!
Before all of this can happen, though, several key factors should be in place, according to our experience and external research. The following six elements are always crucial in DX and can significantly improve an organization's chances of success.
1. Have clear and integrated goals
Successful companies have a clear vision backed by a set of strategic imperatives and quantified business results, linking digital to the overall business strategy and sustainable competitive advantage. A strong vision or sense of purpose serves as a bridge from the present to the future in the minds of those affected by the change. Success is also dependent on transformation leadership positions so successful companies demonstrate a visible commitment to the organization by getting on board the best people with the highest potential to set and clearly communicate the vision and lead the transformation.
2. Strive for high commitment & engagement
The importance of leadership's commitment to large-scale change is widely understood, but commitment alone is not sufficient. Involving middle management in the planning and implementation and helping employees at all levels to understand where the company is headed is proving to be a building block of the successful transformation. Without this, there is often resistance and protection of functional silos and power bases. Companies tend to be more successful in their transformation efforts if everyone understands and is committed to the goals and strategy and there are persistence and results-oriented mindset from both leaders and employees.
3. Involve top-notch talent
Identifying and freeing up the most capable resources in the organization to drive the transformation program is another fundamental factor that single-handedly could increase the likelihood of digital transformation. These efforts can include redefining individual roles to align them with transformation goals, as well as assigning integrators and transformation program managers to bridge potential gaps between traditional and digital parts of the company.
4. Adopt an Agile mindset
Digital transformation is about revolutionizing the way business is done and future-proofing your organization for the continuously changing internal factors, external competitors, industry trends, and new technologies. Therefore, an agile mindset and approach across the business will ensure all teams involved can quickly adapt and deliver value often - reducing the risk of failure and driving companies toward success. Effective agile leadership addresses roadblocks quickly, adapting to changing contexts, and driving cross-functional, mission-oriented, agile behavioral change into the wider organization.
5. Harness business-led technology integration
Digital transformation involves using digital technologies to redesign processes, transform products and services into something significantly better and achieve greater efficiency or effectiveness. Companies that invest in forward-looking, fit-for-purpose technology and data platforms driven by business need to support the development and scaling of digital use cases, have a better chance of success.
6. Perform effective monitoring
A critical, but often ignored, consideration by organizations looking to succeed in digital transformation is to set up key metrics of success that align with new organizational goals. Emerging from the madness of pandemic-fueled changes with survival as a primary measure of success, organizations need to rethink their measures of success and the way they are applied. Companies that establish clear metrics and targets around processes and outcomes, with sufficient data availability and quality, and track outcomes regularly at both program and initiative levels are more likely to succeed in their transformation efforts.
However, setting such metrics – let alone KPIs – on an executive level, is one of the most common challenges and according to Gartner, almost half of all organizations have no Digital Transformation metrics defined. It sure isn't a simple task! Since digital transformation isn't a one-size-fits-all solution, but rather a concept that each organization must define for itself, metrics, goals, and objectives must be defined accordingly. What works for one company may not be relevant for another. Companies that succeed in digital transformation have a clear understanding of their own goals and how they will track their progress toward those goals.
Nevertheless, based on our experience and external research, there are four key metrics that digital executives could monitor and measure to keep track on digital transformation initiatives.
Return on digital investments
Evaluating the return on digital investment is the first essential metric, where executives should look at both the value added from a single digital initiative as well as the large-scale transformation. Although not every investment in digital transformation will yield the desired results for the organization, and not every positive result will have the same impact, the overall benefits of the technologies you integrate into your organization should outweigh the costs. You can assess the ROI of your digital initiatives by tracking how the digital tools you incorporate into your business processes improve your strategic goals.
Revenue attribution
Identifying how technological innovation affects revenue in general could be helpful to most business. This includes how investing in digital transformation can aid in lowering customer churn, increasing customer acquisition, and improving the brand experience. Standard services typically do not generate as much revenue as new, innovative, efficient, and differentiating capabilities that are not only difficult to replicate but also have high growth potential.
Digital maturity assessment
Arguably, the IT infrastructure of an organization and the skill levels of its employees are both important factors in the digital transformation process. The success of integrating new technologies into organizations is proportional to the level of digital maturity of the organization. Existing technologies and digital skills are two factors that influence an organization's digital maturity level.
For example, to ensure continuous improvement and flexibility to adapt to rapidly changing needs, processes that are designed end-to-end in the cloud and designed to learn from human interaction can offer the kind of agility companies need going forward.
Talent measures change according to where an organization is in its digital journey. Early on, enterprises pursue having enough senior architects and builders. Then, the focus changes to expanding teams with technical specialists and quality assurance professionals. But the only constant in these stages is the executive leader, who must understand the most critical needs and have a way of measuring progress to ensure an infusion of talent with a mindset of building and transforming, rather than just maintaining what is already there.
Time required to launch new digital solutions
Quickly translating business ideas into market-ready tools can serve as a front-line metric in digital organizations. Making DevOps and quality assurance part of the company’s core processes, adopting an agile mindset, and mapping out rapid timelines for delivering applications to market and subsequently improving them, could enable organizations to derive greater value from digital transformation.
With digital-native companies infiltrating every sector, large enterprises can no longer afford to compete for consumers by spending years on application development. Instead, traditional companies should focus on rapidly building and releasing solutions for no more than 12 months. In comparison, leading providers need only 2-6 months to bring solutions to market, with world-class, digital-native disruptors shrinking the time-to-market period between 8-12 weeks.
Other examples of digital transformation metrics
Executives and functional leaders could also take into account other traditional indicators, such as:
- Customer engagement and number of users
- Amount of marketing expenditure in digital channels
- Level of participation and positioning of the organization in the market
- Level of contribution and involvement of company departments in digital initiatives
- Level of user satisfaction
- Number of new applications, technologies and innovative solutions applied
In conclusion
Companies had no choice but to pivot their operations and survive the pandemic by doing what needed to be done – quickly. As a result, in many cases, speed was the most important KPI. After initiating or completing a number of initiatives by now, organizations should evaluate their efforts and measure the true value of their investments, as they hopefully find themselves further ahead in their innovation journeys. By mapping out the most important metrics to monitor, they can monitor, analyze, and prioritize the effectiveness of current and future digital investments. Of course, functional leaders must track certain metrics within their own domains, but only the executive leaders are the ones with a company-wide perspective backed by the mandate to create holistic organizational value through digital technologies.
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