Digital Transformation KPIs for Measuring Success
Digitization is a priority for businesses globally right now. In fact, reports suggest that as of December 2020, the global investment in digital transformation was $6.8 trillion. Even so, investing trillions of dollars without proper metrics can be counterproductive. You must define and measure the right KPIs to ensure that you’re on the right track in your digital transformation journey.
This post will walk you through the KPIs you can use to measure the success of your digital transformation journey. But first, a quick overview of what digital transformation is, and what digital ROI is.
What Is Digital Transformation?
Digital transformation is the implementation of technology in business to assist with lowering costs and maximizing efficiency. The core challenge businesses face with digital transformation is that there’s a lack of communication between top-level executives and the tech team tasked with the implementation of digital solutions.
Because of this, what executives were looking for when requesting a new technology isn’t what was implemented by the tech team due to the information gap. It’s crucial to understand that for there to be a true digital transformation, these three components must work together: people, process, and technology.
Ahead of any decisions regarding technology, there must be an understanding of the challenges that people are facing, the current processes, and where they need improvement. Only once these components have been identified can the technology be chosen. Just like when building a home, you can’t begin the construction without the owner’s finalized plan, the same way a digital transformation can’t be successful without an organization understanding people and processes first before identifying the proper technology to implement.
Here are some of the steps you must follow before executing a digital transformation plan:
- There must be an initial meeting with the stakeholders to identify the scope, goals, and expectations. There’s also a need to identify the processes and the team that will be tasked with the ultimate implementation of the solution identified.
- There should be group meetings with teams (users of this technology) to identify the project’s goals, expectations, and constraints.
- There should be interviews. During the interviews, you’ll dive deep into the challenges and opportunities with the individuals crucial for the project. These include users, vendors, and executives.
- Conduct an internal review and analysis where you’ll put all the notes together and craft the plan for your digital transformation.
- This is the final meeting for confirmation that all the ducks are in a row and you are ready to implement the plan. This is like the final blueprint when building a home.
What Is Digital Transformation ROI?
The goal of any digital transformation is to have a significant return on investment. Some business leaders have the tendency to insist that digital transformation be up and running ASAP, pointing to competitors who have a clearly defined digital transformation roadmap. That said, digital transformation projects require careful planning – it’s imperative to think methodically about the project to attain a realistic ROI.
By gathering information during the steps outlined above, the interviews will enable you to get a much better understanding of the time it took to implement the project and the cost incurred. Upon completing the project, you’ll be able to go back and review the time spent on the project and the associated costs. This will, in turn, allow you to calculate the ROI of the digital transformation implementation process.
All digital transformation projects should have an ROI. Suppose the implementation process properly takes into account the people, processes, and technology; the chances are that you’ll attain an excellent ROI.
How Do You Measure the Impact of Digital Transformation?
According to Gartner, nearly half of businesses don’t define metrics to track the success of their digital transformation. Businesses need predetermined KPIs (metrics) to track whether or not best practices are being implemented, and the digital transformation process is creating the intended value.
Let’s look at some of the ways businesses can measure the impact of their digital transformation:
1. Customer Experience
Customer experience has become a vital brand differentiator in recent times and will probably surpass price and product soon. Customers expect a satisfactory experience from the businesses they engage with, regardless of whether it’s digital or in-person.
According to Statista, there are over 37 million internet users in Canada. This number is expected to rise to 39.26 million by 2026. These are all potential customers who’ll engage with your digital assets. End-user satisfaction determines how well the technology investment translates into desired financial and organizational improvements. Among the common metrics used to assess user experience include customer satisfaction, customer loyalty index, and sentiment analytics.
2. User Engagement Numbers
User engagement refers to the number of customers who interact with your products or services. Excellent engagements give you information on whether your customers are adopting your technology. There are three user engagement metrics that can help you determine the number of customers using your products or services:
- Daily active users: This is the measure of the total number of people who log in and engage with a specific product or technology on a given day.
- Weekly active users: This is the number of people who interact with an app or platform in a week.
- Monthly active users: This is the number of people who visit or interact with an app or a platform in a month.
Suppose your business has less compliance issues without the number of monthly users decreasing; it means that your customer satisfaction is increasing.
3. Employee Productivity Improvement
Employee productivity is the output per employee in an organization within a given duration. After successfully implementing digital transformation, the productivity of employees is expected to improve. By tracking how productive employees are (improvement in the duration to complete a task), you can measure how efficient your digital transformation process is. For instance, when basic tasks such as document capture are automated, employees can focus more on productive tasks.
4. Operational Efficiency
Identify the number of processes that now run on new software and how the efficiency of those processes has been impacted. For instance, you could check the value or volume of output relative to the resources invested. This will give you insights into the overall level of usability and adoption. This information can help you identify which processes to simplify and which ones to optimize to enhance operational efficiency. You will also determine whether there is a need to introduce automation or whether you need to train your employees more on how to use the new technology.
5. Hours Saved
While the hours saved by implementing digital transformation may seem hard to quantify, as more and more processes become automated, the number of hours saved becomes a vital measure of progress and innovation. Find a way to measure it, track it, and constantly improve it. Hours saved may lead to cutting operational costs.
6. Cost of Implementing the Digital Initiatives
Successful digital transformation initiatives can help increase the revenue from digital investments. Business leaders should monitor the amount of money they spend on technology and then measure the degree to which their digital investments impact their revenue generation.
Businesses which spend a small portion of their budget on digital transformation initiatives are unlikely to generate high returns. To maximize your ROI, channel enough resources towards optimizing the adoption of new technology.
There must be a balance point. After this point, businesses begin the digital transformation process all over again. This shouldn’t happen. The law of diminishing return takes place after reaching the balance point in business digitization. A proper investment in digital transformation can help you reach this balance point.
7. Reliability of the Digital Transformation
Shifting from workflows that depend on manual processes to one that relies on digital tools may bring about security problems for businesses. You should assess your business’s availability (the ability of customers to access your products and services whenever they are in need of them), system performance, and security (customer’s trust in your business that you’ll keep their data safe) to identify any potential reliability issues. Some of the common metrics used to measure reliability include:
- Mean time to failure: This is the average time to the first failure of the system. After a failure, the relevant components of the system should be replaced.
- Mean time to resolve: This measures the average duration it takes to identify and correct any issue that caused the system failure.
- Mean time before failure: This is the average time between two failures. Unlike mean time to failure, components can be repaired in case of failure.
8. Team Morale
Even as businesses focus on digital transformation, it is equally important to focus on organizational culture. Digital comes with change, which in the real sense leads to cultural transformation. To ensure that employees are motivated and believe in the mission of the business, CEOs must track morale using quantitative feedback. Having an above-average score reiterates that your digital transformation initiatives are headed in the right direction and can become the X-factor.
Pure IT Can Help You With Your Digital Transformation Process
Do you need help with your business’s digital transformation? Pure IT can help. When you partner with us, you’ll have access to a wide range of IT services, including server virtualization, Microsoft solutions, hardware and software procurement, IT infrastructure services, among others. Contact us today to get started.