Should You Try Calculating ROI on Digital Transformation

If it is digital transformation you are seeking, you're probably not going to see the results in the quarter after you complete your first major milestone.

Digital, technology organizations have adapted to agile practices in order to make incremental improvements to the products and processes they support. Product managers have adapted to release Minimally Viable Products and capture customer feedback in order to make better prioritization decisions on how to enhance offerings. Digital marketers employ a toolkit of web, mobile, and social analytics to capture customer engagement and maximize return on marketing investments. All these practices aim to adjust product and practices to improve customer experience, drive revenue, secure offerings and other more substantial pivots.

The Paradox of Calculating ROI in Digital Transformation

But financial practices and thinking remains stuck in quarterly performance objectives and measurable ROI objectives. And therein lies the paradox

• If milestones delivered through digital transformation can't drive significant quarterly performance changes, then financially driven organizations and leaders will drive digital teams to present longer term ROI projections.
• Developing multi-year strategic plans, product roadmaps, or technology plans is difficult for many organizations and including financial projections adds complications especially if you are trying to drive a data driven organizational practices. These financial models must include assumptions and projections in years 2-3+ that create significant variability and uncertainty. Assumptions on impacts of  new competitors on revenue, macro markets and technology trends, estimates on workflow or productivity improvements, adoption rate and pricing of customers buying  new revenue programs, and other assumptions.

Digital Transformation ROI or Digital Practices?

So this leaves me a closing question

Do you build ROI stories on projections and financial assumptions knowing all the pitfalls in trying to develop reasonable models that the organization buys into, or do you rely on vision, strong execution, and agile practices to adopt to market conditions and customer feedback to drive you to a cloudy digital business future?

I'm still pondering this one but believes the answer requires a balanced effort between vision, agile execution practices, and nimble financial methodologies. But... (more to come)