3 Achievable Ways to Define KPIs and Measure Successful Digital Transformation

We all say digital transformation is a journey. We know it's not a project with an end date or a static outcome and more like a portfolio of initiatives and roadmaps that evolve over time.

So, one common question I get when keynoting about digital transformation is, "How do we define and measure the success of digital transformations?"

3 Achievable Ways to Define KPIs and Measure Successful Digital Transformation - Isaac Sacolick

It's a question many leaders stumble on answering. On the one hand, some try defining KPIs and other metrics that capture all the benefits of the underlying initiatives. But that can be hard to communicate to people as an overarching goal or mission, especially when digital transformations require pivots and strategy changes because of evolving market conditions. 

And if you avoid specifying success criteria or meaningful KPIs, well then, that creates an open season for leadership detractors to find gaps and shoot arrows at the program. Just try growing the investment budget in years 2-3 of a digital transformation without demonstrated KPI improvements - expect those arrows to be game-ending missiles. 

My answer has three broad-stroke success criteria, which I outline below and includes several expert opinions on their perspectives.

1. Digital Transformations Must Deliver Growth and New Products

Sorry folks, but if your digital transformation only targets efficiencies, quality improvements, scalability, or other operating metrics, then it's not a digital transformation by my definition. Here's the explanation I shared in my book, Driving Digital:

Digital Transformation is about looking at the business strategy through the lens of technical capabilities and how that changes how you are operating and generating revenue

Going beyond revenue, digital transformation should aim to gain entry into new markets, launch new digitally-enabled products, evolve the business model, or other customer-facing endeavors.  

Your success criteria and KPIs should articulate these targets. Examples include revenue growth from new digitally enabled products, market share in selected targets, or percent of revenue from new business models. 

2. Digital Transformations Must Change the Culture: Agile Collaboration, Experimentation, Data-Driven 

Thomas Donnelly, CIO of BetterCloud, states that digital transformations must "create a culture that embraces change, new technology and leverages data." 

Because digital transformation is a journey, leaders must seek out behaviors, practices, and learning that enable ongoing evolution toward anything - market changes, new technologies, security risks, pandemics, etc. My core practices start with agile collaboration because that allows multi-disciplinary teams to excel at short-term execution while planning roadmaps and developing standards. After that, I seek a culture of asking questions, experimentation, leveraging feedback loops, and becoming more data-driven

So what are the success criteria against culture change? 

My primary metric is employee engagement. How many employees have defined roles on digital transformation initiatives? How many are developing dashboards in citizen data science programs? How many people show up to sprint reviews or are identified stakeholders on agile user stories? How many POCs has the IT team conducted, and is there a growing number of digital marketing lead gen experiments? 

Engagement shows that you are succeeding in a bottom-up digital transformation where more people are challenging the status quo and delivering new capabilities. 

3. Digital Transformations must Empower Employees and Enable a Future Way of Work

Well, what about operational efficiency and automation? Is that not a factor in digital transformations? 

Of course it is - so long as these are means to get to a new ending!

Hemant Makhija, Vice President, Marketing at Newgen, says it this way. "To measure the progress and effectiveness of digital transformation initiatives, modern enterprise leaders must think beyond the standard metrics, such as operational efficiency, top line, and bottom line. In addition, they should focus on continuous innovation, customer success, and employee productivity—metrics that directly impact business differentiation and customer longevity."

So, for example, even infrastructure improvements, app modernization, and cloud migrations have a short-term benefit that must enable longer-term gains. Rosaria Silipo, head of data science evangelism at KNIME, states it this way. "There are two main ways to measure success in digital transformation, like for many other things: time and money. Does your new data infrastructure save time? Does your new data infrastructure increase productivity and therefore generate more money?"

Josh Stella, the founding CEO of Fugue, looks beyond productivity and says that empowering people is a critical success factor. He says, "Digital transformation is ultimately about empowering everyone in your organization. Find out what matters to your people, and you can learn what would empower them in a digitally transformed organization."

Continuous innovation, customer success, productivity, operational scalability, empowerment - all are important targets in digital transformation, but can we define success criteria or KPIs around them?

MPOV is that to really align efficiency, productivity, and a future way of working, you must have a personal conversation with employees and ask them

  • What are some time-consuming things you do today that are business-critical and should be smarter, faster, and easier in the future? In other words - things the business will continue to do but must be a lot more efficient on your time.
  • What activities should you be doing more of in the future that you can barely scratch the surface on today because you're too busy? You've just defined the future of their work!
  • What activities are you taking ownership of or participating in to help enable the transition? And that speaks to empowerment and engagement.

Need a metric? Track how many people participate in addressing these questions and succeed in their personal digital transformation journeys.

-

Just a note that while these are achievable success criteria and KPIs, I didn't say it would be easy getting leaders and teams on board with them. It often requires a facilitated discussion to gain alignment and I advise leaders to start by crafting vision statements.


No comments:

Post a Comment

Comments on this blog are moderated and we do not accept comments that have links to other websites.

Share