The digital transformation times, they are a-changing – and so, too, must digital transformation metrics. “The primary measure of success last year was survival,” says David Cushman, research director in the emerging technology practice at IT consultancy and research firm HfS Research. “Transformation was thrust on so many.” Companies and their IT organizations had no choice but to do what needed to be done – quickly. Speed, Cushman says, was the primary KPI.
Having completed any number of initiatives (many that had been on the digital to-do list for some time), organizations are looking at what’s next.
“Companies relied heavily on automation and advanced capabilities like Artificial Intelligence (AI) and edge computing to pivot their operations and thrive through the pandemic,” says Goutham Belliappa, vice president of AI engineering with Capgemini North America. “In 2021, they will see the true value of these investments as they find themselves farther ahead in their innovation journeys, capturing greater efficiencies and moving at greater speed while gaining the revenue to continue having an aggressive mindset in the market.”
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Digital change will continue. The primary competitive differentiators will be related to responsiveness – to customers, to employees, to ecosystems, to market shifts. The ultimate goal, for most organizations, will be a return to growth. “The pandemic shifted the focus of many companies from growth-focused metrics to metrics that ensured resilience through cost reduction,” Belliappa says. “Now that the U.S. is close to achieving a vaccine surplus, the market is dramatically pivoting away from cost containment strategies and back toward aggressive growth strategies.”
10 digital transformation metrics that work now
It’s critical that IT organizations and their business stakeholders set up key metrics of success that align with new organizational goals. Some digital transformation KPIs that make sense in 2021 include:
1. Continuous business value realization
“What was originally a large-scale transformation turned into continuous transformation and this got reflected in the metrics. So, in a sense, one-time transformation metrics have morphed into continuous-transformation metrics,” says Prashant Kelker, partner at technology research and advisory firm ISG.
Metrics tied to business case realization have or are morphing into continuous value realization. On-time/on-budget delivery metrics are evolving into measuring flexibility in adjusting to scope. “Before COVID, the world was already contemplating a move from project-thinking to product-thinking,” says Kelker, whose firm is also tracking continuous value realization across 400 companies. “The pandemic has hastened this – we have multiple clients who are now interested in aligning, earmarking, allocating, and spending budgets in line with the product-aligned agile delivery.”
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2. Percent of processes designed for cloud
Cloud-native tools and automation can offer the kind of agility companies need going forward. “Processes should be designed end-to-end in the cloud and designed to learn from human interaction to keep improving,” says Cushman, who advises making a baseline assessment and setting targets to monitor. “To create an organization in which the process can run end-to-end across the organizational value chain with the fluidity to respond to rapidly changing needs, you need to get as close to 100 percent as fast as you can.”
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3. Revenue attribution
Matching revenue to specific marketing efforts, for example, will be important. “This includes the gambit of how digital transformation investments can help reduce customer churn, enhance customer acquisition, and improve the brand experience,” says Nitish Mittal, vice president at Everest Group. “For instance, in retail, providing a frictionless direct-to-consumer commerce experience is a key imperative.”
For some businesses, determining how technology innovation generally is impacting revenues will be helpful. “In all of my conversations with CEOs, CDOs, and CMOs, they are pivoting away from cost containment and back toward capturing market share and providing value,” says Belliappa. “Revenue from commodity services is not as significant as revenue from new, innovative, efficient, and differentiating capabilities that are not only hard to replicate, but also have high growth potential.”
4. New customer conversions
After 2020, buyers are more willing than ever to try new things. To determine if the organization is taking advantage of this, companies can look at how well they are successfully converting people who try a product or service from trial to repeat use.
“Our willingness to try new brands is at an all-time high,” says Matt (MJ) Johnson, director of the product & experience lab at business and technology consultancy West Monroe. “Businesses have an incredible opportunity to capitalize on people trying new brands. It’s more important than ever to measure how well they’re converting.”
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5. Innovations successfully brought to market
It’s crucial to ensure that digital transformation and data are truly enabling companies to identify and capture new opportunities. “Measures of success here can be found in the number and value of successful innovations brought to market,” Cushman says.
Let's look at five more compelling digital transformation metrics:
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From a progressive CEO's perspective, the most meaningful and substantive KPI is 'business outcomes' that fuel their digital growth trajectory. That requires digital transformation that will enable new business models, not merely making minor adjustments to existing models. Therefore, CIOs must be bold, be brave and truly work towards reinventing their enterprise via business technology advancements.