5 digital transformation metrics to measure success in 2023

Measuring the success of your digital transformation can be tricky. Consider these five key metrics as a starting point
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There’s general agreement among business and IT leaders that true digital transformation (DX) is a continuous and adaptive process – there’s not necessarily a finish line or endpoint.

That certainly doesn’t mean digital transformation initiatives shouldn’t have strategic goals and milestones – and clear ways of measuring your progress and outcomes – along the way.

Yet developing, tracking, and acting on digital transformation metrics can be tricky. Digital transformation is an inherently broad term, and its continuous nature may at first seem like it doesn’t lend itself well to measurement. Measure you must, however, and there are indeed good approaches for doing so.

While you’ll want to tailor and align your own metrics and/or KPIs to your specific goals, here are five examples of how leaders can measure digital transformation success.

1. ROI on digital transformation

Digital transformation itself has become big business: IDC estimates that global spending on digital transformation investments will hit $3.6 trillion in 2026. That’s a lot of capital. No matter how large or modest your organization’s DX-related spending is, you’ll need a way to track your return on investment (ROI) over time.

“Since DX involves a lot of upfront investment like technology adoption, user training, and hiring, leaders should look for a clear correlation between these investments and revenue,” says Ariel Katz, CTO of Sisense.

Because of the ongoing and evolving nature of many DX initiatives, traditional ROI calculations can be tricky. As we’ve previously noted: “[It]’s] easier said than done with projects that cross functional and business boundaries, change how a company goes to market, and often fundamentally reshape interactions with customers and employees.”

[ Get a primer on all things DX: What is digital transformation? ]

But that doesn’t let you off the hook. You need to define up-front how you’ll measure and show ROI and the economic impact of your efforts, whether you use revenue as Katz suggests or another business metric.

For more on this, check out our previous article, Digital transformation ROI: How to check a project’s payoff.

2. Time to market

If money (whether earned or saved) is the first pillar of most business metrics, then time is another. That could be time spent or saved (more on that in a moment), but it’s also in the sense of pure speed.

"Time to market should be one of the most critical digital transformation metrics right now for enterprises across industries,” says Skye Chalmers, CEO of Image Relay. “The market impact of a digital transformation project is all about its speed: If you don’t cross the finish line first with compelling new customer [or] employee experiences or other digital modernization initiatives, your competitors will.”

So while an overall digital transformation strategy may not have an endpoint, per se, the goals or milestones that comprise that strategy should have some time-based measurement. And from Chalmers’ point of view, the speed with which you can deliver should be a key factor in decision-making and measurement.

Focusing on the time-to-market metric “will directly improve an enterprise’s competitive position and standing with customers,” Chalmers says.

3. Person hours to working prototype (H/wP) and dollars to working prototype ($/wP)

Jon Nordmark, CEO of Iterate.ai, notes some good news on the time-to-market front: Advances in AI/ML, easier data integrations, low-code/no-code tools, and other technologies are enabling teams to move faster than ever.

But as companies shrink development cycles and embrace strategies such as the minimum viable product (MVP) approach, they’re also under pressure to lower costs. (After all, who hasn’t had to operate under pressure to “do more with less,” or at least “do more with the same?”)

“To meet these dual requirements of faster development and lower costs, we believe in tracking person-hours and dollars spent per working prototype,” Nordmark says. “The ‘working’ part is essential: Well-built MVPs should connect to legacy systems and existing application stacks in order to get deployed quickly and avoid technical debt.”

Nordmark and team express these measurements as (H/wP) and ($/wP): “Optimally, these metrics have small numerators and large denominators: CIOs and other technical leaders will likely need to get as many working prototypes done as possible within a given time period,” he says.

Together, they comprise a way to measure and balance time-to-market and cost considerations.

“Tracking (H/wP) gives a good measurement of time-to-market and overall development load of specific digital transformation initiatives,” Nordmark explains. “The ($/wP) metric accounts for all the additional elements that might go into a prototype: developer time, external technologies, project management, designers, legal, and admin.”

Nordmark’s team recently completed a prototype that came in around 17x faster (3 weeks versus 52 weeks) and 12x cheaper ($75K versus $1M) than a competing bid, for example. “The working prototype was production-ready at the end of that time (connecting to existing AI engines, on-premise IoT systems, and existing customer databases) and now operates in more than 3,500 stores in the U.S. and Europe,” Nordmark says. “Hitting both time and cost considerations is critical for digital transformation projects, and that’s why we like to look at the [H/wP] and [$/wP] connection.”

4. Usage KPIs

For both customer and employee-facing initiatives, new digital products – whether it’s a customer application, process automation, employee tool, or anything else under the digital transformation banner – can typically be measured in terms of their uptake and usage as well.

[ Also read: OKRs vs. KPIs: What’s the difference? ]

“Leaders should monitor – and act on – adoption and ongoing usage metrics across the digital transformation lifecycle funnel,” Katz says.

These are sometimes referred to as user engagement metrics and include:

  • Daily/Weekly/Monthly Active Users (DAU/WAU/MAU)
  • Adoption rate/percentage
  • Time spent on specific features
  • Churn

Benchmarks (or a “before” picture) are usually important, as is a clear idea of what success will look like. It’s not necessarily valuable to say “users spent X amount of time on this new tool” but to be able to show how that’s connected to broader strategic goals.

Ultimately, with KPIs (or other measurement tools such as OKRs), remember that you get to define and/or tailor them for your specific organization and its goals.

5. Productivity KPIs

Katz notes that while measurements like ROI or user engagement are output metrics, it’s also useful to measure the inputs needed to produce those outcomes, especially in terms of the investments you make in people. This is particularly important when your digital transformation initiative will require teams to build/learn/use new technologies to achieve business goals.

Katz refers to this category as productivity KPIs – this is certainly an area where leaders can customize to their own teams and goals, but Katz shares some examples of input-focused questions to ask – and suggests then determining a way to measure whether you’re hitting your targets:

  • Do employees have all the digital resources needed to be successful?
  • Are they efficient?
  • Do they have the right digital skills?
  • Do they get the right training?

“I’d build specific KPIs around these questions and then measure,” Katz says.

[ Discover how priorities are changing. Get the Harvard Business Review Analytic Services report: Maintaining momentum on digital transformation. ]

Kevin Casey writes about technology and business for a variety of publications. He won an Azbee Award, given by the American Society of Business Publication Editors, for his InformationWeek.com story, "Are You Too Old For IT?" He's a former community choice honoree in the Small Business Influencer Awards.