The majority of businesses that want to stay afloat and leverage their power correctly are actively working on the development of digital transformation strategies. Although the process has been well-defined and rounded up to be considered a universal pattern, the global COVID-19 pandemic has significantly changed the economic environment due to worldwide lockdowns. Thus, businesses have to come up with smarter solutions to face new realities.
The Importance of Measuring the Performance of Digital Transformation
First things first – digital transformation can be a potential long-term investment or a burden. That is why measuring its effectiveness is crucial for the executives who tend to employ digital transformation consulting companies for this purpose. The whole process of implementing new digital initiatives is based on the assumption that the results will yield long-term value. However, innovative technologies are often expensive and their proper implementation is a complex issue. With this in mind, a smart executive would want to keep track of the progress to make sure that different resources are allocated properly.
On the one hand, the right set of metrics can provide critical information on the effectiveness of an initiative and give insights into potential flaws and their solutions. On the other hand, the lack of knowledge regarding the metrics that should be monitored can lead to unprecedented losses in terms of finances and business performance as a whole.
So, the importance of having a proper set of KPIs is a key to continuous growth for enterprises. Keeping track of the metrics that are crucial for a business provides several benefits:
- An ability to point out the underperforming links of the adopted strategy;
- An ability to begin optimization and improvement as swiftly as possible;
- An ability to avoid potential losses due to a lack of knowledge about metrics.
Creating Effective KPIs by Answering Some Questions
Where are we today?
While some KPIs are kind of universal for any company aiming at digital transformation, it is important to understand that every business is unique. So, an executive should ask oneself – where is the company now? An answer to this question provides a context for the current situation in the enterprise and its further directions.
What is being measured?
After the direction is determined, it is possible to focus on KPIs. Though the use of universal metrics may be useful, a smart executive will focus on the indicators that are specific to a particular industry and those that can be applicable to a specific company. Consideration of both internal and external environments is the key to identifying what is being measured.
What is our goal?
Answering this question creates a set of objectives that have to be achieved. That is, clear formulation of the business goals is imperative for identifying the crucial metrics that have to be tracked.
What is our desired benefit?
The desired benefit is a measurement point that is used to evaluate the effectiveness of a process. A company should set specific desired benefits that can be tracked – something like “20% increased retention rate.” This way, it will be possible to compare actual results with the desired outcome.
What is our balance point?
Now, this is an interesting question to answer. The balance point refers to the desired rate of digitalization. This point relies on the goals and external factors. Sometimes, going all digital is unnecessary if some part of the client base does not have proper access to technologies.
Key KPIs to Measure Digital Transformation
In most cases, digital transformation efforts focus on improving customer experience. That is why this metric is one of the most important indicators, and executives should keep an eye on the following KPIs:
- User engagement during the customer journey;
- Conversion rate in accordance with the digital channels used;
- Drop-off rates during the customer journey.
- Churn/exit rate;
- Customer acquisition rate;
- Bounce rate;
- Customer retention rate.
Since COVID-19 struck the economies and caused lockdowns around the world, businesses need to pay additional attention to the KPIs that measure the effectiveness of internal processes. After all, as many employees are working remotely, it is essential to track the digital transformation and the way it is perceived by staff members through these KPIs:
- Employee performance;
- Revenue generation per employee;
- The number of automated tasks.
- Time saved due to the use of particular software solution;
- The number of employees that use that software.
Digital transformation is aimed at optimizing a variety of processes but it is imperative to remember that businesses need to generate revenue to operate. These KPIs are highly useful in determining whether digital transformation efforts have positive financial outcomes and long-term innovative potential:
- Revenue generated after the technology implementation;
- Projected growth rate.
- ROI after the technology implementation ;
- Changes in product offerings.
The ever-changing business environment has forced businesses to reconsider how they design work practices that best serve both customers and key stakeholders. Now we are drifting away from one-size-fits-all policies to agile practices that suit different functions and roles. The key to digital transformation is driving the technology-based change in how a company is operating. If the results are positive, a business will prosper; otherwise, it may incur tremendous losses. That is why it is important to understand what KPIs should be tracked during the digital transformation journey to improve business processes and generate maximum value.