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November 28, 2023
“Digital transformation” is all the rage with today’s businesses.
In fact, companies all over the world are so committed to their digital transformation (DX) initiatives that global investment is expected to exceed $3 trillion by 2026, with a further five-year compound annual growth rate of 16.3%. These would cover various aspects of going digital, from large-scale operations like building new technologies and overhauling enter systems to smaller initiatives like training workers and switching to new software.
From sterling customer experience to massive increases in profit, the benefits of successful DX initiatives are plenty and well-documented. Even so, many business leaders still harbor concerns. Will such large payouts bring equally large payoffs for their company? Can they guarantee their employees’ livelihood in the face of automation and AI? Is it better to risk reinventing the wheel as “digital pioneers” or play it safe by following the trends?
At the end of the day, each business has its own circumstances and challenges. But while there is no one-size-fits-all DX strategy, business leaders can instead rely on well-established metrics and key performance indicators to measure success.
Accounting for differences in industries, company size, customer needs, access to technology and other considerations, no two businesses will have the exact same digital transformation journey. As such, these metrics are less of a must-do checklist and more of a suggestion that needs to be further tailored for the business’s unique situation.
By keeping track of – and staying on track with – these metrics, it becomes easier for companies to navigate their DX journey, overcome inevitable hurdles and successfully transform their business for the better.
The first (and perhaps ultimate) indicator of DX success is how well a business meets its own take on “digital transformation”. By definition, DX is a fundamental change in an organization to integrate technologies and digital systems as its core. How this applies to businesses in real life will depend on them.
For organizations who have steadily adopted digital technologies in their practices, DX could just be a simple switch to a new platform and re-training their employees. But for businesses who still do things the old-fashioned way, digital transformation could mean a complete overhaul of their practices and systems. Either scenario constitutes a DX journey, but each has a vastly different measure of success.
All digital transformation initiatives are an investment in finances, time and labor. The Return on Digital Investment (RODI) is a critical KPI that assesses the efficiency and effectiveness of these investments vis-à-vis the impact on the business.
RODI goes beyond mere financial gains and encompasses the broader spectrum of business value. For example, did investing in training make employees more productive and well-versed in new technology or did they ultimately fall back on old habits and systems? Did sales go up thanks to the new warehouse robots, or is the business losing money due to damaged and lost stock?
To calculate RODI, businesses should weigh the financial outcomes against the initial investment, considering factors such as increased revenue, cost savings, operational efficiency and forecasted timeline. A positive RODI signifies that the DX initiatives are not only delivering financial returns but also contributing to the overall strategic goals of the business.
Time to market (TTM) measures the duration it takes for a digital tool, product or service to move from conception to deployment. With a shorter TTM, businesses can capitalize on emerging opportunities and respond promptly to challenges. In general, it reflects well on a company’s agility and efficiency.
Monitoring TTM involves assessing each phase of the development and deployment, from ideation and planning to execution and delivery. By reducing TTM, businesses can stay ahead of the competition and ensure that their digital offerings align with the changing needs and expectations of their customers and industries.
Of course, a short time to market must go hand-in-hand with a quality product. Business leaders must be careful not to force a quick market release at the expense of the product’s functionality. Not only is it more expensive to keep pulling back and reworking a product than to simply get it right the first time, but poor quality offerings can greatly damage a brand’s reputation.
DX initiatives will only succeed thanks to the people carrying them out. Above all else, employee wellbeing must take priority, especially during difficult sprints or busy seasons. It is not enough that businesses track worker productivity by way of deliverables rendered, projects completed, accounts closed and other profit-oriented metrics. They must also pay close mind to their employees’ engagement and welfare.
Workers who constantly hit their target numbers and regularly go above and beyond may also be overwhelmed by their workload or feel they are not properly compensated for their efforts. Conversely, employees who struggle to meet objectives and perform their tasks may simply lack training or be more suited for other roles.
When evaluating employees, management should consider not only the value they bring in terms of gaining profits and meeting targets but also their needs and challenges as human resources. Employee satisfaction goes hand-in-hand with employee productivity.
Digital transformation is a full and long-term commitment involving fundamental changes to an organization. It is a long and layered process, much like a caterpillar metamorphosing inside its chrysalis. Progress is gradual but significant and pulling the plug on the process prematurely will undo everything.
Decision-makers and business leaders must understand that investing in digital transformation efforts is not just financial; it also takes time, effort and trust in the process, the plans and the people carrying them out.
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