A critical, but often ignored, consideration in assessing the success of a digital transformation strategy is the application of real-time data and analytics to establish metrics and track progress. This is important given the high rate of failure among modern enterprises, as many find that digital transformation initiatives fail to achieve their goals.
Digital transformation requires organisations to rethink how it puts its technology to use. Organisations now have access to huge amounts of data, which should be at the heart of its decision-making, in addition to new technologies that are geared to improve the user experience.
However, digital transformation is not only about changing the external-face of a business, but about using technology to reshape the company internally. It appears that companies are failing to use data to measure the performance of their digital transformation initiatives.
The need for metrics
Organisations looking to succeed in digital transformation must revaluate the metrics that its executives use to assess company performance. Peter Bendor-Samuel, CEO of Everest Group, suggests using a venture capital process to improve progress where “leaders make capital available, and sprints or projects that are completed, draw down on that capital.”
By applying this approach to digital transformation, and separating the journey into individual projects, it allows companies to track what they’re spending on digital transformation and how well these projects are performing. Companies can even form journey teams consisting of senior executives to track progress using agreed metrics across the company.
These metrics could consist of:
- The data sources participating in an integrated search
- The number of entities that were consolidated during the transformation
- The rate of operationalisation of transformation projects
- The amount of money being spent on projects
- The additional time staff members have to focus on larger goals after the automation of tedious tasks
Naturally, these metrics must be company-specific but should form a strong foundation to enable digital transformation.
How metrics ensure and defend digital transformation success
A McKinsey study of digital transformation success discovered that without extensive metrics, companies might be able to achieve temporary improvements, but will find themselves unable to sustain them in the long-term. The study noted that to make success permanent, the first step is the adoption of digital tools that improve the accessibility of information across an organisation, which doubles the chance of a successful transformation. Pairing this with more frequent data-based decision making and a visible use of interactive tools can also improve the chances of a successful digital transformation initiative.
The study found that organisations that were able to establish clear goals for key performance indicators, based on accurate data, were twice as likely to achieve transformation success over companies that did not. Additionally, companies that had clearly defined goals for its application of new technologies, improved their chances of success by 1.7 times. These metrics must also be supported by real-time data, so organisations remain informed of how they are progressing.
Real-time analytics prove for fast adjustments
To allow for swift adjustments, metrics must be based, as much as possible, on real-time data. In a world where data now increasingly drives decision-making across every imaginable realm, using it for internal progress would only make sense. Yet far too often, companies fail to use their data for this purpose.
While enterprises today are investing in digital tools and other technologies to improve its customer experience initiatives, few are effectively leveraging its real-time data to inform its decisions. Enterprises need to realise its most crucial performance metric is the impact on customer experience, which generates improved revenue and retention. Brand value and Net Promoter Scores are also reliable non-revenue and non-cost vital metrics, to provide a performance indicator. Real-time data is vital in ensuring these types of metrics are reliable and informative to the business.
A recent Harvard Business Review article highlights a CFO’s experience at Li & Fung, around what led this company to digital transformation success. Li & Fung created a three-year transformation strategy that aimed to improve the use of mobile apps and data across its global supply chain. The company used real-time data to measure progress, after establishing concrete goals and which digital tools to adopt. As a result of embracing virtual design technology, it helped them dramatically reduce the time from design to sample by 50 per cent.
In addition, the firm installed a real-time data tracking management systems for its suppliers which helped boost production efficiency, and created a digital platform that integrated information from both customers and vendors. As a result, its finance department managed to reduced month-end closing time by over 30 per cent, and increased working capital efficiency by $200 million. This demonstrates the vast benefits of a strategy that integrates real-time digital transformation metrics.
Digital transformation is becoming a standard for countries worldwide, and IDC estimates that spending on digital transformation will grow from $1.07 trillion in 2018 to $1.97 trillion in 2022. The question has moved away from whether companies should engage in digital transformation, but rather the question is how progress can be measured. By using real-time data to inform metrics on progress is a crucial step in this process.
John Western, Regional Vice President, Europe, Lucidworks