The disparity between Digital Transformation Drivers and KPIs

null

Digital Transformation is key for businesses today in an operational world that is changing exponentially across sectors. For organisations to keep pace with the current digital climate, it is critical that they respond to the challenges this brings and transform their own approach. However, it is clear that the initial drivers used to define digital transformation efforts are not aligning with the metrics used to measure the success of these projects. This is according to the latest digital transformation study by the Cloud Industry Forum and Ensono.

Across multiple verticals, this study of 250 business and IT decision-makers revealed that almost all (99 per cent) of respondents were intending to measure the success of their digital transformation projects and, more importantly, the success achieved so far for nearly half of the respondents (48 per cent) was in-line with their expectations. Although measured in a different frame of reference to the initially defined success metrics, this figure was even higher for business decision-makers, with over half (65 per cent) achieving better results than expected in their digital transformation efforts.   

While it is a positive message that digital transformation efforts are actively being measured, the study found a disparity between initial project drivers and the KPIs against which they are ultimately measured.  This discrepancy suggests the way in which businesses are approaching transformation projects risks the success of the projects through conflicting understanding of what success looks like. 

Where does the disparity lie? 

The top driver for digital transformation, cited most by the utilities sector, is cost saving (70 per cent), followed by increasing productivity (59 per cent) and increasing profitability (58 per cent). Drivers lower down the list included competing with industry disruptors (35%), differentiation (35%), speeding up time to market (33%) and customer experience (40%). Despite being very clear about what was driving their project efforts, when it came to success metrics, it is clear that there is an inconsistency in approach.   

When success criteria are defined after transformation has been initiated, financial metrics are no longer the driving force of digital transformation success. These original metrics are now replaced by new and very different measures, with customer experience being the most cited (52 per cent) metric by respondents. This discrepancy clearly exposes the changing perception of digital transformation for businesses during a project, and how business decision-makers often become more engaged over time and re-shape the way in which success is measured.   

The implications 

The greatest danger to businesses is the disparity between KPIs and drivers indicates that there is common issue where businesses are unaware of - or simply choosing to ignore - the bigger picture around transformation. Given the investment required for successful digital transformation, regarding it as only a cost-saving function, as opposed to a revenue generator designed to grasp new markets or potential customers, is both an outdated and limiting approach. By focusing on figures, rather than the customers, businesses will impede on the impact of their transformation projects relative to the market, which could ultimately cause longer-term repercussions for the business.   

This is especially critical at a time when more CIOs want a seat on the Board, but IT is still often a reporting line to finance. Without a clear and coherent vision for the organisation’s digital transformation strategy, in which the objectives and the metrics for success stand side-by-side, IT will struggle to secure the budget, support and interdepartmental collaboration needed for successful transformation.   

The IT department must take this opportunity to claim its seat at the boardroom, and extract itself from a support role. To avoid the risk of becoming outdated, a new department needs to emerge, which approaches digital transformation with a balance of technical understanding, but more importantly, driving digital transformation with business outcomes.    

Focus on driving growth 

When looking at different sectors, manufacturing and IT see cost savings as less important (55% and 50% respectively), with more of a focus on productivity and customer experience. This is a step in the right direction, but for most sectors, either the strategy is not tied down and organisations are ‘doing’ digital transformation for the sake of it, or the strategy is not being communicated adequately. Whatever the root cause, in order for digital transformation strategies to succeed, the IT department, the business and the board need to have a clear and shared vision, and that vision needs to focus on people first, with the right technology and hybrid IT facilitating. 

The fundamentals of digital transformation are centred around business change and should be viewed as an opportunity for business growth. Driving effective business change through delivery of the best product and service to customers and finding new and quicker routes to market will allow transformation to drive growth within an organisation. This must be seen as an on-going programme within any organisation, and not a finite project to which simple financial metrics can be applied at a point in time.   

Too many technology-led programmes use cost reduction as the primary mechanism used to gain the attention of the business, but this is as out-dated and ultimately short-sighted approach.  The modern CIO must establish the programmes on the foundation of business centric KPIs and be prepared to be measured on the success of the business not technology. This alignment will have much more of a valuable return on the investment in transformation and will ensure the success of any business transformation project.     

Simon Ratcliffe, Principal Consultant at Ensono 

Image Credit: Wichy / Shutterstock