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May 03, 2018

Five Indicators for a successful Digital Transformation


Digital transformation is inevitable if enterprises want to survive and compete with today’s born-in-the-cloud companies. Organizations have realized that they need to adopt agile practices, implement latest technologies, and change the way they operate to stay relevant to their customers and stay a few steps ahead of their peers. However, when it comes to measuring the success of digital transformation, they often find it confusing as to what metrics should be measured. While profitability may seem like an obvious choice, revenue margins or costs alone won’t give a complete picture of a successful implementation.

So, how can organizations determine whether it is in the right direction or it must course-correct itself? Here are a few indicators that you as a digital transformation leader should track.

1. Operational efficiency and agility

A good measure of a successful digital transformation, besides financial metrics, is the effect on the business operations. Many companies are satisfied with just skimming the surface in terms of technology implementation and its utilization. However, this is not sufficient. They should go into the depth of understanding how the implementation of a technology stack has improved operations performance, possibly in terms of increased speed or fewer errors. Another major metric a company should measure is the operations agility and how fast the company can respond to changes in the customer’s requirements, market or in the industry.  A few other performance metrics that can be measured include productivity, task automation, and time to market.

2. Customer experience and engagement

When an organization is looking for metrics, measuring financial outcomes alone is a myopic view of the overall growth of the company. A key metric that indicates whether your organization is there for a short flash or the long haul is its ability to improve overall customer experience. Having said that, measuring only customer satisfaction is not sufficient. Some key customer focus areas your organization should measure include percentage increase in customer engagement across various digital channels and platforms, net promoter score, increase in customer lifetime value, customer loyalty and retention, and decrease in customer acquisition costs.

3. Reduction in costs

Irrespective of whether an investment is made in digital marketing campaigns, cloud computing or new digital touchpoints, one of the indicator any organization would want to measure is the impact of the implementation of digital transformation processes on costs and revenues. While this is obvious, there are only certain cost measurements that make sense when identifying whether you’re on the right path in your digital transformation journey. Some meaningful cost metrics include - reduction in administrative expenses, operational costs and customer acquisition costs.

4. Increased revenue margins

Besides costs, some more important financial metrics organizations could/should measure are revenue margins and ROI. While digital transformation does lead to better ROI, it is a continuous and ongoing process and the financial gains do not occur overnight. Organizations should focus on certain measures which when monitored on a periodic basis, indicate whether the efforts are heading in the right direction. Some of these metrics or KPIs may include increased revenue per employee, annual recurring revenue, growth efficiency, recurring profit margins and creation of new digital channels that enable revenue growth.

5. Increased collaboration between organization teams and functions

The gains achieved through digital transformation are not limited to financial benefits alone. Organizations need to look at certain intangible benefits that eventually lead to quantifiable returns. One such metric every organization looking to transform themselves digitally should  include, increased collaboration between teams, departments, processes and functional leaders  of the company. This leads to improved communication, knowledge sharing and co-operation, thus achieving common organization goals.

Financial gains is probably something that ultimately determines a company’s willingness to invest in the tools and technologies that enable transformation. However, the gains achieved through digital transformation go beyond reduced costs and improved ROI. Hence, tracking these key indicators should give corporations an insight into whether they are truly transforming themselves or not. After all, digital transformation is not the end, it is the start of a journey.

Disclaimer: The information and views set out in these blogs are those of the author(s) and do not necessarily reflect the official opinion of Microland Ltd.