Measuring digital transformation: 3 steps to evaluate the success of your change effort
Measuring digital transformation is both one of the most important priorities for businesses that want to remain competitive, and one of the hardest challenges.
Unlike a tech upgrade with an obvious endpoint, digital transformation represents changes across every part of your organization that impact how you serve customers and conduct business. For digital transformation to truly succeed, a cultural shift must accompany tech upgrades. Every member of the team must embrace change and experimentation as a new way of life.
With such far-reaching implications, it can be easy to lose sight of the end goal of digital transformation and hard to measure progress along the way.
Step 1: Define your own digital transformation roadmap
Digital transformation means different things to different businesses. For example, in a regional coffee shop chain, digital transformation could mean creating an app for online ordering, switching from paper-based timecards to an online punch clock and switching to a digital inventory management system. But in a multinational corporation with thousands of employees across dozens of business units, digital transformation could mean automating, eliminating or reorganizing entire business units.
Because of the wide range of projects that could be encompassed by digital transformation, it’s impossible to measure your own progress unless you have specifically defined what digital transformation will look like at your business.
Your business strategy for the next 10 to 20 years should include a few key digital initiatives that are tied to overall business goals, whether that’s saving money, meeting customer expectations, or improving the value of your product.
Once you have defined what the end goal of your digital transformation effort will look like, select a few key performance indicators (KPIs) to help you track your progress along the way.
Step 2: Choose the right KPIs for measuring digital transformation
Since digital transformation efforts almost always involve some kind of investment in new technology, your evaluation metrics should fall into two categories: one category focuses on whether the technology has been successfully installed and adopted, and the other category should evaluate whether the new technology has achieved the desired impact on overall business outcomes.
The first category is more straightforward, but there are a few questions that can help you evaluate where you are at with integrating new technology:
- Is the new technology operational and fully integrated into your processes?
- Are all of your databases talking to each other, or are employees having to duplicate data entry into multiple databases, or manually transfer data from one to another?
- Are your employees actually using the new software or are they clinging to their spreadsheets and manual processes?
The second category requires you to step back and take a more holistic view at your business. We’ll take a look at those questions in more depth next.
Step 3: Evaluate the impact of your change effort on your overall business outcomes
Ultimately, your digital transformation strategy should be designed around making improvements to key business outcomes, such as revenue, productivity, lifetime customer value or other operational improvements. Each digital initiative should be tied to specific metrics related to business outcomes.
For example, if you invest in a new customer relationship management (CRM) software, the expected business outcome should be an increase in lifetime customer value and a decrease in customer churn.
Here are some questions you can use to evaluate whether your digital transformation effort is making an impact on your overall business goals.
- Have you eliminated any paperwork? Eliminating the use of paper-based documentation of processes, customer purchase history, employee data or other types of information can save time and money for your team. But often, companies are reluctant to put a complete stop to their paper-based processes even after they have implemented cloud-based databases that duplicate all of that information, either because they don’t completely trust their technology and want to have a backup source of info, or because some employees find the new databases harder to use than the manual processes they are used to.
Think about a recent trip to the doctor or dentist. Did you still have to fill out your medical history on a paper-based form, even though you also filled it out online before making your appointment? This redundancy can cause frustration for both your employees and customers — and could be easy to miss if you only look at whether your employees are using the digital system. The fact that your team is still using a paper-based system means the digital transformation hasn’t quite reached its goal.
- Are you meeting customer expectations? One of the main driving forces behind digital transformation is the change in customer expectations. Customers expect to be able to find you online, transact business with you online and get real-time updates about their account status online. As you make digital investments in order to upgrade the customer experience, the best way to evaluate the progress of those investments is to ask customers directly if their experience has been improved. You can do this in a variety of ways, from setting up automated emails that send customer satisfaction surveys after every purchase, to hiring a market research company to conduct focus groups.
- Is employee satisfaction going up? Another major goal in any digital transformation is to make it easier for your employees to serve your customers. Even though many employees will groan about having to learn new processes, ultimately, they should experience more satisfaction once they have gained familiarity with the new system. If they’re finding it harder or less enjoyable to do their job after the new technology has been implemented, that’s an indication that your digital transformation effort has gone sideways.
Embrace failure and focus on building momentum with small wins
Organizational change of any kind is hard. Part of the culture change involved in digital transformation is shifting into a mindset of experimentation, which means being able to fail quickly, learn from mistakes and try again.
Aim to spend a significant portion of your budget on new digital initiatives and the rest on maintenance of your legacy technology and tools. If you aren’t willing to dedicate a significant portion of your budget to experimentation, your transformation efforts will fizzle out before they’ve had a chance to make an impact.
Finally, remember that big transformations start with small changes. Your employees will get overwhelmed if you take on too much at a time. Prioritize two or three digital initiatives that will have an immediate impact on the customer experience and your ability to compete. A few early wins will help boost morale and keep your team motivated to embrace the changes that come with a digital transformation effort.
Where are you at in the digital transformation journey?
Wipfli can help. We work with clients every day to bring about digital transformation, from business intelligence and analytics to organizational roadmapping. We shore up gaps in your digital maturity, strategy and security. We even implement and manage the technology applications that modernize your systems and transform your business. Learn more about our digital services.
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