Organization's ability to develop and measure digital KPIs drives success
Why KPIs are important
As per research from Harvard Business Studies, close to 95% of the organizations being studied, are investing in digital transformation initiatives. But only a handful (15%) of those initiatives meet the business objectives set out for these investments. A similar research from MIT Sloan suggests that out of many factors, it’s the organization’s tendency to measure wrong things seems to be the most common in such failures. An organization’s ability to measure the right KPIs strongly influences its success. It is surprising that only a half of such organizations don’t have the KPIs for their Digital Transformation initiatives.
While Digital Transformation is on top of every business leader’s mind, there is no one size fit for all while undertaking the journey. It is a broad subject that requires capabilities across many key levers like Strategy & Vision, Competency in tooling / technology, Process & Frameworks, Maturity of and across the organization, Reporting/Organizational structure and lastly but most importantly the talent & staffing etc. All these levers have to work in cohesion and in conjunction all the time for a successful Digital Transformation.
Unlike many other transformations, drafting or executing a Digital Strategy is difficult, because all those critical levers have a differing level of influence and capability for different organizations. The best way to start a DX initiative, is therefore would be to first internalize and understand the maturity of each key lever, identify the capability building measures required and then voyaging in to the Digital transformation journey. DX transformations are complex and often requires an enterprise wide view. As the organization are underway in its DX journey, it is equally important to do the regular check ins to gauge its progress by having the appropriate progress measures and if required pivot accordingly.
Why the organization’s struggle to measure their Digital Initiatives
A large proportion of organizations struggle in measuring their digital initiatives for three reasons
- Not having the KPIs or having the right KPIs in the first place
- Measuring the wrong KPIs
- Too many KPIs
- Unavailability of right data to measure the KPIs
How should you come up with right KPIs?
A value focussed Digital Transformation by principle aims to target multiple business objectives by building capabilities broadly across the disciplines of people, process and technology. Therefore, strategic KPIs for a digital transformation must encompass capabilities and journeys across all these key building blocks. It should be multi layered in which the first set of KPIs act as North stars, while the next sets are capability focussed having the ability to be measured on real time and having a clear link with the North stars. A thorough audit of the KPI/KRA framework that this organization’s is currently monitoring might be helpful in reducing the effort duplication.
- KPIs must reflect strategic goals: This should be clear in every leader’s mind that the primary objective of Digital Transformation is to provide business benefits. It is the organization’s Corporate and Business strategy should drive Digital strategy. Surprisingly, many organizations make the mistake of having their Digital strategy led primarily by the IT department.
So as a first step before venturing in to a DX journey is to articulate the “How” in relation to and in alignment to the organization’s business strategy.
The business goals and objectives becomes like he north start metrics that would guide the objective of the Digital Transformation initiatives.
- KPIs must provide proactive
While the first set of KPIs ( the outcome focussed) establish the linkage between business objective and transformational goals, the next set of KPIs help drive the decision making at an operational or tactical level. Business goals are the lagging indicators or the outcome metrics, while the outcomes of DX initiatives should be aligned with the business goals. Digital KPIs for such initiatives in effect would act like the leading indicators. Any positive shift in the Digital KPIs for the DX initiatives should positively influence the business goals. So identification of the Digital KPIs (both for progress & success).
- More is not Merrier
While KPIs are important, too many of those are not. Many organizations fall in to the habit of drafting too many KPIs and as a result miss tracking those. Based on the business objective & capability, an organization have to discover its own forward looking Digital KPIs but restrict the number to track at each level to less than 5. These KPIs must be mutually exclusive and comprehensively exhaustive in terms of its coverage of the transformation’s objectives and factors of influencing the objectives.
