3 Digital Transformation KPIs That Actually Matter
In this article, we outline the digital transformation KPIs essential to understanding the progress and impact of your transformation efforts. We cover customer experience metrics, operational efficiency metrics, and why you need a mix of leading vs. lagging indicators in your digital KPIs.
Organizations across industries have embraced Digital Transformation as a critical path to stay competitive and relevant. But how do they know if they’re succeeding? And why isn’t it enough to simply measure the success of the product?
Today, I’m diving into the essential Key Performance Indicators (KPIs) you’ll need to consider if you want to stay on track to achieve a successful and lasting digital transformation. Keeping an eye on these metrics will help your company streamline how teams work, optimize processes, and unleash the full potential of digital technologies well beyond initial launch.
Understanding The Issues with Digital Transformation KPIs
I’m guessing your company is probably already measuring quantitative measures around depth, breadth, and pace against your endeavors, including things like:
How many product teams have been stood up?
How many product people have been hired?
How many engineers have been hired?
What’s our turnover rate?
What’s our open headcount?
There isn’t anything wrong with measuring these elements, but they only capture one part of the picture. These quantitative KPIs aren’t terribly useful in understanding if the transformation is working to your advantage yet.
Just like in product management, it’s not helpful to get overly focused on the velocity of the digital transformation work because transformation is about making a wholesale shift on how technology enables a benefit to the company and the customer. This is the WHY of transformation (the outcomes that an organization is trying to achieve).
When companies don’t articulate the outcomes and stay focused on them, they get trapped in a cycle where teams are more concerned with building something rather than the right thing (in the right way, and with the right goal in mind).
Similarly, the outcomes you’re trying to drive with your transformation have to be about more than standing up and staffing teams. If they aren’t functioning in a healthy, productive, and efficient manner then you’re right back at having built something, not the right thing.
Understanding Key Digital Transformation KPIs
Before we dive into this list, it’s important to preface that when thinking about digital KPIs, we need to be thoughtful about LEADING vs LAGGING indicators.
If you focus entirely on lagging indicators, it’s difficult to monitor how the small changes influence KPIs, either because you need time to see the impact, or because the impact is only felt when multiple efforts come together (and you don’t know how any one of them impacts the outcome you’re trying for).
Introducing leading indicators can help your team have some “canaries” to give early warning to the direction of KPIs. Doing this allows your team to make adjustments more quickly and intentionally. Measuring both leading and lagging indicators is essential to truly understand the progress of a digital transformation journey.
1. Customer Experience Metrics
Oftentimes, the “why” behind transformation is to ensure the enterprise is oriented to the needs of the customer, from top to bottom. But those needs are constantly changing, so it’s necessary to monitor shifting consumer expectations and the team's ability to be nimble in the face of that change.
In these cases, customer experience metrics like Customer Satisfaction, NPS, Customer Retention and churn rate, conversion rate, CLV, etc., can be used as lagging indicators.
But what are the leading indicators that Customer Experience is at the center of your transformation? How about examining the number of product teams doing customer feedback weekly, bi-weekly, or monthly? Or tracking the percentage of customer-facing digital experiences with proper instrumentation and tagging to help get clear customer behavior data? If either or both of these are low, it’s going to be a challenge to know if teams are prioritizing the right work or delivering the right value to the customer.
2. Revenue Growth Metrics
Revenue is always a lagging indicator and an evergreen outcome, but it’s critical that revenue growth metrics are carefully constructed to ensure that teams are going after sustainable opportunities.
Here, you'll need to be specific about the kind of revenue and growth you’re after. For example, articulating a growth target for new clients with little or no qualification means that teams might prioritize short-term gains (converting new clients at any cost), while inadvertently cannibalizing other important KPIs (like customer retention and satisfaction).
Finding leading indicators like referral rates, average transaction value, transaction frequency, or cross-selling or upselling metrics may help you see where your trend is going. And therein lies your ability to be more sustainable and scalable when it comes to translating revenue metrics into actionable shifts.
3. Operational Efficiency Metrics
Many companies start digital transformation in hopes they’ll be able to make operational efficiency gains alone.
As a consultant, I hate when I have to break the news that an org isn't going to be able to cut roles or save massive amounts of money just because they’ve implemented a new technology.
The ROI for digital transformation initiatives is much more likely to come through QUALITY. A process or workflow improved by technology might decrease manual efforts on a team, but it also might increase the volume of customers the team is asked to serve because it now reaches a new population or broader customer base.
For example, I once helped a client roll out a new tech automation to help customers better troubleshoot trivial issues on their own (rather than having to phone into the call center). Our KPIs for success in this initiative were tied to call center volume and average call time handling. We assumed both would decrease as self-service increased.
However, after the tech rolled out, average call-time actually went up, but call volume went down. Now that customers were able to troubleshoot simple problems on their own, more time was freed up for the call center agents to handle the complicated issues that took longer to resolve.
The good news was that we never even considered workforce reduction as a part of the ROI of the work. We knew we had done our job right when the quality of the customer interactions went through the roof (along with employee satisfaction), showcasing the value of focusing on operational efficiency metrics.
Tracking and Measuring Digital Transformation KPIs
Evaluating the success of your digital transformation relies on digital KPIs and broader business transformation metrics. That means you may have to find or create new data analytics tools to track metrics, or integrate new data sources for a holistic view of performance.
It’s also critical to establish a reporting cadence and communication channels to support the regular sharing of that information. Don’t just set it and walk away. Revisit your metrics as often as makes sense to identify trends and patterns in KPI data. This will enable you to make data-driven decisions and adjustments to the digital transformation strategy (and keep an eye on the big picture).
Concluding thoughts on Digital Transformation KPIs
Getting it right requires us to think a bit differently about WHY we’re transforming and WHAT we’re measuring. It’s time we gave just as much energy to measuring the leading indicators as the lagging indicators, the latter of which typically steals the thunder but really isn’t helpful all on its own.
There’s no time like the present for organizations to define their own digital KPIs and commit to continuously monitoring their progress towards digital transformation goals.
Want some more reading on this topic? Check out my post about the three signs I always keep an eye out for to determine if transformation is headed in the right direction, available here.
And, as always, if you aren’t sure where to start on your journey toward progress, team Tuckpoint can point you in the right direction.