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New digital transformation metrics and CX success KPIs

Trends

Digital transformation is no longer optional for the vast majority of companies. Firms of all sizes, from across every industry, are now hurtling toward their digital futures, making investments along the way in the next-gen technology and tools they believe will position them for success.

IDC's Global DX Leaders Survey, conducted in June 2018, surveyed over 1,000 business executives around the globe. Based on the maturity level of their digital transformation initiatives, IDC categorized the most mature businesses as "digitally determined" and the least mature as "digitally distressed."

In addition to operating differently, it turns out that digitally determined companies also use different metrics than their less digitally realized counterparts. According to the IDC survey, many of the digitally distressed haven't adequately shifted the way they measure success. Instead, they often rely solely on traditional business success metrics, to the exclusion of new digital transformation-related metrics that can deliver more insight to company leadership.

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How digital transformation metrics and customer experience KPIs work together

What exactly is digital transformation? IDC defines it as "transforming decision making with technology." This means working to improve financial performance using new innovative and creative solutions. To fit the definition, organizations can't just modernize existing technology systems. Rather, they must bring entirely new structures and systems to bear.

Although digital transformation encompasses a new set of technology-related activities, it's important to tie them to established metrics like revenue and profit, on top of digital transformation metrics that assess key performance indicators (KPIs) like innovation rate, customer advocacy, data capitalization and digital operations, writes IDC. In the customer experience (CX) space, those traditional and transformation-focused financial metrics can also include specific CX-focused measures like loyalty, Customer Satisfaction (CSAT), and Customer Effort Score (CES)

How digitally determined companies are approaching transformation

It's important for digital high-performers to keep in mind that using new measurement techniques isn't a set-it-and-forget-it proposition. Rather, companies should clearly communicate why they matter, and consistently refer back to them in order to gauge success as it's happening. As IDC notes, digitally determined companies were more likely than their distressed counterparts to use digital transformation KPIs in daily, weekly, monthly and annual report and strategies.

As organizations embark on new digital journeys they need to develop a rich transformation story and communicate it in a way that builds urgency and collaboration around the initiative. For some companies, digital transformation marks the first time IT has led such an important and company-wide strategic initiative. Everyone, from leadership down to the frontline, needs to be informed to ensure success and ongoing organizational buy-in. A story that's supported with key metrics increases the chances of success.

Which digital success metrics are the right ones for you?

Traditionally, IT departments don't report out to the broader organization. A new focus on digital transformation KPIs changes that. In this new world of constant technology implementation and evolution, IT must tie its activities to traditional business success metrics. But aligning your departments around a new set of metrics requires rigorous analysis.

To create a digital KPI, Gartner recommends IT organizations asking these five key questions:

  • What is being measured? An example might be the percentage of customer interactions that are virtual/digital.
  • Where are we today?
  • What is our target goal?
  • What is our desired business outcome/benefit (for example, 50% better customer outcomes and 20% lower cost)?
  • What is our balance point? (The reasons why an enterprise shouldn't overdigitalize)

For a complete snapshot of business operations and DX initiatives, IDC recommends implementing a combination of "leading" and "trailing" KPIs.

Leading KPIs are the milestones that dot the path to the bigger-picture, future outcomes, helping analysts and business leaders to understand how a project or innovation is performing. Trailing KPIs, meanwhile, usually refer to KPIs that upper management relies on to get a more global sense of performance.

For instance, sales pipeline is a leading KPI, while recognized revenue is a trailing KPI. Process improvements are leading KPIs, where NPS is the trailing KPI resulting from those same process improvements.

Why are leading KPIs so important? They help managers measure potential business contribution of digital transformation initiatives early in their lifecycle. Even though the organization is introducing a new set of KPIs, it's the traditional metrics that judge a business' success in the end. Using leading KPIs can help companies avoid sinking money into initiatives that don't work.

As a company embarks on their digital transformation journey, it's important to have the right metrics in place to garner success. After all, "if you can't measure it, you can't improve it," and digital transformation is all about evolving for the better.

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