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Software Development

Top 3 ways how to measure Digital Transformation progress

date: 2 September 2021
reading time: 8 min

Research shows that a staggering 7-8 out of every 10 digital transformations end up failing.

Why do you need to measure the progress of Digital Transformation initiatives?

Why does this happen, even to the bigger players on the market?

Well, this is often due to two reasons: because they keep on making at least one of these common Digital Transformation mistakes, and also because they’re more focused on the process itself (delivering on budget, time and in scope with the requirements) rather than on the results achieved.

However, simply delivering a product according to the plan does not mean that it is or will be a success.

A digital transformation initiative has been successful if it has resulted in systemic, organization-wide change. For this, it’s not enough to simply improve technology; we must also encourage a mindset of constant innovation and adaptation.

The objective of Digital Transformation efforts

The objective of digital transformation efforts is to create value that can be measured through digital KPIs (Key Performance Indicators), customer experience and satisfaction, staff engagement, and competitive positioning, among other areas.

Instead of being viewed as a mere collection of technical achievements, Digital Transformation strategy can be leveraged as a catalyst for long-term success by regularly assessing progress against these business objectives.

If you want to measure digital transformation effectively, you need to shift your mindset towards the problems that you want to solve. Because what’s the point of using new technology or having impressive software if it doesn’t actually change anything or falls just short of expectations?

Check below the top 3 ways of measuring success in digital transformation and ensure the transformation of your company is heading in the right direction.

How to effectively measure Digital Transformation success?

When it comes to assessing the success of digital transformation, there are different aspects and approaches to consider, including Digital Transformation performance metrics.

This section explores the best practices for evaluating the results and progress of successful digital initiatives. Right Digital Transformation KPIs not only help measure success but also give insight into how these digital efforts impact the organisation’s growth, customer satisfaction and efficiency as a whole.

Prepare a list of KPIs for Digital Transformation Strategy

Increased revenue as an indicator of success sounds like a good KPI (and an obvious one), but… there can be many reasons behind the growth in profits, some of which may not necessarily be related to the transformation process.

And it can be difficult sometimes to tell exactly what is behind it. That’s why you should make a list of non-financial KPIs, both the external (customer-related) and internal (employee-related) ones.

In either case, a set of KPIs should be SMART as well as people-centred because solving real-life problems is a much better team motivator than just generating more money for an employer or company.

For example, you may want to measure your success in:

  • hours saved by automating repetitive processes – this is much more tangible than being vaguely “efficient”,

  • new customer conversions,

  • employee satisfaction rate – if you were also measuring this before you started your digital transformation,

  • active usage metrics of your new solution – not the number of licences purchased, or downloads or implementations within your company, but the actual adoption rate,

  • service availability rate – uptime/downtime ratio,

  • top technical talents attracted.

Although these KPIs are not completely centred around money and focus instead on problems that lack solutions, solving these kinds of problems also translates directly into financial success – so you don’t always need to put the latter first.

Check out what else to look out for when choosing a digital transformation services:

Formulate hypotheses and test them

This is slightly different from setting a regular set of digital transformation goals or KPIs. Instead of just measuring how much a solution has influenced your organisation, you also define the desired numbers in advance – the minimum that you want to achieve in order to consider your digital transformation successful.

All you need to do is go through the following sequence every time you want to introduce an innovation:

  • make observations and formulate a hypothesis,

  • define the indicators of success to be evaluated as the project progresses,

  • run your project and evaluate the results.

Digital Transformation Metrics: Hypothesis Driven Development
Digital Transformation Metrics: Hypothesis Driven Development

This can pertain not only to the impact of digital transformation, as a whole but also to individual parts of it, even the smallest ones, like specific digital tools, features or changes in your website layout. Remember that while thinking big is great that doesn’t rule out starting small and growing over time.

Actually, it’s just the opposite. Taking things one step at a time pays off – it allows you to make necessary adjustments to small parts of your project, adjust the course, and avoid costly large-scale changes.

Market responsiveness: evaluating Digital Transformation through customer feedback and market trends

You cannot be stuck in the past and successfully transform your organisation, especially in isolation from the external environment, which is constantly changing.

One of the most important aspects of digital transformation is keeping up with market changes. To thrive, one must be agile enough to respond to a constantly shifting external environment. The success of digital transformation and technological projects depends on how quickly they can adapt to these changes in the market.

If your digital business processes and activities are successfully drawing in new consumers and keeping the ones you have, it means they are meeting the demands of your target audience right now.

This is why you need to stay up-to-date with the most current customer behaviours. Follow these trends closely because it may turn out that the problems you’re solving right now have already become marginal and that there are other, much more urgent issues to handle. Agility is the key to success, both in ordinary tech projects and digital transformations.

How strongly a big change in the external environment can influence people’s behaviour is reflected in the chart below:

To what extent are you conducting the following activities, compared before the COVID-19 pandemic?
To what extent are you conducting the following activities, compared before the COVID-19 pandemic?

So, always make sure that you’re answering relevant user needs. You will know that you’ve succeeded when you get new customers (or retain old ones) through the new services, products or upgrades that you’ve made.

Find out what digital transformation initiatives can look like depending on the industry:

Digital Maturity Assessment and Delivery Success Indicators

Apart from these three ways of measuring the success of your digital transformation project, there are also two other concepts that you should familiarise yourself with – if you want to gauge the effectiveness of your transformation and see where you are in your digital journey:

Digital Maturity

Digital maturity measures a company’s ability to further digital adoption, create value in the digital sphere, adapt to disruptive environments, respond to changes in the market, and take advantage of technological developments.

You should occasionally check on where you are in your digital maturity and see if it is a factor that changes positively over time. Many models allow you to track your progress, like this one or that one, so just pick the one that suits you best.

Digitally maturing companies are better able to scale their experiments enterprise-wide
Digitally maturing companies are better able to scale their experiments enterprise-wide

Delivery Success Indicators (DSIs)

Delivery Success Indicators are KPIs that help you monitor projects with greater efficiency.

They allow you to measure the effectiveness of your digital transformation as it progresses so that you can:

  • define the status of the transformation,

  • draw adequate conclusions and make changes accordingly,

  • maximise your efficiency.

Innovation Index: measuring how Digital Investments drive new solutions

An organisation’s capacity to rapidly provide new functions and digital capabilities can be gauged using the Innovation Index within the digital transformation framework.

In essence, it evaluates the effectiveness of digital investments in driving innovation, employee productivity and expanding into new markets.

To use the Innovation Index to measure how digital investments influence revenue and transformation, focus on key metrics like the ratio of R&D spending to new-product sales and the conversion of new-product sales into gross margin. These metrics help assess the return on investment (ROI) from R&D and innovation efforts, looking at how well investments convert into profitable products and services.

Comparing a company’s innovation efficiency and transformative impact of digital investments against industry peers provides valuable insights.

How do I make sure my Digital Transformation journey succeeds?

Now that you have a better idea of how to approach this, you can engage your internal talents and resources to come up with a plan for measuring the effects of the digital investment and the successful digital transformation – and then execute it.

If you prefer to walk through this step with external specialists, participate in our IT Strategy Workshop, designed to help you work out a high-quality IT strategy to achieve your own business objectives and goals and also come up with a set of appropriate KPIs – the choice is yours.

In fact, Future Processing provides a full range of services, from initial consultations, planning, and workshops to the design and implementation of solutions, as well as ongoing support throughout your digital transformation investments.

Among other things, we can help you with:

If you have any questions or want to learn how we can help your company develop, don’t hesitate to contact us.

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