- The digital transformation strategy defines how the organization realigns its targeted markets, creates new business models, and evolves its operations based on evolutions in customer expectations, technology capabilities, and the impact of data, analytics, and AI. As a result, outcome-based metrics should be your guide.
- The portfolio of digital transformation initiatives often includes programs targeting growth, efficiencies, and improved end-user experiences, but adequate evaluation of outcomes requires program leaders to select KPIs specific to each initiative.
- The culture transformation and evolutions in digital core competencies that CIOs target as their new collaborative operating models require KPIs to guide executives on where to focus leadership efforts, communications, and process improvements.
These objectives overlap and are interdependent, but separating them in this way highlights the three steps CIOs should take to ensure their KPI strategies align with their three objectives.
1. Define outcome-based strategic KPIs
Because executives and board members want to know how effective the digital transformation is toward overall strategic goals, CIOs should select KPIs that demonstrate outcomes driven by how well the portfolio of digital transformation initiatives performs. KPIs to consider should come from the following categories:
- Growth metrics can link revenue to a digitally enabled product or sales channel. For example, in media and ecommerce, CIOs may select revenue growth from digital subscriptions and advertising.
- Efficiency metrics might show the impacts of automation and data-driven decision-making. For example, manufacturers should capture how predictive maintenance tied to IoT and machine learning saves money and reduces outages.
- Customer and employee experience metrics can be measured through satisfaction surveys (CSat and Esat), sentimental analysis on social media, account-based revenue growth, and employee retention metrics. The art is asking the right questions and connecting experience metrics to the digital strategy and prioritized initiatives.
- Quality metrics can be used to measure the improvements that come from reducing defects, lowering the impacts of human errors, improving data quality, and other program outcomes that illustrate how increasing quality connects to business impact.
- Risk reduction metrics can focus on security, business continuity, and compliance functions impacted by technology, data, and process improvements.
In discussing digital transformation KPIs at a recent Coffee with Digital Trailblazers event, John Patrick Luethe, managing partner at Redapt, said, “Many digital transformations are forced on organizations, for example, to stay relevant in a competitive environment, respond to compliance requirements, adjust to natural disasters, or to avoid technologically driven disruption.”
In these circumstances, CIOs may want to narrow their outcome-based KPIs to the ones most likely to impact their challenges and signal to employees what’s critically important.
2. Empower digital trailblazers to align initiative KPIs
After defining and communicating the above outcome-based metrics, CIOs should leave it to the digital trailblazers leading individual transformation initiatives to propose KPIs for their programs. By defining at least one growth, efficiency, experience, quality, and risk reduction outcome-based KPI, digital trailblazers shouldn’t find difficulty in aligning with at least one of the strategic goals.
For example, here’s how Arvind Joshi, chief operating officer for global technology and co-head of public cloud at JPMorgan Chase, defines KPIs for the bank’s multi-provider cloud strategy: “We focus on measuring our progress against what we set out to do with a balanced view across our results and challenges. We track KPIs on execution (on-time delivery, cycle time for adoption), risks, outcomes for benefits (time to market, change failures, major incidents), and costs (TCO before and after adoption).”
