Digital Transformation: Measure and Improve the ROI

Here are the 5 key steps to measure ROI for digital transformation.

1. Establish the primary focus of digital transformation: While the avenues of what’s possible through transformation are many and tempting, clearly define the critical priority for your efforts and investments. Pinpoint it to a primary focus, like increasing customer satisfaction, reducing process execution errors, enhancing logistic efficiency, etc. Answer some basic questions like why this objective is of value to the organization and how achieving it will impact connecting processes. It is crucial to arrive at what the transformation will deliver concretely. When building a list of promising digital initiatives, also measure their impact on the bottom line and quantify it.

2. Determine the investment metrics: Detail the investment figures while considering variables like network infrastructure, applications, monitoring and security tools, project-wise staffing, customer service tools, advertising / digital marketing, strategies of awareness, and loyalty of users.

3. Identify the value metrics: Identify the metrics needed to quantify the return of the budgeted investment. For example, if a restaurant wants to measure the success (or failure) of its online promotional campaigns, it may do so by the number of guests now being served per day, the average income generated per table, or the number of guests arriving at the restaurant through social media recommendations (for a specified time period like per month.

Many of the metrics that organizations develop will be quantitative in nature. But it helps to also look for softer, more qualitative progress criteria and maintain a balance between the two.

4. Decide upon metrics that sync with your transformation focus: Create or adopt metrics that sync with your primary focus. Work towards establishing a common understanding of – what success will look like when the objective is met and what do you need to gather the correct data. For example, if you are looking to digitize customer support processes, you may adopt response time to email/chats/phone calls as a metric. Similarly, if you want to create compelling customer experiences, the net promoter score or likelihood to recommend can be the defining metrics.

Through these steps, the organization can define accurate numbers, arrive at the most suitable ROI for each project or activity, and determine the additional commercial benefits of digital transformation.

Here are the four ways to improve ROI for digital transformation.

1. What percentage of your tech budget is spent on bold transformation initiatives?: The allocation of technology spending is a leading indicator for CEOs to understand how the organization is positioned to deliver digital value. By spending only a small part of technology budgets on enabling the most strategic, bold initiatives, the organization is unlikely to maximize its return on digital investment.

2. Adopt transformation initiative for one business domain at a time: Consider a critical process, customer or employee journey, or function to transform. Transforming domains one by one enables the company to leverage similar data sets, technology solutions, and team members for multiple use cases. This is instrumental in saving time and expense.

3. Allocate sufficient resources to promote the adoption of new digital tools: A fascinating predictive insight is only as valuable as the response it enables. For example, consider a cyber security initiative built around protecting digital assets and customer information. The data informs you about the frequency of attacks and threats detected. The team building tech and security analytic solutions must not only build a tool to detect threats but also redesign the IT team’s workflow to enable action. Further, the organization must put in place change-management initiatives that encourage the adoption of the solutions. This manner of efficiency gains to improve ROI is particularly attractive for industries where productivity provides the most significant source of company value – such as manufacturing and mining.

4. Identify and remove barriers to scaling: Here’s how to counter some of the most common obstacles to scaling of transformation projects –

• Work towards developing an operating model that is sized for your digital agenda, is flexible to include changes, and enables the development and incubation of new digital capabilities and solutions.
• Create a pool of digital talent to bridge business needs with technology. Initiate L and D programs for the existing staff with a focus on upskilling.
• Explore ideas while establishing an outcome-based governance model focused on scale.