How do you quantify the results of a successful digital transformation journey?

How do you quantify the results of a successful digital transformation? Is it best to focus on hard or soft metrics? Or should we rather concentrate on better customer value propositions, or on new offerings? Or mix all of the above? Tune into this special podcast episode to find out what our digital leaders recommend as best practices.

Transcript

Christine: (00:02)

Welcome to the Lost in Transformation podcast series dedicated to the complex world of Digital Transformation. We feature guests from large corporations, start-ups, consultancies and more, to shed light on the success factors around Innovation, Transformation, and adjacent topics. 
We share first-hand insights and inspiration from experts for all the intrapreneurs, entrepreneurs, and anyone curious about Digital Transformation.

Christine: (00:31)

How can we best measure the success of our digital transformation efforts? 
We checked in with some digital leaders to find out what they recommend as best practices. And, well, for most of them, it’s a difficult question to answer. Some would advise measuring your success based on your ability to provide better value for your customers, and how technology supports you with this. Others focus on success through new value propositions that you’re able to offer to your customers as a result of introducing new tech. And again others suggest quantifying the results of your journey with a mix of both financial and behavioral metrics, adjusted to each and every project. And for many, it’s a lot of in-between. 

How do YOU normally measure your transformation journey? Take a listen and get inspired!

Linda Sessa: (01:21)

It’s always a million-dollar question, right? I don’t think that I have a silver bullet answer to that one but one of the things that worked well for me is to map that before and after. And it might be a different range of KPIs. So what was before that you are trying to change, or what was before that you are trying to improve, and then after: did you manage? And I think that then becomes more tangible. It could be the processes' KPIs in terms of time to market, number of releases you are doing, number of faults, number of customer calls and complaints, people trying to find explanations for stuff that you thought you did in a very well way, or number, percentage of service in general - it depends literally on what you're before was and where you are trying to move in after. I think it’s very important that you actually include people's KPIs in terms of were they confident enough before? Are they more confident now? Can you go to decisions faster? Can decisions be done in a faster way but still be the right decisions with the minimum bad effect on the market? So there are certain aspects. I would put it in 3 buckets. I would put it around processes, I would put it around people, and the last one which is also very important is the commercial. But the commercial from gaining new revenues or traffic or anything related to that. But also the cost aspect on the other side. And please bear in mind that with the digital transformation the investments in the first 2 years are quite huge but then the depreciation and amortization of all of those costs actually drop quite quickly because zeros and ones are not table and chairs. So be also aware that the financial model for digital transformation is a different one. 

Marie Cheong: (03:13)

That’s a really good question. I think that the way you quantify results is through the new value propositions that you’re able to offer your customers, that you were able to offer as a result of introducing new technology and new solutions. So, probably an example that’s been cited several times before is DBS and how it’s the leader in digital banking in the retail space. And as a Singaporean, I looked at that and I was like "whoa DBS has been around forever. No way it’s a leader in that space." And then over the circuit breaker, I managed to open an account for my helper completely online. And I think that’s a customer service that would have never existed if it wasn’t digitally enabled. If there wasn’t a solution that sat behind that. So I think it’s these kinds of new offerings and new segments that you’re now able to serve because of digital transformation. That is ultimately the mark of success.

AJ Boelens: (04:17)

For me, ideally would be against the customer journey map and what are the pain points that are there, and would customers come back and say "yep, if these things would happen, if it would work this way, my journey would be much better." And as a result of that, that will then lead them to not wanting to go anywhere else. They believe that that experience is better than where they can get other experiences with competitors. They’ll stay, customer lifetime value grows. And so it kind of is a cascading effect. So for me, it’s really going back to customers and saying ‘if we were to do this, would this make your life better? Would you stick with us more?’ And not all digital transformation is about customers and customer-centricity, I know that. A lot is about efficiency. 
But I hate the way it’s almost always steered towards the efficiency of the existing business model, where sometimes that customers are like "oh, you went through a big digital transformation. I don’t see any difference in my life at all. I still need to call you. Now I call you and it only takes six seconds, but why do I have to call you actually in the first place? Why don’t you solve the base problem?" So for me, really always as much as possible will go back to: do we understand what value looks like for our customers? And how can technology help us to create that value? And that for me is really the catalyst and the viewpoint that we should be having as organizations when it comes to digital transformation or any other type of technology being applied. It should be to make life better for the customers in some shape or form. 

Scott Anthony: (05:51)

So I think there are two things that you need to look at to really look at the quantifiable results of a digital transformation journey. The first, of course: You’re not doing this for fun or [...]. You’re doing this because you want to have a bottom-line impact on the organization, and digital transformation should have lots of predictable benefits related to the productivity of some of your internal operations, your ability to provide great service to customers, etc. So I think you want to look at some of the quantifiable metrics that will tie to the specific financial results you have. Then I think you want to think about the specific behaviors that are required to digitally transform, and find ways to measure those and see how they change. In the case of DBS for example there is a range of ways that they use employee engagement surveys and other things to see the degree to which people are adopting and embracing new behaviors that will be a leading indicator of some of the financial results that you’ll see. So I think you want both the hard, financial metrics and some of the softer, behavioral metrics.
 
Ee Ling Lim: (06:49)

I think we touched upon quantifying results earlier on as well. And this actually varies according to the different projects. I think it’s also important not to have just one single metric for your entire innovation initiative or entire innovation project, but rather be able to tailor for each project what is that one metric to measure? The same thing that startups do as well. Just be sure that there are no vanity metrics but some of the other things you can measure to quantify would be your customer MBS score. So let’s say you’re rolling out a new digitized purchasing process for your customer. What is that customer satisfaction score after you roll out that new tech tool there? It could also be new revenue streams that are generated, it could also cost reduction, and it could also be employee satisfaction and productivity that you measure itself. But on a project by project basis, I think some of the things that we’ve seen measured, my advice would be: number of POCs run, number of startups engaged, number of investments in startups as well. So just be sure to create a metric for different projects that you’re running.

Florian Bankoley: (08:00)

So the success factors for me remain the same as you have had in your business so far. Because as a business, your most important KPIs most likely is how much revenue do you generate, how much profit do you generate, how satisfied your customers are, how satisfied your employees are - taking these 4 for example. So these should remain the same. And the reason is, any transformation should not be a fancy exercise with no link to your running business. It should be tightly linked to that. So any transformation should actually pay into these factors. It should pay into what makes your business successful, day in, day out. These should be the same KPIs. You can use additional ones, saying I want to measure the maturity of my transformation, for example, if I’m in a technical organization, how much agile methodology is used. How many people have been traded in these? This is a helpful KPI but the success of a transformation for me is measured in what makes your overall business successful.  

Wilma Gerber: (09:03)

It depends on what the goal of the transformation journey is. But on a high level, most digital transformation wells down to improving business performance by increasing revenue or reducing costs. For example, if you try and create a better client experience, ultimately that’s about generating more revenue. If you’re automating a process, that’s about speed and efficiency which translates into cost savings. The problem is that there are many other factors that contribute to business performance and so how do you untangle the specific contribution of digital transformation? And that’s why it’s important to get really granular on the measurement, down to the initiative level.
 
Sam Hall: (09:47)

What is the realized commercial impact of the portfolio that you’ve affected? Or perhaps earlier in time, what is the expected or forecast commercial impact of that portfolio?

Thomas Jakob: (09:59)

Well, at Bosch for example we have a couple of measures. First of all, we defined a number of years ago the percentage of physical products which will have an interface into the digital world as a measure. So we said by 2020 we want to have 90% of our electronic product classes enabled with a digital interface. And we achieved that. But that is only the first step, so to say. Now we are looking at how much additional revenue are we generating through digital services? So that’s the next measure. So, very concrete, and it comes in phases. You have to start somewhere and you also have to be mindful that you don’t overreach. So the first step was just to enable our products. To be able to be connected. That doesn’t mean that they are connected. So the next phases are now making sure that as many are in fact connected and are generating additional revenue with that connectivity. And that’s the phase we are currently in. The first phase took us nearly ten years to get there. It takes a long time, these kinds of things because obviously, we are putting a couple of million devices out there every day. So lots of different things. And to go through all of these is obviously quite an effort and to provide this kind of connectivity there. But now it’s really about how much can we generate in terms of additional, recurring - and that’s another thing, that’s another big change also right now which is happening. In the past we sold a thing for a certain amount of dollars actually, now we are looking at recurring services revenues actually. And so that is now reflecting the change in the business model more and more actually. And so that’s currently the measure we are working very hard on.

Yi Ming Ng: (11:39)

I think it’s what range of stuff that you can do to get from financial returns on investments, the time that you take to put on this digital solution, and how much financial returns, emotional impact on the employees itself, and I think at the end of the day how ready your employees or your colleagues are with the use of this new technology. A lot of times we see companies looking at new solutions they implemented for the good of the entire organization. But the problem is that they forget "hey, there are certain things that potentially my older employees won’t be able to understand, they might need more time than is required, even though the project is 2 months, 3 months, but they might need more time than that." So can we cater for more buffer, can we cater for more bandwidth, can we look at the entire user experience from an employee’s perspective, from a consumer’s perspective, or from a client’s perspective when these solutions or products are rolled out to different parties itself?  

Olaf Frank: (12:45)

I think if a company is still in business and successful five years from now, I would approve that they had a pretty successful journey. I think everything else is a little... I have to say. I mean you can have all kinds of targets in between but I think so many times what we saw in a lot of ways was a technology looking for a problem. So you can develop all kinds of skills. The key thing is that you understand what your customers want, if you’re able to serve those needs and make money, that’s from my perspective the best proof of concept. Otherwise, you can easily get lost in a technology-focused play that rather leads to the implementation of technologies, not necessarily the resolution of customer problems. So from that perspective, I would say if you’re successful in the market, then most likely you’re successful with digital transformation.

Christine: (13:35)

Thank you for listening to this episode of “Lost in Transformation”. If you enjoy our podcast, please subscribe to our channel and leave us a review on iTunes. Join us next time for another episode of our podcast.