Setting digital KPIs to keep your DX on the right track

Focusing on the customer journey grounds the transformation process in the operational realities of keeping the customer front and centre. It compels the business to identify every technology, process, capability, and transition needed to deliver a great experience.

This helps companies apply digitalisation tools and technologies to improve customer touchpoints, making them more efficient and faster while integrating them into a single, consistent customer experience.

To achieve this, there must be clarity on key performance indicators (KPIs) and metrics to track and reward progress on the transformation process. But it’s not uncommon to find companies defaulting to older KPIs as a fallback.

Many CIOs don’t have a clue on how to set a ‘digital KPI’, one that will help gauge how well their digital transformation projects are faring. Applying traditional KPIs such as revenues, cost efficiencies, and other indicators that track past performance are inadequate to measure digital transformation success, given the agility required to succeed in the digital marketplace.

In fact, according to a recent survey, ‘Digital Transformation in the Intelligence Economy’¹, 28% (see chart 4) of organisations are using only lagging and/or traditional indicators to measure new digital businesses. The survey identifies outdated KPIs – previously adopted KPIs to measure an organisation’s digital efforts – as challenges that are ‘advancing toward the overarching goal - to digitally transform the overall organisation.’

Best practices in setting digital KPIs

Since each business sector’s requirements are unique, defining digital KPIs is difficult. What exactly does a digital KPI look like? And how do you define one that is distinct to your industry needs? Successfully setting KPIs will not only determine if your transformation efforts have succeeded but also provide essential data on why one project has failed and not another.

Here are several best practices in setting digital KPIs:

Senior management buy–in

Identifying which aspects of the business will benefit from digitalisation is critical to setting achievable KPIs and requires the cooperation and support of senior management. Working with senior executives will ensure resources are deployed in areas where they are likely to succeed.

Tie KPIs to outcomes

Set business outcome expectation clearly from the outset to avoid misunderstanding and communication. Tangible, quantifiable targets offer clarity without dispute and help focus workers on achieving them when they know what the expected outcomes and benefits are.

Measure business value

Some digital KPIs will serve their purpose seasonally while others may establish permanent standard operating procedures as the transformation goals are on-going. Deciding which transformation projects companies should embark must be aligned with the kind of business value attached to the project. Long-term KPIs will demand an investment in enhanced staff training and changes to corporate culture before success is determined.

Don't over-digitalise your business.

Companies should always seek a balance between customer satisfaction and employee effectiveness in setting digital KPIs. For example, opting for fully digitalised sales operations at the expense of traditional touchpoints may upset some customers and negatively impact customer relations. Each KPI should have a balance point that counters the risks that come with going all-digital.

While there’s no magic formula for setting digital KPIs, they should communicate the real-time nature of the future enterprise and how companies will respond to a digital economy. If traditional KPIs are deployed to measure digitalisation efforts, companies will struggle to make the necessary changes to thrive and grow in the future.

Setting digital KPIs are all about understanding revenue acceleration and improving existing business models, while measuring and working with all stakeholders to achieve new digital business outcomes.

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¹ IDC Intelligence Economy by Digitalization Survey, commissioned by Singtel 2018