Forming a clear methodology for monitoring the performance of digital investments is a vital component of any effort as organizations go forward with digital transformation efforts.
Process and business model transformations and cultural and developmental transformations are all part of digital transformation. The key performance indicators, which assess the profitability of the digital transformation investment, are used to gauge the success of digital investments. These analytics verify that the investment meets or surpasses the projected hurdle rates of the initiatives.
While businesses are doubling down on tech investments, the “EY-Parthenon 2022 Digital Investment Index (DII)” survey indicated that they struggle to define their digital investment strategy.
Centralized Governance and Oversight
According to industry experts, those who succeed have embraced a centralized governance and oversight approach to cost outlays and the benefits. These businesses also have formal processes in place to identify, measure, and report on the results of digital investments.
The most important questions to answer are how organizations are allocating capital to undertake this digital transformation and how they are measuring the ROI. The metrics that drive that ROI must be understood by all stakeholders, from the CEO down to the individual business units.
Framework for Digital Governance
It is critical to have a well-designed digital governance structure that establishes decision-making responsibilities, identifies who is accountable, and clearly articulates accountability and ownership. This framework must also maintain continual change management authority for the organization’s digital initiatives and support improved sales, compliance, lower costs, and risk mitigation.
Stakeholders Must Be Diverse
The digital transformation project will determine the primary stakeholders responsible for measuring digital returns. The primary players engaged in determining those metrics have complexities and layers to them. It all starts with the person in charge of the company’s digital strategy.
Data is the key to analyzing success. Data is the lifeblood of any company, and having access to the right data at the right time is becoming increasingly vital for all stakeholders.
It’s crucial to remember that the same metrics that are used to assess overall business success, such as Net Promoter Score, Return on Investment (ROI), Return On Invested Capital (ROIC), and employee engagement, can also be applied to digital transformation projects.
Data analytics methodologies and technology should be selected on a case-by-case basis, focusing on the proportion of company growth enabled by the digital transformation effort and how teams have performed as a result.
Businesses should design a digital transformation governance strategy and plan as part of their overall company strategy. This might include an ongoing examination of business goals and areas for further optimization and an investment of time and resources to investigate existing tools that will help the company achieve its objectives.
Due to inadequate planning and the lack of established KPIs before embarking on a digital transformation project, many businesses continue to fail to measure and obtain returns from digital investments. The first stage in any digital transformation project is identifying the problem enterprises are trying to solve, the KPIs they will use to measure success, and collecting data.
It’s a Struggle to Measure Results
Measurement should be quantifiable, objective, and transparently presented, with no negative consequences for failure. However, if the investment fails, it must fail quickly, allowing the company to pivot if necessary and move on to the next goal.