The lack of consistent and reliable ways to measure digital performance has long hampered organizations in their quest to successfully transform. It’s hard to know how far you’ve come if you aren’t tracking your progress, or if you’re using inappropriate measures.
According to the Innovation Index by Dell Technologies, when it comes to digital and IT, only 26% of decision makers base their actions on measurements and data.
We’ve spent many years collecting and organizing the most common and effective digital transformation KPIs, and have updated our list for 2023. These KPIs are divided into four categories: Digital for operational efficiency, digital for workforce engagement, digital for customer engagement, and digital for new sources of value creation.
The KPIs are shown in Figure 1.
Digital technologies are often used to save costs, improve efficiencies, and enhance operational performance. Measures within this category are often linked to enhanced speed, reduced costs, fewer defects, more output, and better service availability. For example, forklift supplier Linde built a smart factory based on hybrid cloud, edge solutions, and robotic automation and obtained a 27% increase in manufacturing output along with 30% faster detection of process errors.
While efficiency has traditionally been associated with performance metrics such as these, more recently they have been complemented by new criteria linked to sustainability. For example, Linde’s smart factory reduced carbon emissions by 28%. Additionally, the company decreased energy consumption due to intelligent automation of the forklifts’ movements and more efficient IT assets.
Digital solutions can improve workforce engagement in multiple ways, many of which can be measured. These KPIs can link to time saved, workforce safety, task performance, and collaboration effectiveness. Canadian financial services firm Scotiabank gamified many of its training and talent development programs, resulting in an 89% participation rate and response accuracy of 79%. Digital tools can also be used to enhance diversity and inclusion.
For instance, workforce service provider Randstad adopted AI-powered talent engagement solutions that combined email outreach with webchat and found that 63% of the conversations resulted in uncovering new job seekers. The same kind of solutions allowed consumer goods firm Unilever to achieve a 16% increase in the diversity of new hires.
A third category of KPIs is linked to customer engagement. There are a number of ways that digital tools can augment customer interactions, such as collecting and analyzing customer journeys and operationalizing the voice of the customer. Beverage giant AB InBev founded BEES, an e-commerce and SaaS company, to solve issues of poor service for small and medium-sized retailers. The BEES solution collected over three billion data points per month from web and mobile applications, logistics and inventory software, and routing tools to build customer profiles and personalize the end-to-end customer journey. The platform can send personalized reminders and automatic recommendations to better target promotions and reduce churn. BEES allowed AB InBev to increase monthly customer engagement by 48%, processing over 1.8 million orders per week and achieving $7.7 billion gross merchandise value.
Digital tools can also be used to find new sources of revenue and profit. KPIs in this category include revenue from digital products, services, channels, and ecosystems along with growth in digital vs analogue services. For example, the New York Times bucked the downward trend in the traditional media sector by growing digital subscriptions to 41% of total revenues by the end of 2022. The company helped to grow these subscriptions by bundling content with games, online lifestyle events, and product reviews. Along with recently acquired sports news website The Athletic, the New York Times reached its goal of 10 million subscriptions ahead of schedule.
These digital transformation KPIs can be extremely useful to monitor the progress of your digital transformation. Yet, a common mistake is to over-rely on one or two KPIs. Our experience suggests that, for a medium-to-large scale transformation, multiple KPIs should be tracked across different categories. A digital transformation may, for instance, include elements of new value creation as well as cost control and efficiency improvements. To achieve these goals, it is necessary to closely engage with customers, employees, and other relevant stakeholders. Hitting many of these KPIs requires a level of cross-silo coordination that is consistent with most digital transformation successes.
Digital transformation is difficult – and without a good sense of where you are in the journey, it can often lead to failure. A portfolio of relevant KPIs that are specifically attuned to the needs of digital transformation can go a long way towards providing the guardrails required to increase the chances of successful outcomes.