Digital Transformation Drivers and KPIs Don’t Stack Up
By Simon Ratcliffe, Principal Consultant, Advisory – Ensono
In research released earlier on this week, Ensono, in conjunction with the Cloud Industry Forum revealed that a survey of 250 business and IT decision makers in enterprise organisations across multiple verticals show that digital transformation is still very much an emerging process. The survey demonstrated a variety of drivers for digital transformation, with many different metrics used to measure the success but also showed that nearly half of the respondents believed that they were obtaining more value than expected from their digital transformation efforts.
The top three drivers for digital transformation were cost savings (70%), increased profitability (58%) and increased productivity (59%), demonstrating that transformation is still very much viewed as a business efficiency activity rather than one designed to reach new potential customers or markets. Although some respondents did include other drivers, including competing with industry disruptors (35%), differentiation (35%), speeding up time to market (33%) and customer experience (40%), these were all notably less than the top three.
Arguably, given the investment required for successful digital transformation, simply viewing it as a cost reduction function seems, on the face of it, rather short sighted. Digital transformation is fundamentally about business change and seeing this change as a revenue generator allows it to become an opportunity for growth within most businesses.
Growth through innovation and the delivery of the best service, product and experience to customers and through finding new and quicker routes to market is a more valuable return on the investment in transformation and the focus on cost savings is outdated and will negate transformation efforts, limiting its scope and impact. This could ultimately have longer-term implications for the business in the digital era and yet less than half of the organisations saw customer experience as the primary driver.
Interestingly, when it comes to measuring the impact of their digital transformation efforts, 99% of organisations actively measured the impact but the KPIs used for measurement are not aligned to the drivers. The key drivers and the metrics used for measurement were very inconsistent across all organisations suggesting that, although the programmes were undertaken with one objective in mind, they are subsequently measured in more business centric terms such as external customer satisfaction (52%). These responses suggest that digital transformations change shape throughout the programme and business decision makers often become more engaged over time and re-shape the way in which success is measured.
With 48% of respondents indicating that the value received from digital transformation is higher than expected, it becomes more apparent that such programmes often evolve effectively once they have been initiated although obtaining buy in the start the process often requires potential cost savings to be identified.
Transformation is an on-going change with any organisation and it is obvious from this research that the benefits and measurement of these benefits is also subject to change. As with many technology led programmes, cost reduction is still the primary mechanism used to gain the attention of the business but once the programmes are underway and the business becomes more aware of the benefits, the drivers morph into more business centric KPIs.
The good news for the IT function is that half of the respondents have now successfully over-delivered against expectations which is a strong validation of the value of a well-planned digital transformation programme. I’ll be writing more about the research in a few weeks’ time about what CIO need to consider – and do! – to be successful.
About the Author: An established thought leader and innovator, Simon served as a Virtual CIO, CIO Advisor and Leadership Mentor for a wide variety of organisations before joining Ensono as Principal Consultant. He is an IT evangelist capable of promoting the value of IT within organisations by developing a single strategic vision that unites business and the IT department. Simon holds a Master of Arts from University of Cambridge and is a trained psychologist and former finance director.