One often overlooked factor in successful digital transformation journeys is the integration and use of real-time data and analytics to establish metrics and track progress.
This is especially important because numerous studies, including this one from McKinsey, have found that 70 percent of the digital transformation efforts by companies fail.
As pointed out in Telstra’s “Disruptive Decision-Making” report, digital transformation must involve the rethinking of how a company puts technology to use. New access to huge amounts of data will be at the center of those decisions. So, too, will new technology that is implemented to upgrade user experiences.
But digital transformation is not just about changing the external facing technology of a business. It’s also about using technology to change a company internally. And based on a review of reports and articles about digital transformation, companies are often failing to use data to measure how well their digital transformation is proceeding.
The Need For Metrics
As pointed out in this Forbes article, for companies to succeed in digital transformation, they have to change the metrics that executives use to measure company performance. The article’s author, Peter Bendor-Samuel, CEO of Everest Group, recommends using a venture capital process and mind-set to improve progress, where “leaders make capital available, and sprints or projects that are completed, draw down on that capital.”
That allows companies to see what they’re spending on digital transformation and how well those projects are faring. Companies can even establish journey teams made up of senior executives to monitor progress through the use of metrics agreed upon by all those in the company.
These metrics should be specific and could include:
- The data sources participating in an integrated search.
- The number of entities that were consolidated during the transformation.
- The rate of operationalization of transformation projects.
- The amount of money being spent on projects.
- The additional time staff members have to focus on larger goals after the automation of tedious tasks.
The metrics must be company specific but are a strong foundation to make digital transformation possible.
How Metrics Ensure and Defend Digital Transformation Success
This McKinsey study on digital transformation success found that without expansive metrics, companies might achieve temporary improvements that are not sustained over the long-term. The study’s authors write to make success permanent, “The first key is adopting digital tools to make information more accessible across the organization, which more than doubles the likelihood of a successful transformation … [and] an increase in data-based decision making and in the visible use of interactive tools can also more than double the likelihood of a transformation success.”
The survey found that organizations that established clear targets for key performance indicators that were informed by accurate data were two times more likely to have transformation success than companies that did not. Additionally, companies that established clear goals for their use of new technology improved their chances of success by a factor of 1.7. Such goals and metrics must have real-time data so companies know whether or not they are on track.
Real-Time Analytics Prove for Fast Adjustments
In order to make speedy adjustments, metrics must be based as much as possible on real-time data. It might seem obvious that in a world where data increasingly drives decision-making in almost every realm, using it for internal progress checks would make sense. But far too often, companies are not using data in this regard.
In an article on the “three p’s of digital transformation”, Billy Bosworth, the CEO of DataStax says that, “While 89 percent of enterprises are investing in tools and technology to improve their customer experience initiatives, too few are relying on real-time data to inform decisions.”
He goes on to write that “… the most important performance metric is the impact on customer experience — which translates into increased retention and revenue. Brand value and Net Promoter Score can also be non-revenue and non-cost vital metrics to track performance.”
Real-time data is vital to make sure these types of metrics can be accurate and informative to the business.
A recent Harvard Business Review article brings this point home. The article’s four authors all have extensive experience in various industries. One of them, Ed Lam, the CFO of Li & Fung, shared his firsthand experience of what led to digital transformation success at his company. The authors note that Li & Fung created a three-year transformation strategy geared toward improving the use of mobile apps and data in its global supply chain. The company then used real-time data to measure progress.
The authors wrote, “After concrete goals were established, the company decided on which digital tools it would adopt. Just to take speed-to-market as an example, Li & Fung has embraced virtual design technology and it has helped them to reduce the time from design to sample by 50 percent.
“Li & Fung also helped suppliers to install real-time data tracking management systems to increase production efficiency and built Total Sourcing, a digital platform that integrates information from customers and vendors. The finance department took a similar approach and ultimately reduced month-end closing time by more than 30 percent and increased working capital efficiency by $200 million.”
The benefits of such a strategy and integration of real-time digital transformation metrics can thus be profound. Digital transformation is now an imperative for companies worldwide.
For instance, IDC estimates that spending on digital transformation will grow from $1.07 trillion in 2018 to $1.97 trillion in 2022. The World Economic Forum recently echoed this conclusion, estimating that the overall economic value of digital transformation to business and society will exceed $100 trillion by 2025.
It’s not a matter of whether companies engage in digital transformation, but rather how. Using real-time data to inform metrics about progress is a crucial step in this process.
Dan Woods is a Technology Analyst, Writer, IT Consultant, and Content Marketer based in NYC.