A major new global study from IDC reveals both the main drivers of digital transformation as well as the biggest barriers to it. The study then goes another step further, uncovering the top key performance indicators (KPIs) of digital transformation success, while pointing to ways the barriers can be overcome.
Surprisingly none of the top barriers – existing business models, culture, and organizational structure – relate directly to technology, but rather to people and process. That is why one of the bigger mistakes made as organizations try to implement digital transformation is a technology-first focus at the expense of people and process.
The Infor-sponsored IDC study sampled opinions of 1,048 executives in three geographic areas – Americas, Asia/Pacific, and Europe – across five vertical markets. The five verticals were healthcare, discrete manufacturing/wholesale, process manufacturing, retail, and public sector.
While there are clear top choices among survey respondents when it comes to KPIs currently in use for ongoing digital transformation efforts, the top three are within a few percentage points of each other, and ahead of the second tier of KPIs, as shown in the graphic above.
Topping the list is improved predictive analytics to foresee market changes and customer demands. This requires the ability to process tidal volumes of both structured and unstructured data – yes, there is a technology link here. But it also means the ability and willingness of business analysts to leverage the reports generated.
Following that KPI is improved workforce productivity and decision-making. Again it is logical to assume that advanced analytics will play a role in validating these KPIs.
And the third most commonly used KPI reported is the percentage, or growth thereof, of an organization’s total revenue produced by customer engagements with new, customer-facing digital tools.
But as McKinsey warns, many companies today may be overly focused on output-based KPIs, such as EBITDA growth, CAPEX reductions or digital revenues as a percentage of total revenues. Remember the IDC data measures KPIs in current favor, not necessarily those that are most effective. These measures , McKinsey maintains, do not isolate the factors that actually produce the desired result. Instead McKinsey recommends that:
[Organizations] develop a set of simple input metrics tracking elements such as SEO conversion and app traffic, while making it clear who owns each item and is accountable for the result.
McKinsey further recommends that digital transformation KPIs be based in part on leaders designing small projects with more frequent milestones, giving teams a steady sense of accomplishment.
In addition to getting the KPIs right, there are several other actions experts recommend to conquer the barriers to digital transformation surfaced in the IDC study. Doing so starts from the very top of the executive ladder with a clear and unambiguous message that digital transformation is far less about technology and far more about a major transformation of how people work and how they thinkabout technology.
Rob Roy is chief digital officer at Sprint. In an interview with McKinsey, Roy reflected on a transformation project designed to essentially force customers down a digital, self-service path to boost efficiency. The technology was all in place. But the customers were not ready, and there was nothing Sprint could do about it, as he explains.
A digital transformation isn’t about digitizing a channel or simply doing more things digitally. It’s a much broader scope than that. We’re really looking to improve and simplify customer ‘moments of truth’ — and all the supporting processes that build a true omnichannel, world-class experience. We’re now working with each area in the business to help everyone think and act digitally for the things they control. And we’re starting to see real gains in productivity, simplification, cost reduction, and building on earlier gains focused on sales.
Roy and others also strongly advocate consideration of key new hires, people with talents not typically found in many organizations. These hires might include a head of business intelligence and AI to translate massive data blocks into coherent English for business analysis. Also consider a designated lead for digital adaptation to actively promote the role of being more digital-first.
The key take away is that uniting people in a seamless way with the underlying enabling technologies is the most critical aspect of a successful digital transformation.
To dive more deeply into the important details of the IDC study, download this free white paper.