Most executives, both inside and outside of technology, are familiar with the concept of digital transformation, and if they haven’t yet begun a transformation initiative, it is likely that they’re in the planning stages — in fact, record amounts of money are being spent across all sectors of the market in these make-or-break organizational reinventions. What’s more, more than 60% of respondents to a recent Couchbase survey reported a belief that traditional businesses that can’t complete a successful digital transformation won’t continue to exist (unless acquired) after two to four years.
However, in the rush to stay relevant, many organizations forget the most important prerequisite to successful digital transformation: a foundational data-driven culture. Gartner reports the astounding fact that nearly half of companies have no metrics or key performance indicators (KPIs) for the digital transformation. This is hard to understand considering it is one of the top priorities for a large number of survey respondents.
This lack of data-driven decision making and measurement is especially dangerous in the context of digital transformations. Because digital transformation by nature collapses and automates processes, data is the primary means of inspection. Even beyond those processes, having a true “North Star” to point to as a measure of success and a destination for the journey is critical.
It’s true that top business goals that lead to transformation initiatives can be hard to quantify sometimes. Enhancing the customer experience, improving product relevance or increasing efficiency are just some of the drivers a company might consider, all which could be measured in a large number of ways. Unfortunately, many executives– especially those in IT — also choose to focus on traditional operational metrics, which fail both to reflect the importance and to align all departments’ activity toward a common goal.
Instead, each digital transformation initiative should be structured against a larger program and focused on solving a single business goal. Key performance indicators for that goal must be established and watched ruthlessly. For instance, increasing loyalty as a business goal may be measured in transactions per month per user, customer lifetime value to the brand or customer churn. Whatever measure is decided upon must be applied consistently. It is important to determine key risks and early measurements that can point toward the KPI in a rapid fashion if lagging indicators are selected, which allows for investment to be redirected at appropriate times.
The more relevant the KPI is to the business itself, the more likely it is to be a good measure of success. Rather than setting “reducing downtime” as a target, try to measure the impact on goods production or on dollars lost from customer sessions that were not able to be completed. Such a data-driven mindset can lead to massive business agility at every step in the process, not only initiative funding (for example, a food supplier can understand, via a digital dashboard, which items and ingredients are most popular and alter the menu or more proactively manage ingredient supply), but only if the data is constant, current and examined.
Like any kind of journey with a large degree of uncertainty, digital transformations should be executed in a very agile, iterative fashion that takes the statistics and data collected as a point of reflection at the end of each deliverable and should use that information to dispassionately and intelligently guide what comes next. This requires a robust, often automated form of data collection and examination, but the payoff is found in many ways. For instance, using executive-level dashboards as a single source of truth can drive better action and clearer communication, allowing new ideas to be quickly tested and proven.
Creating a true data-driven culture is a journey in and of itself — an important one that is every bit as powerful as creating new offerings or business synergies. The successful digital organization has likely moved from data identification to data collection to data warehousing and management to business intelligence to eventual performance management, all as a way of powering the engine of business transformation. When considering your own business’s digital journey, don’t forget to lay a successful foundation for change with a robust data-driven approach.