Digital transformation has been likened to a wave, a powerful force sweeping across industries and businesses and leaving in its wake more modern, nimble, effective and customer-centric organisations. Business leaders have bought into digital transformation in a big way: IDC estimates that accumulated global spend on digital transformation will approach $2-trillion by 2022.
When IT was still in its infancy, it was considered separate to the core business, a support department in and of itself. In those days, value was measured along simple, static lines – was the project delivered within budget, and on time? IT was primarily a cost driver; it later evolved to a driver of business benefits. With CEO buy-in, IT departments and their technology partners could translate organisational goals into tangible business cases, project roadmaps and business outcomes such as increased sales or reduced operating costs.
Lately, however, a confluence of dynamic market trends has somewhat muddied the waters. Successful business outcomes no longer always come with a Dollar sign attached to them. Aspects such as customer experience have become critical to businesses’ success but quantifying the value of a CX-inspired digital transformation project is tricky. The value delivered by digital transformation – and how that value is measured – needs an urgent rethink.
Challenges with defining value
Our assumptions about why we conduct digital transformation projects is part of the problem of how such projects are measured for value. We boldly claim that digital transformation is what customers – all customers – want. We assume it will deliver better experiences or replace existing experiences. We make the dangerous assumption that digital transformation will increase the amount of value the organisation can deliver to its end-customers.
These assumptions are broadly driven by our view of value as something that is measured in cost. But cost is one-dimensional; value in the modern sense of the word is multi-dimensional and focuses more on qualitative aspects such as customer affinity than it does on Dollars and cents. KPIs such as “improve customer subscription renewals by X%” or “reduce inventory costs by X%” remain prevalent. But they don’t always speak to the deeper challenges faced by CEOs and the organisations they lead. They take a static view of value: the outcome of digital transformation becomes a destination – better experiences, happier customers, more revenue – where value is delivered as a windfall.
Very few – if any – organisations will find success in this model. In fact, McKinsey estimates that 70% of large-scale change programs never reach their stated goals. The pace of disruption and the need to innovate have placed immense pressure on organisations to transform and build Intelligent Enterprise capabilities. The risks a business faces at the onset of a digital transformation project may be completely different by the time the project concludes. How then do you illustrate value?
Reframing value measurement in digital transformation
Step One is to transform your own thinking about value, from business value, which is an internal measurement, to customer value (external). When your measures of success are customer-centric, your digital transformation projects have a better chance to affect deep change within the organisation and continuously deliver value throughout each iterative step of the project. Instead of creating outcomes that meet only internal expectations, you create products and services that your customers want to use.
Step Two is to move away from cost measurement to value measurement. Admittedly this is difficult: assessing costs is easy, as organisations’ accounting practices are set up to track costs. A value-driven measurement will have to measure the success of each digital transformation project relative to that project’s stated objectives. This requires organisations to become adept at finding value metrics for smaller iterations of work.
How? Data. Many organisations can’t even tell if they are delivering value because there’s no benchmark from which to work. And data sets the benchmark: if an organisation can articulate its current-state metrics and then match each iterative step of the digital transformation project to an improvement in those metrics, it’s far easier to illustrate value.
When the organisation then collaborates with a global digital transformation partner, they also gain visibility over trends for digital transformation projects at similar organisations and make appropriate adjustments along the way to ensure each iteration of the project delivers optimal value. And when the organisation has the insight and capabilities to take advantage of value-generation opportunities of their digital transformation projects at every step of the way, value becomes undeniable.
Digital transformation is a difficult but necessary step in the evolution to Intelligent Enterprises. With the support of a global technology partner that can provide much-needed context and insights, digital transformation projects can unlock unlimited possibility for innovation and success. Why settle for less?
