Just as a pilot checks measurements before, during, and after a flight, your digital transformation requires the same attention to measurement.
Previous articles in this series explained how digital transformation impacts the entire company and, therefore, requires an enterprise strategy that balances culture and technology. We then started explaining how to turn strategy into successful execution. Here, we discuss the necessity for measuring business impact before, during, and after your digital transformation.
From Customer Experience to ROI
In our Introduction we defined Digital Transformation as utilizing technology to create a differentiated customer experience that gives you a sustainable competitive advantage.
Most projects start with an analysis of the costs and benefits. I can’t emphasize enough how dangerous that is in today’s world. Why? Keep reading…
Always start with an evaluation of your customer experience. We use a customer journey map to identify every interaction the customer has with a business. We then ask the business process owners to rank those interactions as follows:
- Green means that interaction is a competitive advantage for us
- Yellow means neutral
- Red means a competitive disadvantage
This can be a chilling exercise but, don’t worry, your customers and employees already know all this. It may be the first time they’re seeing it across the entire customer journey, and that may be the alarming part.
Next, we determine ways to improve the reds and yellows without sacrificing the greens. Those process improvements then dictate the high-level requirements for our digital transformation.
Now, we can use those requirements to complete our first estimate of the costs of our transformation.
This is where it really gets fun. We meet with the business process owners and ask them to estimate how much time would be saved by improving the processes as described in the requirements. We can document how long a process takes and how many times a year it’s performed. Multiply by average staff compensation for that group and we arrive at a current cost. Then, we look at processes that may be eliminated or improved and do the same math. The result is either cost savings, if we can eliminate staff costs, or margin improvement if we can grow without a proportional increase in staffing.
OK, that’s the cost side of the return on investment. What about revenue?
Meeting with senior managers and executives, we can start estimating growth and new revenue opportunities. We frequently hear about how current technology constrains growth. “Our system can’t support what we want to do so we don’t do it.” Or “if the customer could do these new things, we could sell 10% more of this product or service.”
I like to run the revenue growth opportunities by the CFO. They usually reduce the numbers, which makes the ROI analysis more conservative.
Now we have a plan to improve the customer experience, an estimate of the costs to do so, and an estimate of the cost savings, margin improvement, and revenue growth that should result. That’s when we go to the Board and pitch the plan.
Before, During, and After
I started by saying that, just like a pilot, we need to measure our digital transformation before we start, during the initiative, and after it’s done. We just described measurement before. That’s the business justification part of any major initiative.
It’s equally important to measure during the project. It’s easy to lose sight of the key objectives as we get caught up in activities. I like to take some checkpoints along the way where we stop and verify that our detailed requirements and our design are leading us to the goals we defined at the onset. You’ll be amazed at how a few reminders and minor adjustments can keep us on track to achieving the digital transformation goals. We also know that some design changes will likely be made during implementation. Just make those changes with the customer experience, cost savings, and revenue growth in mind.
We still may not know if we achieved our goals at the end of the digital transformation initiative. It may take months or even a year to see the fruits of our labor. Keep the goals in place. Use them as performance objectives for executives and business process owners. That accountability is crucial.
Tracking results also helps us with continuous improvement in our project management processes, business justifications, and personal performance. If someone projected cost savings ten times what were actually achieved, doesn’t that person deserve the visibility, transparency, and opportunity to learn and grow? If we don’t provide that, aren’t we hurting both the individual and the company?
As a final thought on this topic, good measurement also builds credibility with executive leadership and the Board. Success tends to lead to further investment because the company is trusted to deliver the desired results. Similarly, transparency when we miss our targets, along with action plans to improve in the future, also builds credibility.
Measurement before, during, and after a digital transformation is a critical success factor. We measure the customer experience and set out to improve and differentiate it. Then we measure likely cost savings that result from improved processes. We also measure expected revenue growth. Then we track all these measures throughout the digital transformation to keep us aligned and focused on the desired outcomes. Finally, we measure the results at the end of the transformation and for some time afterward.
The focus on measures is crucial to the success of your digital transformation, just as the focus on the measures reported by the countless gauges in the airplane cockpit is crucial to a safe and successful flight.
In the coming weeks we will cover the following, critical aspects of digital transformation:
- Change Management
- Scope Management
- Marketing and PR
- Staff Challenges and Surprises
- The New World After Digital Transformation
If you’re embarking on a digital transformation, planning to do so, or just don’t want to wait 12 weeks for all of these articles, just email Emily at Emily@WolffStrategy.com and she’ll be happy to schedule a call with me to discuss any or all of these topics.
Larry Wolff is the founder & CEO of Wolff Strategy Partners, a boutique consulting firm specializing in Enterprise Strategy Management and Digital Transformation. Larry has served as CEO, COO, CIO, CTO, chief digital officer, and management consultant for public, private, international, and emerging growth companies. His specialties include corporate and IT strategic planning, technology led business transformation, business and IT turnarounds, merger integration and large-scale project rescues. His methodologies span industries and scale to companies of all sizes.
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