Top Digital Transformation KPIs and Performance Measures

Written By: Eric Kimberling
Date: March 18, 2022

Most digital transformations fail to deliver on time, budget, and business value. There are several KPIs or (key performance indicators) that can be used to manage and monitor any digital transformations that problems can be avoided.

Oftentimes, when transformations fail or neglect to deliver the expected results, it's a surprise to the organizations. In some extreme cases, the negative impact on operations wasn’t expected or planned for. The key is understanding why disruptions happen and ultimately deploying KPIs throughout the journey as well as post-project.

The end goal is to ensure that the implementation is on time and budget, but also minimize operational disruption and maximize potential business value.

Implementation Time and Cost

The first, and probably most obvious, is overall implementation cost and timing. There are some key questions that may need to be answered before beginning implementations like:

  • Are we hitting the milestones of the company?
  • Are we going to go-live with new technologies on time?

The key to mitigating any risk of overruns on budget and time is to install strong governance and track the process. It is important to establish limits on time and budget by truly mapping the entire project. A lot of organizations don't consider the magnitude of different workstreams and budgetary line items within the project plan and strategy.

It's a matter of appreciating the impact is of the timeline and overall budget. Any organization should be able to identify when a project is moving off track, well before it’s finished.

If the company is 25% through the project but has spent 50% of the budget, chances are high that the overall budget will need to be increased. Strong governance and controls along with regular project status reporting will raise the red flag on any potential issues sooner than later.

This seems like project management 101, but there's also an art to understanding digital transformations and anticipating risks regarding time and cost.

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Operational Readiness

Another key KPI is the overall operational readiness of the organization. Assuming the business processes and requirements in the future state are defined, there should be a measurement system to quantify success and identify any breakdowns in the business operations. Consider user acceptance testing and conference room pilots. It is important to think beyond how the technology functions and address the full business processes through the different scenarios.

During the testing of different scenarios and while running through business simulations, certain things are going to work fine, and others are going to fail or create problems along the way. Operational readiness is an important part of understanding how well the business processes and the technologies are aligned before go-live.

Organizational Readiness

Like operational readiness, it is also important to measure organizational readiness. How ready are the people within the organization and how will changes affect them? Like operational readiness, there is a need to quantify how close the company is getting in terms of where we expect people to be before go-live. This could manifest in several different ways.

One example might be to go through scenarios with user acceptance, testing, and conference certain pilots. It is key to measure how well people understand those business processes. In other words, the business processes and the systems may work from a technical perspective, but do the people understand how those processes work? It is essential to demonstrate some level of competency in performing those processes within the new system.

It's critical to measure what percentage of the organization has been fully trained on the different modules, and what percentage has demonstrated the competency to perform end-to-end business processes.

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Business Value and ROI

The next performance metric to look at is business value and ROI or return on investment. These expected business benefits are important to understand.

Before we get there, let me back up and point out that it's also essential to measure operational risk. What happens if, during go-live, not only are the expected business benefits not achieved but also, basic operations are disruptive. What is the magnitude of that potential negative benefit?

This is something we hope that we don't have to measure, but there is a need to identify and quantify the level of tolerance. For example, not being able to ship products. If the product can’t be shipped for a certain amount of time, is that an acceptable delay? Now, again, if you do everything right during the transformation and are following best practices throughout the transformation, this becomes less of an issue.

It is important to be thinking about how to maximize business value and get the full ROI out of the system or systems. An organization can quantify measures around what it is we expect.

It could be inventory levels, optimizing inventory through better planning to reduce inventory by a certain percentage, or it could be that we are to increase revenue by X% due to new sales enablement tools.

All these are examples of things that might drive revenue enhancements. The question becomes then, what do we expect the revenue enhancements to be?

I have a whole video out of my YouTube channel that talks about the Top 10 Business Benefits of Digital Transformations. In general, it is imperative to evaluate business benefits and quantify them to ensure people are held accountable.

Resources

For more information on this and other best practices, I encourage you to download our annual 2021 Digital Transformation Report. This report talks about independent technology, agnostic, best practices related to digital transformation, including several potential business benefits and KPIs.

If you have questions regarding digital transformation KPIs and performance metrics, please don’t hesitate to reach out to me directly. I am happy to be an informal sounding board as you move through your digital transformation journey.

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Author:
Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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