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  • Victor Kmita

Why KPIs Are Musts in Digital Transformation

How to determine a company's place in the digital race? When will it reach the finish to take full advantage of modern technologies?


Digital Transformations Key Performance Indicators (KPIs) can define it. It's time to discover more about what these "magic" instruments are. And most importantly: how do they help to predict the future of business. Let's start it.




Digital KPIs: What Are They and Why Do They Matter?


Digital Transformation KPIs are indicators of the company's progress towards achieving aims within the business’ digital transformation. Thanks to them, a company can track how its activity affects the digitalization processes.


The principle of DT KPI operation is the following. A company sets goals and chooses some performance measures. These metrics can affect not only the IT-team but also other ones. Each employee has his/her own local goals for the month, quarter, or year. The personal development system is built to achieve the company's aims. The level of reaching local goals is a piece of analytical information. It is used to determine a percentage of some KPIs.


As seen, a company can achieve certain digital results, using KPIs. Usually, management takes 5-9 KPIs, analyzing the situation in progress. But it is difficult to determine which KPIs will reflect it accurately. Each company is an individual, so the choice of metrics must be approached thoroughly. There are several universal rules for choosing the most relevant KPIs.

  1. Indicators must be as simple as possible. Every employee has to understand them to make a common performance.

  2. Metrics should not be guided by the trends of growth or the actions of competitors. Each company is unique. An individual KPIs approach will help to obtain more exact monitoring information.

  3. Correct indicators must be adaptable to the environment. They should respond flexibly to changing situations.

  4. KPI tracking the results of the previous actions shouldn't be used. It is more efficient to choose leading indicators. They directly affect future outcomes.


KPIs help to determine the level of performance on the way to big digital transformation aims. They make all teams’ work structured, effective, and meaningful.



Types of Digital Transformation KPIs


“There are 2 KPIs that a business should focus on: 1/ The amount of time and human resources spent on maintaining a particular process. Reducing the human factor is an increase in business scaling opportunities; 2/ Customer Effort Score (CES) - a value, determine the convenience of the interaction between customer and business.”

~ Victor Kmita, XM^ONLINE CEO


There are no sets of KPIs templates. To be honest, there is not even a clear number of DT KPIs applied in different industries. Nevertheless, they can be divided into groups, depending on the subject of monitoring. Thus, some metrics are related to:


‣ customers; ‣ teams of employees (human resources);

‣ business processes;

‣ innovations;

‣ profitability.


To fully determine, which indicators to consider, it's necessary to analyze examples of KPIs for each of the above groups.



1/ Customer-Oriented KPIs.


◦ User retention rate. One of the key indicators of digital transformation success. DT improves customer experience and products. The higher this KPI percentage, the less effort it will take to retain existing clients and attract new ones.


◦ Customers' utilization of digital channels. This performance measure shows how convenient the company's applications are. Besides, it determines how well the business knows the preferences of its audience.


◦ The number of offers tailored to different markets. The new software can expand the circle of customers and adapt existing products to new requirements. The more services a company offers to different business areas, the higher level of its digital development.


◦ The effectiveness of marketing activities. The indicator is determined by the ratio of funds invested in digital marketing instruments to the number of attracted customers.



2/ Staff and Process-Oriented KPIs.


◦ Time spent minimization. Automated systems can significantly reduce the work time of human resources. Therefore, the fewer time employees spend, the more effective a company's digital transformation strategy is.


◦ The level of employee digital maturity. Before any global digital ideas can be implemented, a company needs to prepare staff for them. Therefore, the measure of how well people understand and accept transformation determines its effectiveness.


◦ Labor Productivity. Well-implemented digital technologies in the company will guarantee high employee productivity.



3/ Innovations-Oriented KPIs.


The number and success of implemented innovative ideas. This KPI for software development takes into account how much ideas were realized due to a certain period and the ratio of investment funds of each project's effectiveness.


Application of innovative solutions. This metric considers the flexibility of existing software and the speed of its adaptation to changes.


◦ The level of reduction time to market for a new offer. Digital technologies allow you to create a product in a brief time. Therefore, such KPI determines how efficiently the software works.



4/ Profit-Oriented KPIs.


◦ Percentage of revenue from digital customer interaction channels. As profitability rises, the quality of channels improves.


◦ The ratio of funds received due to transformation and spent on it. This metric tracks how effective the new approach is. A company should have high margins, reasonable costs of maintaining new software.


Hence, due to a wide range of DT KPIs, it is difficult to choose the most suitable in a given situation. To simplify this task, one should consider the nature of set goals, the features of the company, and the business niche.




How IT-Infrastructure Can Impact on Digital KPIs?


There is one more component that affects the choice of metrics. Besides this, future KPIs results depend on it. This is about IT-infrastructure. It's a complex of all information resources and technologies used by one company.


Naturally, an existing system determines the choice of the indicators. Its improvement is the main task of digital transformation. The percentage of the above KPIs will be a partial reflection of the infrastructure state. Thus, IT-infrastructure must be flexible for the provision of satisfactory DT KPIs results. Otherwise, it will be complicated to develop and implement new digital solutions.


How To Improve KPI performance, using XM-Platform?


There is a universal solution that makes the digital transformation easier. XM^Platform offers a variety of frameworks for software creation. It makes the transformation process less laborious and time-consuming. How does this service help improve KPIs? Let's consider:


‣ XM^ developed software enhances the customer experience. It’s raising a percentage of Client-Oriented KPIs.

‣ The final digital XM product is flexible. It improves the state of the company's IT infrastructure.

‣ Due to the platform, the IT-team doesn't need to develop applications from scratch. It allows for upgrading Process-Oriented KPIs.

‣ Basic codes can be used for further software development. This solution will bring more profit, covering maintenance costs.


XM^ is a convenient digital service platform, which allows to do it all at once. For example, develop digital products, raising the level of chosen KPIs.



Summary


Following Gartner's latest forecasts, companies will continue the large-scale digital transformation. But, initiatives implementation will take twice the time and cost. Does it depend on the correct strategy and performance indicators? - Partially. To prevent irrelevant data receiving and analyze actual working results, a company must choose the right KPIs.

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