The metric that matters when evaluating digital transformation success
DIGITAL transformation is a priority for every organization these days.
Whether you’re a manager or seated in the boardroom, there’s a high chance that you’re responsible for one or more of your company’s digital transformation projects.
However, digital transformation projects aren’t implemented overnight. They take planning and are usually performed in carefully planned stages in order to avoid disrupting ‘business as usual’.
In fact, organization slowly climb the digital maturity curve, and as they progress — streamlining systems and processes and integrating legacy infrastructure with new-age applications — they start to make a visible impact on how the world perceives your brand.
So, how do you measure success? Do you wait until all the digital transformation projects in various departments and divisions have been piloted, perfected, and scaled up and have helped the organization reach one of the higher levels of digital maturity? Of course not!
Measuring success is key
One of the most important things about the digital age is that projects are executed within agility and iterative framework — by default — allowing managers to constantly review delivery, milestones, and end goals.
Tech Wire Asia recently spoke to Sandra Ng, IDC’s APAC Group VP for its ICT Practice. Given her expertise with digital transformations, she emphasizes that it’s important for organizations to have KPIs and constantly measure success.
However, Ng points out that traditional KPIs don’t do justice to digital transformation projects and programmes. Companies need to realize this and create different metrics to help measure success.
One of the KPIs that Ng strongly believes in is the Net Promoter Score (NPS).
“It’s a better indicator of the success of digital transformation compared to the customer satisfaction index, for example, since it measures how many customers will really recommend you and speak positively about you to their peers. NPS is obviously a better indicator of digital transformation,” said Ng.
How does NPS measure digital transformation?
When someone says NPS is a good judge of the success of digital transformation, managers are bound to pay attention — because it’s a metric they’re familiar with — although not necessarily in the same context.
But what Ng says about the metric’s capability needs some emphasis and explanation.
To calculate the NPS, you need to ask customers about how likely they are to recommend your brand to their friends and family on a scale of 1 to 10.
From their response, you can categorize them as promoters (score 9 and 10), passives (score 7 and 8), and detractors (score 0 to 6). Subtracting the percentage of detractors from the percentage of promoters yields the NPS.
According to Index NPS, the upper limit for the benchmark in most industries is about 61 — however, it is possible for a single company to score much higher than the benchmark — such as Tesla (96) and Porsche (84).
Now, if we apply this NPS to all of the tiny digital transformation pilots in an organization, we can achieve two things:
- We can understand the impact of that particular initiative and evaluate it against the cost of scaling the project across the organization.
- It will allow us to make changes to the project at the pilot phase so as to make sure that the net impact of that particular project is not only positive but also successfully turns customers into promoters.
As a result, every single digital transformation project can help the organization improve its overall NPS, one step at a time.