Value Metrics and Digital Transformation ROI
Digital transformation ROI is vital to a company and mapping value metrics against the entire digital business transformation portfolio will highlight overlaps, conflicts, gaps, or synergies, enabling informed decision making at the portfolio level. That said, it's important to remember that not every useful metric has to, can or should tie back to money.
But despite widespread acceptance that social media, cloud, mobile and IoT, etc. has a place in every company's future, some digital leaders struggle with how to build a worthy business case to secure the resources required for new digital initiatives, and demonstrate value realisation.
Projects and programmes have long suffered from a lack of benefit management and realisation, particularly in the technology space; and you might be involved in one right now, where the focus is upon implementation and change management, with no strategy to define, track, realise and optimise the business benefits.
On the other hand, some companies manage value extremely well, such as Intel, where at one time, the IT Finance team devoted 20% of its time to helping business sponsors and project managers estimate, track, and document project benefits, and where they measured the value of all IT investments in IT projects using a set of 19 value dials.
When it comes to digital business transformation, should stakeholders dig their heels in and demand value metrics and benefit realisation management? – or is there justification for them being a little more relaxed? But before you answer that question, just imagine the money being spent was yours!
Big Transformational Bets
The big strategic bets that CEOs make, such as transforming an entire business model, is one area of transformation which is less predictable, but the CEO will still need to present the numbers to the chairman and other stakeholders, and his or her job will be on the line.
Similarly, setting up incubators where teams are given facilities and expertise to develop their business ideas into sustainable realities, are also much less predictable. This is where leaders might need to adopt the mindset of venture capitalists who back start-ups and of the entrepreneurs who shape the future. But internal start-ups should still be subject to a method of measurement such as ‘Innovation Accounting', which can help them to define, measure, and communicate progress.
The Irony of Data
When considering specific digital initiatives, digital leaders should be able to provide the value metrics that stakeholders are after. But it can seem ironic that in an age when data-points are in abundance, that some are announcing that they are unable to measure benefits or ROI because they don't have the right data.
For example, some might argue; “it’s impossible to prove the quantitative impact of social media on a business”, when all it requires is an understanding of how this is done. The data exists, as does a range of methods to assess the ROI of social media. The data relating to consumer behaviour can be used to identify how, when, and where social media influences consumers at each stage of their journey and provide executives with the numbers they need.
Whether you use break-even analysis, payback period, internal rate of return or any other method, there are multiple ways to measure ROI for different digital initiatives. After all, digital solutions provide data, and digital leaders now need to know how to use that data to generate valuable business insights.
Let me give you one more example, this time relating to mobile. Calculating ROI might be based on questions such as “How has the campaign increased consumer engagement and improved customer satisfaction?” and “How has it led to improvements in operational or workplace efficiencies?” While on the surface these outcomes may seem qualitative, it's easy to uncover the measurable outcomes that can be used to provide executives with the business data they need.
Digital Business Leadership
If you’ve identified and clarified the business need and built the right team, gathering the numbers that underpin costs and benefits, and tracking them, should be just another activity in the day-to-day life of a digital business transformation leader – albeit hardly technology related!
Business activities like these are what separates strong digital business transformation leaders from those limited to technical capabilities. They are part of what will separate the transformation endeavours worth writing about, from those that will best be brushed under the carpet and forgotten.