Digital transformation is one of the most important initiatives a company can undertake in order to stay competitive in today’s digital age.
However, without proper tracking and measurement, it can be difficult to know whether or not your transformation efforts are successful.
That’s why it’s important to track a variety of key performance indicators (KPIs) to ensure you are achieving a positive return on investment (ROI) with your digital transformation.
In this article, we’ll look at 45 different digital transformation KPIs that companies should track to ensure success with their digital transformation initiatives.
Let’s dive in.
- Why do You need KPIs for Digital Transformation?
- Which Digital Transformation KPIs Should You Consider?
- Conclusion: The Key Metrics That Drive Digital Transformation
Why do You need KPIs for Digital Transformation?
KPIs, or key performance indicators, play a vital role in determining whether a new integrated digital process is yielding results.
Various digital transformation KPIs measure how well the digital technology is performing, including metrics for customer experience and satisfaction, operational efficiency, marketing strategies, and other processes centered around customer satisfaction.
Many large corporations and organizations invest significant funding into digital tools, expertise, and transformation initiatives to maximize their ROI or return on investment.
For this reason, key performance indicators are crucial in detecting areas that require improvement while finding which strategies are the best practices for success.
Which Digital Transformation KPIs Should You Consider?
Of course, it depends on why you are embarking on the transformation in the first place.
For example, if you are moving away from legacy business process systems and adopting a new ERP system, or transitioning to a cloud-focused document management policy, your KPIs will be different.
Every company approaches the DX process for different reasons, with different cost concerns, and different value drivers.
Importantly, digital transformation is an ongoing process (I’m sure you’ve heard that it’s a journey, not a destination), so having clear KPIs for different stages of the process can keep you focused and on track, and demonstrate the value of this process along the way to company leadership.
Your customer’s needs and expectations are evolving. If you’re still relying on legacy business models and processes, it’s only a matter of time before you’ll need to adapt in order to meet these needs.
This is where many digital transformations start.
So, to begin the list, here are a few important customer-focused KPIs to monitor.
Customer Satisfaction Score (CSAT) – This measures how satisfied customers are with a product or service on a scale of 1 to 5, with 5 being the highest score.
Interestingly, a McKinsey survey revealed that companies with more digital offerings receive higher satisfaction scores.
Customer effort score (CES) – This measures how much effort it takes for a customer to use a product or service. It may be measured by asking customers, on a scale of 1 – 7, if they agree or disagree that your company made it easy to handle a particular interaction. A higher average indicates a better customer experience.
Net Promoter Score (NPS) – This customer loyalty KPI measures how likely a customer is to recommend a product or service to others on a scale of 1 to 10, with 10 being the highest score.
If you’re receiving many “detractor” scores (0-6 ratings), you might consider adding a comment field to understand why the customers feel this way and make adjustments as necessary.
Custom Acquisition Rate – This measures the number of new customers acquired over a period. It’s particularly helpful to understand the ROI of your lead generation efforts, as it can indicate how many leads are actually turning into customers or clients.
Customer Lifetime Value (LTV) – This measures the total value of a customer to a company over the lifetime of their relationship.
There are different interpretations of this KPI, but a common way to measure LTV is to determine the average gross margin per sale of a product or service, and then calculate the number of times a typical customer buys that product or service.
Number of Active Customers – This simple metric is often overlooked. Many companies look at the number of new customers and stop there. But understanding how often are they using and interacting with your technology is also critical.
Change in User Behavior – This measures the change in how customers use a product or service over time. A change in user behavior can be an indication that the product or service is no longer meeting the needs of the customer.
Customer Churn Rate – This measures the percentage of customers who stop using a product or service over a period. A high customer churn rate is an indication that something is wrong with the product, service, or company and should be addressed.
How are your digital transformation efforts affecting your employees? Are productivity and morale improving, or are new digital products and processes having the opposite effect?
It shouldn’t be assumed that your employees are thrilled about your company’s digital advancements. After all, cultural changes are often harder to navigate than technological changes during digital transformation.
So, in addition to measuring revenue, technology and customer-based ROI, make sure your HR department has its pulse on the following KPIs:
Employee Engagement – This is a broad metric that reveals how invested, satisfied and engaged employees are at work.
It’s an emotional component of digital transformation that can help you understand the effect on workplace culture by looking at things like employee satisfaction surveys and net promoter scores (i.e. how likely would you recommend working at our company to a friend or colleague?).
Employee Absenteeism and Turnover Rate: In addition to lack of engagement, a high level of absences and turnovers can ruin the ROI of digital initiatives.
For example, many companies expect to have some turnover (i.e. due to a digital skills gap), but should aim for a turnover rate of 10% or less.
In addition to the raw numbers, understanding why employees are staying or missing work/leaving can help improve overall employee experience.
Workforce Productivity – This measures the amount of work that is completed by employees in a given period.
How you measure productivity of course depends on the type of work your employees are performing but may include factors such as the number of projects completed, sales close rate, parts produced, overtime hours, and effectiveness ratio.
Number of New Hires – Are you hiring for new roles and creating job titles as a result of your digital transformation?
By looking at the ratio of internal promotions vs external hires, % of tech talent, specialist roles, workers with advanced degrees, and more, your company can better understand the makeup of your workforce as it relates to the scope of the anticipated digital projects.
Learning and Development KPIs
Depending on the scale of your company’s transformation, you will likely need to retrain and/or upskill existing employees (as well as new hires) on new digital skills and competencies.
In fact, training will likely be one of the major investments you make.
Keeping track of the following KPIs can help your HR team measure the engagement in learning and development efforts related to digital transformation:
Digital Skills Training – This is a broad metric that tracks the overall investment skills and development training related to the company’s digital transformation goals.
Here, administrative and HR leaders will want to understand the overall training objectives, evaluation criteria, data collection efforts and more.
Training Completion Rate – While many companies track overall participation in their L&D programs, it’s not always clear how many employees actually finish the training.
And, unfortunately, the average eLearning completion rate is only between 20-30%.
Tracking completion rates will allow you to make adjustments and achieve a better ROI on your digital training and certificate programs.
Learner Engagement – This captures how engaged employees are in digital training based on the time and effort they are putting in.
This is not an exact metric, but often either integrated into an L&D system and based on feedback from completion rates, satisfaction scores and performance.
Training Satisfaction Score – This training KPI measures how satisfied employees are with the training they’ve received, usually based on the question: “How likely is it that you would recommend this training session to a friend or peer”?
Financial KPIs for Measuring ROI
One of the main drivers of digital transformation across different industries is to grow the revenue of your business with better customer engagement, reduced operating costs, and new products and services.
This is often where we first look when trying to determine the ROI of our digital efforts, although it’s only one of the measures we should be looking at.
In any case, here are a few metrics to help you understand the financial return on implementing technology or transitioning to a digital model.
Revenue Per Employee: Revenue per employee (RPE) is a ratio that measures total revenue divided by the number of employees. If your RPE improves, it indicates that employees are becoming more productive and efficient.
Revenue from New Digital channels: This measures the revenue generated from new digital channels, such as a website or mobile app.
For example, Royal Caribbean generated new revenue streams by developing a mobile app that made it easier for customers to find and book events and activities from their devices.
Operating Expenses: This measures the effect of digital transformation on the operating expenses of the business, such as employee salaries, rent, and utilities.
For example, is your company saving on energy costs by implementing new technology that manages and optimizes power usage?
Revenue from New Products or Services Launched: This measures the revenue generated from new products or services that have been launched as a result of the digital transformation (unlike ‘revenue from new digital channels’, which adds revenue to existing products or services).
For example, this could mean measuring revenue from selling a new piece of software, app, device, or digital offering.
Cost of External Hiring: A company often needs to hire external consultants and contractors for different stages of digital transformation. Tracking these outsourcing costs will help you measure the impact of these engagements on your transformation efforts.
Marketing Expenditure: Many companies overspend on their digital marketing efforts. If creating a digital marketing program is part of your digital transformation (see below), or if you are allocating part of your marketing budget to promote new digital products or services, keeping track of this expenditure will allow you to make adjustments along the way.
Return on Digital Investments: This KPI helps your company gauge the return on new technology investments related to training, governance, data, and internal products or processes.
Technology and Innovation Metrics
Adopting and adapting to new technology is obviously a key ingredient to the digital transformation process. As companies mature, they need to enable a flexible and secure infrastructure to meet the needs of improved processes.
The following KPIs are designed to help a company understand how well it is moving along with technological change and aligning these changes with business goals.
System Integration – One of the keys to digital efficiency is integrating disparate systems and avoiding silos. Understanding how well your company is integrating these systems is a key indicator of digital progress.
Cloud Adoption – This digital transformation KPI measures the percentage of employees who are using cloud-based applications.
Since cloud deployment is often at the center of digital innovation, this metric is essential to not only understand the percentage of processes designed for the cloud, but the overall usage of these platforms.
Software Adoption – This measures the percentage of employees who are using software applications.
For example, one way to measure this KPI is by comparing the number of licenses purchased to the number of employees actually installing and activating the licenses.
Percentage of AI-Enabled Processes – So, we know that AI is one of the fundamental technologies driving digital transformation, but is your business taking advantage of AI to improve internal products and/or business processes?
Here you can evaluate the percentage of AI-driven automations, data centers, and more to see its overall contribution to your operations.
ERP Implementation – This may be a series of KPIs that helps your company track the success of a new ERP implementation (often an initial step towards digital transformation).
These metrics can reveal the impact of the ERP on scheduling, project margin, inventory turnover, employee satisfaction, demand forecasting, and more.
Data Quality – If your company is investing in new technology, you are likely using this technology to develop data sets to drive business growth.
But is the data providing the insights you need to make better business decisions?
As part of the digital transformation process, you’ll have to monitor the qualitative and quantitative data for things like completeness, accuracy, timeliness, consistency and validity.
Cyber Security KPIs – Depending on your current level of exposure and scope of new projects, cyber security may involve an entire set of its own KPIs to measure.
Weak security can destroy the ROI of new digital investments.
So, be sure to implement strong measures and monitor things like vulnerability management and awareness score, incident response time, breach cost, employee training, and number of events per application, account, location and more.
Digital Marketing KPIs
Digital marketing initiatives are an important component of new business transformation programs. And it may be a small or a very large part of your overall DX objectives.
Luckily, there are a few basic KPIs that are easy to implement and track to measure progress and ROI in this area.
Website Traffic – If you’re developing a new website, or optimizing an existing one, you’ll want to monitor website growth using an analytics dashboard (i.e. Google Analytics and Search Console).
Your SEO and marketing team will need to look at things like organic and paid traffic growth and engagement metrics such as time on page, sessions/users/views, bounce rate, and CTR.
Lead Generation – Here, we’re looking at how well your new digital marketing channels (i.e. newsletter campaigns and landing pages) are driving and converting leads.
So, we want to analyze the number of leads, the percentage from different attribution channels, conversion rates, cost per lead, and more.
Social Media KPIs – We won’t attempt to cover the extensive list of social media KPIs that marketing pros cover. You can review this post to learn more.
Just know that social media marketing spend can be significant in digital marketing transformations, so you want to make sure you are measuring ROI by using analytics tools and looking at follower count, impressions, post reach, audience engagement, quality of traffic generated to your website, ad conversions, and more.
Project Management KPIs
Project management KPIs are highly useful for segmenting overall digital transformation investment by project and examining in greater detail to look at completion rate, budget variance, resource utilization and more.
Here are just a few of the project management KPIs to consider.
Project Success Rate – This measures the percentage of projects that are completed on time and within budget.
In looking at the success rate, you’ll analyze the budget variance of DX projects by looking at how much the actual spend varied from the projected budget, as well as planned work versus budget work.
Project Task Completion Rate – A more granular metric, this KPI measures the percentage of project tasks that are completed on time as a percentage of total project tasks.
Project Management ROI – This measures the overall return on investment from project management activities by looking at the money spent on new digital transformation projects versus profits generated from these activities.
Resource Utilization – This metric digs into how your project resources are being utilized to complete tasks, including allocation of budget to billable time, types of tasks and time to complete, etc.
Organizational Change KPIs
Organization metrics are higher-level KPIs that evaluate the effects of overall cultural change that takes place during digital transformation.
As mentioned before, a company’s cultural shift is often the most challenging part; even more so than the technology that enables these shifts.
Here are a few organization KPIs to monitor.
Data-Driven Decision-Making – What percentage of new business decisions are based on data from new technology and digital channels?
Using data effectively is at the core of effective business transformation, so this metric can help you determine if your investment is truly contributing to business strategy.
New Business Models Adopted – How many new business models has your company adopted to approach new markets and reach new customers?
Business model transformation involves changing the way a business operates, and involves adopting faster, simpler models to engage with customers on new levels.
Departmental Contribution – Digital transformation is a cross-functional concept, often involving multiple departments, including HR, IT, finance, marketing, sales, and company leadership.
By looking at the contribution from each department, you can assess how well transformation initiatives are integrating different departments into the overall mission.
Incentives Linked to Digital Projects – It’s very important to have leadership buy-in when implementing a new digital strategy. And leaders should be focused primarily on how these new technologies will drive value for the company.
By tracking DX-focused incentives, can make sure you are involving leadership at a deeper level.
Business Process KPIs
In addition to organizational KPIs, you’ll also want to monitor how digital changes are improving the efficiency and quality of your business processes.
Here are a few business process KPIs to track during your digital transformation.
Business Process Reliability – As part of the business process management (BPM) model, companies should examine the percentage of results that are delivered on time, on budget, and within requirements.
Business Process Quality -Piggybacking on the reliability metric, the quality KPI should look at the ratio of conforming output to nonconforming output to determine if your processes are both efficient and effective.
Throughput Time – This metric looks at the amount of time it takes to complete a process, from the beginning until it is delivered to the customer.
For example, for manufacturers, this involves tracking the process from materials, through production, and until it reaches the customer.
For services, it may start with a customer service inquiry and end upon resolution and feedback. It may be further broken down by different intervals in the workflow.
First Time Fix Rate (FTFR) – This is a powerful metric that tells you the percentage of times an engineer or contractor is able to fix an issue on their first attempt. This might be for internal purposes or if you are solving customer problems.
Either way, a high FTFR percentage indicates you are reducing downtime, saving costs, and satisfying customers.
Conclusion: The Key Metrics That Drive Digital Transformation
We’ve covered a lot in this article, but it’s still only scratching the surface. The fact is, the right set of KPIs truly depends on several factors, including your company’s stage of digital maturity, company size, budget, objectives, and more.
The metrics that matter are those that help you understand if transformation is truly delivering value for your customers and creating opportunities for your company to become more efficient and adapt to market changes.