Measuring the Success of Business Transformation: What KPIs to Use?

The success of a business transformation is a key factor in the success of any company. But how do you measure the progress of such a process? The answer lies in the right key performance indicators (KPIs). These KPIs can help you track the progress of your digital transformation journey and determine whether or not it is successful. The best KPIs to measure the progress of digital transformation include the number of users in relation to the number of licenses purchased, the breadth and limitations of usability, the number of processes carried out on the new software, productivity indicators, and the amount of new revenues attributed to digital investments.

Companies that are transforming in the upper quartile act quickly and renew frequently. Execution occurs at an equally rapid pace, but each transformation is unique; some, by nature, will take longer. Our findings suggest that successful transformations generally implement initiatives that account for 28% of the total increase in value in the first three months, 57% in the first six months, and 74% in the first 12 months. It's important not to overlook health in search of rapid performance improvement. For more than 15 years, our Organizational Health Index (OHI) has been monitoring health in one hundred countries and more than a thousand companies, aggregating the opinions of millions of employees and managers on management practices that drive results in nine dimensions, including leadership, responsibility, innovation and learning.

Companies with a healthy culture consistently outperform their peers. In fact, publicly traded companies in the upper quartile of the OHI generate three times the total return for shareholders (TRS) obtained by those in the lower quartile. The return on digital investments tells you the relationship between money entered and money withdrawn in relation to your digital transformation. This would compare how much you spent on new technology, training, new hires, and other expenses related to the new technology or processes, and the amount of revenue you've generated since you made the transition. Measuring employee productivity is also important. Before you can start measuring employee productivity, you need to specify what that means.

Do you want to reduce the amount of time an employee spends doing a certain task, or do you want them to be able to complete more tasks in the same period of time? Get clear information about your productivity metrics. Measuring the percentage of your company that uses AI can help you track what stage of your digital transformation journey you are at. However, keep in mind that 100% of your company doesn't need to use AI to be successful; in fact, it might not make any sense in some areas. If you're introducing a new digital technology, you want to know how much revenue those specific components bring to your business. This metric is similar to the return on digital investments, but instead, it specifically analyzes revenues in relation to the new technologies introduced. With a cost-benefit analysis, you can compare the costs and rewards of different situations to determine which ones are most likely to pay off in the long term for your company. Your ROI may seem small in the early stages of the transformation, but long-term measurement can give you a better idea of the success of the initiative. Measuring cloud deployments can help you see how well your cloud data storage is working and whether employees can access the information they need.

As more of your business becomes digital, you'll need to continually assess the risks surrounding your current technology and any new ones you incorporate, especially when it comes to cybersecurity and data privacy. To track the success of this transformation strategy, you must choose metrics that reveal whether you are using data more intelligently or not. Replace slow, error-prone processes in your company with more efficient technology to create more scalable and automated digital workflows. Sustainability is at the heart of PMI's transformation and helps address some of the challenges stemming from the transition while stimulating innovation and better positioning the company for long-term success. Companies that fully implemented these health improvement measures recorded nearly twice as much excess TRS as companies that did not. The relevant KPIs change to fit market conditions and company needs so it's important to have a plan on how to measure progress before starting any transformation process. Measuring cloud deployments, employee productivity metrics, return on digital investments and cost-benefit analysis are all important KPIs for measuring success.

We are aware that business transformation is a very company-specific process which ESG reporting standards do not adequately capture.