Measuring ROI for digital transformation is problematic. Traditional approaches do not work on projects that undergo continuous modification. In this article at the Enterprisers Project, Stephanie Overby discusses best practices to get better ROIs for digital transformation efforts.
Quantifying Digital Transformation
Pace Harmon director Brian Caplan observes that you cannot just introduce new technology in the company. You must make the efforts accountable by mapping with KPIs. As it has been some years since companies have first implemented digital transformation, the market has evolved ROI-generating best practices.
Everest Group partner Cecilia Edwards advises that you should focus more on the portfolio than the projects. This will stop you from judging the entire picture from a single project failure and improve your risk appetite eventually. Projects with higher risk probability can also give your higher returns. If all the projects in your digital transformation portfolio are working fine, they might not be innovative enough.
- Set some initial goals. ISG partner Prashant Kelker notes that your digital transformation efforts will turn valuable only when there is an outcome. You must scale metrics as you progress.
- Divide the vision into smaller plans and set up short-term metrics. Achieving these metrics will assure that you are getting value from the digital transformation efforts earlier. Pace Harmon managing director Andrew Alpert opines that these efforts should be measured holistically to understand ROI generation.
- As per Edwards, calculate three types of impacts—strategic, operational, and cost. The strategic impact includes revenue growth, lifetime customer value, and time to market, etc. Meanwhile, the operational impacts are productivity improvements, scale, operational efficiencies, and so on.
- Though technology projects go for cost efficiency, do not rule out operational and strategic impacts. Measuring all three would give better returns. Caplan reminds that IT is undergoing digital transformation too. Identifying new areas of improvement would further generate new business opportunities for your vendors.
- Review project performance periodically. If it is not drawing any lesson or not adding much to the current pursuit, Edwards recommends terminating it.
To view the original article in full, visit the following link: https://enterprisersproject.com/article/2019/2/digital-transformation-roi-how-to-do-investment-checks