Ask a CIO how he or she quantifies the impact of their digital transformations and you may get a funny look, like you told tasteless joke. The reality is that many CIOs don't have metrics for gauging the success of digital projects, such as new ecommerce platforms, mobile apps and chatbots. But CIOs who fail to quantify these initiatives may find themselves outflanked by nimbler rivals, analysts say.
To score the value of their transformation efforts, CIOs must use digital key performance indicators (KPIs) as their "enterprise compass,” Peter Sondergaard, Gartner's global head of research said at the company's Gartner Symposium/ITxpo 2017 this October. But there's a chicken-egg quandary at work: You can't measure what you haven’t defined.
“The biggest limitation [of digital KPIs] is the lack of a clearly defined digital ambition," or strategy, Gartner analyst Paul Proctor told CIO.com recently. "Having a clear idea of your digital ambition will give you some ideas of what you should be measuring to measure your progress. You can't measure something you don’t have a measuring stick for."
What are digital KPIs?
Digital KPIs are measurable values for evaluating the performance of digital business initiatives. Digital KPIs can help an organization ascertain how far it has progressed on its digital strategy and how well it is improving its digital business outcomes.
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Companies have traditionally measured business performance based on net profit, earnings per share and other Wall Street metrics — numbers that in turn are supported by more specific KPIs such as inventory turns, production quotas and customer satisfaction. Digital KPIs, on the other hand, are more difficult to define, as businesses across different sectors have different ways to quantify their digital initiatives.
Digital KPI examples
For some industries, a key digital KPI may be the percentage of revenue generated through digital channels such as the web and mobile apps. A life insurance company may measure the percentage of sales made through self-service digital channels, while a property-and-casualty insurer may measure the percentage of claims submitted through digital channels.
DBS CIO David Gledhill created instrumentation and metrics to track operational efficiency and digital engagement for the bank's customers. “Digital engagement drives business and revenue volumes and so just the metric of how many times a customer touches you is important,” Gledhill told CIO.com earlier this year.