5 Key Metrics to Measure Digital Initiatives

Depending on where organisations are on their digital journey, some speak of “digital” in terms of digital delivery, while others speak of “digital” more in terms of digital transformation. Either way, all organisations need to ensure that they can clearly measure whether digital initiatives are delivering business value, says Kevin Bloch – former Cisco ANZ Chief Technology Officer and founder of corporate technology advisory firm Bloch Advisory.

Strategising for Digital Success

“The role of the CTO is essentially to mobilise technology to support the business objectives,” Bloch told Orro’s recent ‘Delivering Disruption’ virtual event. “The CTO reports to the CEO, who lives in a macroeconomic environment, so the CEO needs to look at the big picture of what digital is delivering to the business.” This alignment ensures that technology serves the broader strategy rather than operating in a vacuum.

Drawing on the work of McKinsey, Bloch cites five key digital transformation metrics to keep in mind when businesses determine the true value derived from their digital initiatives. Organisations pursuing digitisation need a fully engaged CEO to take charge and drive actual performance gains from digital investment. This avoids the trap of viewing technology solely as a cost centre.

“That means prioritising scalable initiatives capable of substantially improving the organisation’s performance; insisting on fast, minimally viable outcomes that can be improved over time; and, importantly, measuring and tracking the impact and value creation of all digital initiatives,” according to McKinsey. This structured approach allows leaders to pivot quickly while maintaining focus on high-impact outcomes.

1. Return on Investment as a Key Digital Transformation Metric

To maximise returns, McKinsey recommends transforming one business domain at a time and broadening from there for traction and coherence. In this context, “domain” refers to one critical process, function, or customer or employee journey. This method prevents the dilution of resources across too many disparate projects at once.

Transforming domains one by one allows organisations to leverage similar data sets, technology solutions and team members for multiple use cases. This ultimately saves time and expense, to further improve ROI. “There is the need to prioritise bold initiatives for the business, so you can really get a handle on whether those initiatives are making sense or not,” Bloch says.

CEOs should look not only at the value provided by individual digital initiatives, but also at each initiatives’ collective support of strategic organisational goals. These digital transformation metrics provide the clarity needed to scale successful pilots into enterprise-wide standards.

2. Budget Allocation Within Digital Transformation Metrics

Those organisations which only spend a small proportion of their technology budgets on enabling the most strategic, bold digital initiatives are unlikely to maximise return on digital investment. Many legacy organisations are still caught up in overly complex technology stacks, which consume vast amounts of resources. For example, some banks spend 92 per cent of their digital budget on infrastructure and maintenance and only 8 per cent on business improvement.

“That is not sustainable, given the pace of innovation and disruption,” Bloch says. “Companies today should be spending more than 25 per cent on their growth initiatives.” Breaking down legacy technology platforms into a set of microservices, and prioritising areas enabling an organisation to more quickly develop apps and services, is one way for large organisations to tackle this challenge. Tracking digital transformation metrics related to budget split helps identify where maintenance costs are strangling innovation.

3. Time to Market: A Quantitative Digital Transformation Metric

The quick translation of ideas into tools which can be used on the front line is critical in a digital organisation. Delays mean yielding advantage to the competition or, worse, producing tools which are already obsolete. A lack of agile continuous-delivery processes and overly burdensome documentation are often key hurdles. In the modern marketplace, the speed of iteration is a primary competitive advantage.

“Traditional organisations can have a time to market of one to two years, with a release frequency of one to four per year,” Bloch says. “Meanwhile, leading organisations get time to market down to two to six months, with a release frequency of one to four per month.” The difference in operational tempo is night and day. “Looking at world-class organisations, they’re achieving time to market of only eight to 12 weeks – with a release frequency of 10 to 15 per day – which is an amazing difference.” These digital transformation metrics for release frequency are a direct reflection of an organisation’s digital maturity.

4. Aligning Leadership Incentives with Digital Transformation Metrics

Aligning incentives is critical for a CEO who needs to ensure that all organisational leaders are accountable for digital transformation and are driving tangible value. If leadership rewards are tied to legacy performance indicators, the friction against change will remain high. “This is where you need to consider what percentage of your leaders’ incentives are linked to digital,” Bloch says. “It also leads on to thinking more clearly about the exact role of the CTO.” Using specific digital transformation metrics as benchmarks for leadership success ensures technology remains a top-tier priority.

5. Talent Management and Digital Transformation Metrics

The ability to attract, retain and promote exceptional tech talent is arguably the most crucial driver of long-term success. The correct talent strategy can change over time, depending on where an organisation is in its digital journey. In an era of remote work and global competition, talent is more mobile than ever. “This is a massive challenge, with some tech firms now paying anything to get bodies on seats – especially with the borders closed during the pandemic,” Bloch says.

“There is an insatiable demand for talent and it’s a challenge leaders must address if they want to ensure that their digital initiatives are actually delivering business results.” Effective digital transformation metrics should therefore include talent-specific indicators such as technical attrition rates and the speed of internal skill acquisition. Without the right people, even the best metrics will fail to drive progress.