Digital business KPIs must serve as leading indicators of enterprise performance, drive decisions and show benefits.
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CIOs: Use the Right KPIs to Measure Digital Performance
Here’s how CIOs can measure digital performance in terms of business success
The Gartner Digital Execution Scorecard™ (DES) benchmarks data on strategic digital KPIs across hundreds of global organizations.
DES shows that top performers (those that outperform others in generating new revenue) significantly excel against certain metrics.
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The metrics at which top performers excel
How the metrics align to who does the work, how work is done and what is worked on
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Why and how CIOs must measure digital performance
Measuring digital performance effectively, including benchmarking against peers, is critical for gauging digital-business success, plotting improvements and telling a good IT value story.
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Value-Based Digital KPIs
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CIOs need two types of digital-business metrics to assess digital success
While most CIOs do a good job at tracking project-level KPIs (measuring on-time, on-budget, within-scope, risk profile and so on) for their digital initiatives, many struggle to talk about any value being accrued beyond projects being delivered on time and on budget.
CIOs need digital business KPIs to serve as leading indicators of enterprise performance to drive executive decisions and explain the benefits of digital investment. KPIs specific to digital business transformation efforts are key to measuring the business value of IT and telling a good IT value story.
CIOs need two separate sets of digital business KPIs to assess:
Current business model — progress and goals in digitalizing existing domains, such as sales, marketing, operations, supply chain, product/services and customer service.
New digital business models — progress and opportunity of pursuing net new revenue sources. These reflect growth, revenue, market share and margin metrics that are clearly differentiated from nondigital sources and emphasize financial and market share metrics, not operational metrics, and indicate future market share so the magnitude of the opportunity can be properly quantified.
Customizing digital business metrics
Since successful digital-transformation metrics tie closely to business outcomes, no generic list works for every enterprise. Gartner recommends the following construct to create digital-business KPIs for your situation, by incorporating these five key elements:
What is being measured? Example: Percentage of interactions that go through a digital channel.
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Where are we today? Example: 27% (of interactions currently go through digital channel).
What is our target goal? Example: 60% (of interactions).
What is our desired business outcome/benefit? Example: Reduce costs and improve customer experience.
What is our balance point? The point beyond which diminishing returns are expected to begin. Example: Pushing all customer interactions through digital channels will begin to lower customer satisfaction.
To create compelling digital KPIs, focus on business outcomes
To ensure that senior decision makers value IT as a business partner, CIOs must create KPIs and metrics that reflect company strategy, drive desired business results and inform stakeholder decision making.
An effective KPI exhibits four key characteristics:
Establishes a clearly defined and defensible causal relationship to a business outcome. This is probably the most difficult characteristic to successfully achieve, but it’s also the most important. Begin by understanding our role in the operational value stream.
Acts as a leading indicator of a business outcome — to ensure the focus stays on where the business is going and not where it has been.
Addresses a specific, defined audience. There is no single dashboard that will please everyone.
Flags a status change (green to yellow to red), which drives action.
Develop digital-performance metrics for the non-IT business partner
It is not enough for CIOs to present dashboards or KPIs to stakeholders. Effective digital CIOs learn to speak the languages of IT, finance and business outcomes, and contextualize and communicate metrics for a specific audience.
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The change from traditional IT operational metrics to “business metrics” is probably more important to executive stakeholders than IT’s operational performance as a stand-alone report.
Also note that in many instances, the “digital” metric will be related to a digital channel that duplicates a “manual” or “legacy” channel in the areas of customer relationship management, sales, marketing and other business operations.
Access a comprehensive set of digital strategy benchmarks to accelerate decision making and drive execution
The Gartner Digital Execution Scorecard™ provides CIOs and top technology executives a comprehensive set of digital strategy benchmarks to accelerate decision-making and drive execution.
Benchmark performance
CIOs and technology executives use the assessment results to compare their organizations against peers, competitors and top digital performers across various industries.
Gain competitive insights
Gartner Digital Execution Scorecard™ offers over 15 industries and subindustries to compare to your own organization’s progress.
Assess progress online with easy updates
Can complete the assessment as often as needed to communicate progress against digital priorities across organizations.
Empowering Sara Assicurazioni’s Digital Transformation
Find out how Gartner helped this IT leader identify the right suppliers to ensure optimal performance and make informed decisions based on real information rather than emotional factors.
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