Only 47% of organisations have a defined digital transformation plan in place. 52% of enterprise-level organisations are looking to increase their strategic IT budgets to get their own plans in place. If you’re in that 52%, start by building a clear investment case for your transformation initiative. These 5 steps will help you create a realistic ROI model.
Step 1: Understand your digital transformation objectives
To develop a roadmap and define a business case, you need to know what your destination is. Are you looking to digitise data? Integrate touchpoints? Increase operational efficiency? Boost repeat purchases? It’s probably a combination of several such examples. You need to know your objectives in order to understand what financial KPIs should be measured. This framework from PwC highlights (fig.1) several areas to consider for your ROI calculations.
Step 2: Clearly define your cost centres
It is far too easy to assign all the cost of digital transformation to your IT department. After all, you’ll need more tech-savvy staff and additional software and hardware to drive change.
However, it’s important to remember that successful digital transformation must incorporate all areas of the business. For example, consider the additional training call centre staff may need to help customers using your new web portal or app.
Step 3: Take a wide view of measurement
Make sure you’re including all possible impacts on revenue from changes to customer experience, for example:
- Customer churn
- Satisfaction scores
- Repeat purchases
- Referrals
- Increase in customer value (spend)
This gives you a true picture of how your digital transformation initiatives are impacting your customers. It’s also important to allocate a figure to those customer metrics that don’t have an obvious financial number – for example, can you assign a lifetime value to a customer who rates you highly after a second purchase? You can then add this in to predict the impact of improving customer scores across the board.
And don’t forget the impact on staff. Operational costs – such as training, recruitment and even incentive schemes – will affect your bottom line. And improved employee satisfaction and efficiency are key indicators, so should be included in the ROI model where possible.
Step 4: Set realistic timescales and milestones
Over what period are you going to measure the success of each element of your digital transformation? If you’re launching a new app, you’ll see inbound call levels decrease in the first year because customers are better able to self-serve. But with KPIs relating to customer satisfaction, you’ll need to take a longer-term view as people experience the benefits of new digital services and processes.
Step 5: Don’t stop measuring
Don’t fall into the trap of focusing on a snapshot of the business at a particular point in time. Instead, measure continuously, keeping those milestones you defined in mind. This helps you understand how different factors affect your ROI, so you get a more accurate cause-and-effect analysis. It also makes it easy to identify potential issues and address them before they have a detrimental effect.
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