"Return Of Investment - ROI" on digital transformation journey

2020/02/04 10:13

It's very important for IT leaders to prioritize digital transformation to meet the goals of the company in the new era. This requires automating manual processes or using digital tools to make business operations smoother. According to data from the International Data Corporation (IDC), global spending on digital transformation was estimated at about $1.18 trillion USD in 2019, up 17.9% from 2018.

In a recent survey by Forbes with a group of high-level IT leaders to discuss the implementation of digital solutions, participants had to write down their most pressing issue regarding digital transformation, and over 40% of the content was about estimating the success of digital transformation. Specifically, everyone wants to know: How do you measure the return on investment - ROI of digital transformation?

Although each company will have its own way of measuring ROI, following these steps will help adjust your metrics to align with the goals and activities of your business to make it more reasonable.

Motivation for digital transformation

What do you want to achieve with this digital transformation? Choose one goal: activate transparency, increase employee engagement, increase operational efficiency. Why is this goal important to your business? Will increased operational efficiency free up more time for employees to perform other tasks?

Choose metrics that align with your main motivators

For example, if you are trying to improve the customer experience, you can try tracking and rating the customer service department. Or if you are using a digital workplace to increase efficiency, you can measure the number of applications your employees are using to complete their daily tasks. If employees need to switch between 10 different applications every day, does this affect their level of distraction and create a higher error rate?

Predict unintended consequences

Change always comes with an adaptation process, so be prepared to deal with some hiccups in that change process. For example, if you switch to a new digital toolset, your team may spend more time working online, but it may cause concerns about reduced productivity.

However, this is only a temporary side effect. In a few months, when everyone has learned how to use digital tools more efficiently, you will begin to see a significant improvement in productivity.

Example of ROI in digital transformation

Let's take a simple example of measuring ROI of digital transformation in the human resources department of a large company. Their goal is to automate the leave of absence request process to improve efficiency.

Return on Investment - ROI when implementing digital transformation

Sending leave of absence request via email, tracking process with the HR department, and then receiving approved requests, this old manual process typically takes up 75 working hours per month for an employee. If you apply a digital transformation process, the employee's waiting time will be reduced to only 15 hours per month, saving significant costs for the business. This change may be just one step in the overall digital transformation, but it can clearly be measured.

When it comes to measuring ROI, there is rarely a one-size-fits-all approach, but customization is what makes it most effective. Take time to identify your main motivators for digital transformation and ensure you have the right metrics to evaluate.