Taking a Look at Technology ROI in the Digital Era
For digital transformation leaders, it can be fairly difficult to identify the return on investment (ROI) of digital transformation. Measuring the return on digital transformation is challenging because interactions with customers cannot be quantified using traditional measures. Digital transformation cannot be measured using one metric.
Businesses will need to fully evaluate their business in its entirety and acknowledge the improvements that can be made in workflow, customer experiences, and internal and external processes. It is important to take the right approach when measuring ROI on digital transformation so you can have a better understanding of the efficiencies and effectiveness of your transformation efforts.
Digital Transformation: What are the Metrics?
More businesses are attempting to approach digital transformation in a more disruptive and compelling manner. A union of the following metrics can help scale the transformation:
- Increase in customer experiences, customer retention, customer satisfaction, and new customers
- Increase in sales
- Improvements in process and product quality
Maximizing the ROI of IT spend has generally been centered around cost, quality, and time, known as the “Iron Triangle”. Can you deliver high-quality products and services on time while staying within the budget? If the Chief Technology Officer (CTO) was under a significant amount of pressure to deliver more products and services with limited time or limited finances, the Iron Triangle was the measure that would need to be adjusted.
In today’s IT era – characterized by swift technology shifts and increasing customer expectations -digital excellence is so omnipresent that if you fail to succeed under any of the iron triangle areas, you may find it difficult to recover. Today, the key source of competitive advantage is the customer experience. As IT continues to become, the focus on the customer will make the biggest difference. How can this impact how IT ROI is viewed?
The Customer Experience
There are a few key players behind this major ROI model shift, including the use of technology and increasing expectations from customers. The technology supporting digital excellence is often taken for granted. Cloud-native technologies empower businesses and organizations to build and run scalable applications, but this means it can be easy to extract oneself from the tech pyramid.
As more businesses and organizations sharpen their skills on business logic, customer expectations continue to rise, with consistent, inherent and expanding digital experiences becoming the norm. IT ROI is much more than what is in the past. The focus of an IT department needs to make the transition from focusing on technical outcomes to customer and business outcomes. Customer outcomes and business outcomes will have a major impact on how IT will be measured.
With all the current platforms in place that allow customers to interact with brands, it is essential to assess all the benefits of using technology to improve the overall customer experience. It is essential to key tabs on technological innovations that are becoming impactful at improving the customer experience and try to implement the best strategies that can improve the experience.
Manage Customer-Centric Innovation
If the new source of competitive advantage has become centered around the customer experience, IT ROI will come from frequently delivering outstanding and innovative customer experiences. Your IT department should no longer be viewed as a cost center. IT should be at the forefront and become the main engine of your business or organization’s value.
From a technical standpoint, steps should be taken that will lead to delivering rapid innovation. When it comes to delivering rapid innovation, some metrics will need to be followed, including the following:
- Change failure rate
- MTTR (Mean-time-to-recovery or mean-time-to-restore)
- Release frequency
- Lead time
You have to be able to determine how all users are interacting with your digital services and/or digital products? Where do the problems arise? Where do users become frustrated? After obtaining this relevant information, you will need to take this information and use it as feedback. Rapid innovation and feedback loops are needed to successfully manage customer-centric innovation. If you can make a change in digital features, ROI will be guaranteed.
Linking Digital Outcomes
It is critical to define the right metrics, as well as using timelines for achieving the level of performances you are hoping for, in all aspects of your digital transformation. All metrics should be tangible and quantified, but initiatives that are more innovative and disruptive, your metrics may be more qualitative. It does not matter how you choose to measure your metrics, your main goal should be to ensure your business or organization’s goals are fulfilled.
While you attempt to deliver innovation on a customer centric-level, cost, time, and quality will become even more relevant. One bad customer review can quickly make the rounds on the internet. So, what can you do to balance the increased complexity of innovation? Given the major investments you will make to succeed in the digital era, it is important to maintain the right perspective on how all your investments will fit into your digital outcome.
The Importance Technology Budget Increases
As technology strategies join forces with business strategies, IT’s emphasis on service delivery will make room to focus on value delivery. Maintaining successful business operations remains important, but it will continue to be important for technology teams to work with business teams to create the best value.
Yet the majority of IT departments will invest the majority of their technology budget on business operations and a lesser percentage on creating innovative capabilities. IT budget planning can seem like an enormous task. Business leaders need to set clear standards on all objectives and components with organizational goals. IT budgeting is no longer something that just takes up a line on the financial sheet, it has transformed into a topic that dominates workplace discussions on various aspects, such as the following: security, investing, strategy, etc.
Unfortunately, many businesses and organizations often struggle with IT budgeting and planning because there is not always clear communication between the finance teams and the IT teams. IT leaders need to understand what has an impact on budgeting decisions, including the following:
- The business or organization’s cash flow
- IT spending’s impact on other budgets
- The impact of IT initiatives that have been planned
- The impact of the initiatives on employees, such as their ability to transition into a new system
To make better decisions, IT budgets will need to separate expenses by categories and types and identify specific expenses that relate to technology. It is also important to understand the key factors that can hurt your IT budget, including the following:
- Outdated technology
- An inefficient infrastructure
The rewards of succeeding at digital transformation will certainly be something to celebrate, but your business or organization will only get a complete view of how you are progressing by measuring each step along the way. Your digital ROI framework will provide you with the comprehensive view you will need to deliver the transformation you desire while fulfilling your goals.
Your IT department is a key player in gaining a competitive advantage in your industry, and you have the responsibility of delivering the digital transformation that your current customers will appreciate and your new customers will love. How you measure your ROI should reflect this. For more information on IT ROI in the digital era or if you are looking to introduce a new technology solution in your organization, contact us today at (305) 278-7100.