How to Measure Digital Transformation: KPIs and Strategies

Learn how to measure digital transformation successfully to deliver change across your business with must-know KPIs and strategies in this complete guide for business leaders!

Over the past ten years, digital transformation has evolved rapidly, reshaping industries, creating entirely new job roles, and helping businesses big and small be innovative.

What was once a paper-and-pen world has flourished into a digitalized environment packed with opportunities at every corner. For teams looking to streamline their operations, stay competitive, and leverage technology, now is the perfect time.

Unfortunately, not every leader knows how to measure digital transformation. It’s not like the Worldwide Web comes with a handy manual outlining how to digitalize business processes, automate mundane tasks, and scale a business.

That would be a game-changer! Until then, we’re here to help with this guide to digital transformation KPIs, key strategies, common challenges, and more. Your one-stop guide to everything measuring digital transformation.

What Does Measuring Digital Transformation Mean?

Measuring digital transformation means tracking, monitoring, and analyzing metrics to understand the value delivered by a digital initiative. It’s a helpful way to assess a company’s efforts to digitally transform things like workforce engagement, innovation development, day-to-day efficiencies, customer experience, and more.

The results of robust digital transformation can be observed in the mighty success of brands you likely know and love! From Netflix to LEGO, Disney to Domino’s, these businesses once implemented digital transformation to move to cloud-based solutions, build apps for autonomy in pizza delivery services, and more.

Each of these brands will still have active digital transformation strategies. How they measure those may differ from their initiatives to grow ten years ago or twenty years ago. However, one thing we can count on is that they know how to measure digital transformation to a tee. And the results are phenomenal.

Why Measure Digital Transformation, Anyway?

In the wise words of Peter Drucker, “You can’t improve what you don’t measure”. Knowing how to measure digital transformation is half the battle. It’s what you do with these findings that matters.

First and foremost, measuring digital transformation efforts allows you to make more informed decisions moving forward. To see what is working, and what is not. What worked five years ago may not benefit your approach today. That’s the nature of digital transformation.

Digitalization also isn’t for the faint-hearted. It can take months or years to transform your operations and future-proof your business in the digital age. By measuring your efforts, not only do you validate your investment, but ensure continuous improvement in the right direction.

Ultimately, knowing how to measure digital transformation is as much about knowing what to do next as it is to review your progress and results. The future moves fast, meaning digital transformation never truly ends.

Another great quote emphasizing the importance of measuring digital transformation is by American Businessman Warren Buffett, who said, “Digital Transformation is a fundamental reality for businesses today.”

Step-by-Step Guide to Measure Digital Transformation

The next few steps are a fail-proof way for you to measure digital transformation. Follow the steps carefully and understand what it takes to go from clueless to seamless management of transformative initiatives!

Step One: Define Your Digital Transformation Goals

Start by identifying what successful digital transformation looks like to you. Every business is different, so this must be unique to your brand, operations, and long-term ambitions.

This might include improving operational efficiencies, increasing employee well-being, enhancing supplier relationships, and delivering better services. Realistically, there are hundreds of various goals you could decide on.

Try to align your digital transformation goals with your business objectives. For instance, if you are actively trying the customer experience, weave this into your digital transformation strategy.

How might this work? Take a look at the example below…

Let’s imagine an eCommerce retail brand called John’s Jackets wants to improve its customer experience in 2025. To do this, they set the business objective of increasing customer retention by 20% by the end of the year.

To align this to their digital transformation, they identify a pain point. Feedback from customers reveals that long wait times for support damages retention. This forms one of their digital transformation goals:

• Implement a sophisticated chatbot to offer customers 24/7 customer support to help improve their retention rate.

To measure this digital transformation goal, John’s Jackets can analyze their Net Promoter Score (NPS) score both before and after implementing the chatbot on their website! This is a key example of how your business can identify digital transformation goals based on existing business objectives.

Step Two: Find Relevant Digital Transformation KPIs

There are many measurable metrics you can employ for your digital transformation strategy. This includes process automation rate, Net Promotor Score, digital adoption, employee productivity, time-to-market rates, and many more!

We’ll cover these in detail later. For now, it’s about identifying metrics that will help you know how to measure digital transformation.

Know your industry

Depending on your industry, the KPIs you use to measure digital transformation may change. For example, a business such as Adidas might focus on retail-based KPIs for its digital initiatives such as Order Fulfilment Time or Automation Rate in Logistics.

However, a private healthcare provider might opt to track Patient Satisfaction Scores or Telemedicine Adoption Rates. By understanding your industry and business inside-out, you can accurately pick the KPIs that work.

Here are some other industries and their common KPIs that help leaders know how to measure digital transformation (at scale):

Manufacturing

• Downtime percentage
• Yield rates
• Overall equipment effectiveness

Education

• Engagement metrics (platform login frequency)
• Student satisfaction
• Course completion rates

Step Three: Set Digital Transformation Benchmarks

You need to know two things; your starting point and what determines success. These benchmarks will help you navigate progress clearly. We recommend collecting baseline data to help you do this.

What is baseline Data?

Baseline data refers to the data you have at present. To know how to measure digital transformation, you want to know how the numbers currently look. It gives you a “before picture” so you can put together a “before-and-after” vision!

Whether you’re collecting customer experience, employee productivity levels, process automation rates, or time-to-market metrics, assess these now, and determine some checkpoints (benchmarks) for making steady progress.

Step Four: Choose an Excellent Analytics Tool

There are many great tools out there for measuring your digital transformation strategy, collecting data, providing actionable insights, and more. The tool you need depends on several factors. Here are some questions to think about:

• What is it I need to track?
• How much data do I truly need to collect?
• How well does a tool integrate with my existing processes?
• Does the tool meet our budget?
• Can we access real-time data? (this is a big win!)

Now that you’re aware of the criteria you should assess different tools against, let’s outline several tools and their categories that can oversee digital initiatives and make it easier for you to know how to measure digital transformation.

• Analytical Platforms: There are many creative analytic tools out there such as Google Analytics, Tableau, and Power BI for visual data analysis.
  
• Customer Relationship Management (CRM): Platforms such as HubSpot and Salesforce help you manage and measure customer-related KPIs
  
• Automation Tools: Tools such as Zapier, Airtable, and UiPath can help you automate and refine operation processes within your business.
  
• Project Management Tools: Platforms like Jira and Trello can help you manage project-based transformation initiatives.
  
• End-to-End Business Transformation: edison365 offers business transformation software. From idea to concept, or plan to project portfolio management, our cutting-edge tools can help you manage, monitor, and master digital initiatives and transformation.

Remember: You can also combine many of these tools above to create a stacked powerhouse of tools to help you know how to measure digital transformation.

Step Five: Always Review Your Digital Transformation KPIs

Things change, and how you monitor your KPIs should too. The truth is that your digital transformation strategy isn’t something you can set and forget. Feedback from your customers and results from your analysis should determine what you track and why you track it.

Review your digital transformation metrics on a monthly or quarterly basis to ensure you’re focused on the right initiatives and steer the ship of transformation toward success! That’s our two cents on how to always measure the right KPIs.

Top 10 Metrics to Measure Digital Transformation

Now let’s get down to business and discover some of the most important metrics for you to track! From operation KPIs to financial insights. These will massively help you know how to measure digital transformation effectively.

Operational Metrics

Below are a few KPIs that can help you know how to measure digital transformation regarding operation efficiencies as part of a wider strategy.

Time-to-market

Time-to-market refers to the time it takes to bring a new product or service from concept to delivery. Leveraging digital tools, businesses can execute time-to-market with agility and accuracy.

Why is this important?

• Provides businesses with an edge over the competition.
• This can result in cost-saving and increased revenue due to shorter timeframes.
• Helps respond to market demands much faster.

Process Automation Rate

Process automation is the percentage of workflows that have been automated within your business, reducing the demand for manual labor. It’s a key metric many businesses strive to improve in the digital age.

Why is this metric important?

• Automating process saves time and resources.
• Improves the accuracy of processes and minimizes human error.
• Teams can focus on results-driven tasks instead.

Digital Tool Utilization

Many tools, platforms, and systems are digitalized, and they can form part of a wider digital transformation strategy. One metric you might choose to measure is the utilization of such tools. This ensures you’re investing in the right tools to make steady progress in your digital initiatives.

Why is this important?

• Highlights which tools are being utilized and engaged with by your team.
• Low utilization could reveal gaps in training or the quality of digital tools.

Employee Metrics

Understanding your employees is important for the success of your business. Here are a few metrics that reflect your employees and can be tied to your digital transformation strategy!

Employee Productivity

Employee productivity determines the progress of different tasks, workflows, and other projects that might make up your digital transformation efforts. Realistically, digital initiatives are only sustainable through employee adoption, making it a worthwhile metric to measure digital transformation.

Why it’s important?

• Increased productivity helps assess the ROI of digital tools.
• Low productivity could indicate inefficiencies with your strategy.

Employee Retention

Employee retention refers to your company’s ability to retain employees during a specific timeframe. It helps evaluate how digital initiatives impact retention and satisfaction. Is transformation moving in a direction that employees can get on board with?

Why it’s important?

• Shows whether things like digital training programs are working
• Higher retention suggests employees are happy with digital transformation.

Bonus Tip: here’s how to measure employee satisfaction:

[Total employees at the start of the set period – the employees who left your company) ÷ Total number of employees at the start of the period] × 100.

Financial Metrics to Measure Digital Transformation

Below are three key financial metrics used in many businesses to evaluate the monetary impact of investing in digital transformation and initiatives.

Return on Investment

Commonly known as ROI, this metric helps you understand the overall profitability of investing in efforts and initiatives related to digital transformation during a set period, compared to before you invested in a strategy.

Why it’s important?

• Offers a vivid picture of whether digital transformation is generating value.
• Justifies future investment in digital transformation initiatives.

Cost-Saving

Are you saving money because of digital transformation? This metric helps measure this with ease the operational expenses both before and after implementing digital initiatives. Who knows, your business might not only be profiting from digital transformation, but directly saving money in other ways!

Why it’s important?

• Highlights the efficiency of digital transformation.
• Shows you where resources are freed up for other tasks and projects.

Revenue from Digital Channels

Revenue from digital channels is a great in knowing how to measure digital transformation. This refers to the revenue generated via digital channels such as eCommerce, apps, or subscriptions that previously didn’t exist.

Why it’s important?

• Indicates how your business is leveraging digital tools for transformation.
• Reveals what digital channels are scalable for huge gains.

Key Challenges of Measuring Business Transformation

Knowing how to measure business transformation doesn’t come without its challenges. Some organizations suffer from resisting change amongst senior team members, while others lack clear goals.

Here are three key challenges, and how you should navigate around them to ensure you’re measuring the right KPIs, and making meaningful progress with your digital initiatives…

Low buy-in among senior team members

Creating a culture of innovation where employees are open to change starts with senior colleagues. People need to be nurtured into a growth and innovative mindset. The perfect environment for transformative success.

Regardless of whether you know how to measure digital transformation or not, the right culture is required for fast adoption and readiness from your business to jump into the deep end with every digital initiative.

We’ve written extensively on other innovation management challenges leaders face. A must-read for anyone trying to shift the workplace culture once and for all!

Unclear Digital Transformation Goals

Setting the right goals is what this guide is all about! If you’ve made it this far, you’re likely safe from this one. However, you’ll be surprised just how many organizations are caught out by setting unclear, confusing goals.

Unfortunately, many businesses skip the goal setting altogether. This results in blind digital transformation, and that’s not good for anyone. By following our step-by-step process earlier in this article, you can set the right goals that align with your business.

Data Silos Causing Confusing Results

What good is knowing how to measure digital transformation when you’re working with data silos? Picture this… You’ve begun implementing your latest digital transformation strategy, just to discover the data you need is isolated to different teams or tools. A big no-no.

Before moving forward with your digital initiatives, be sure to consolidate your data to a single environment (like edison365 for example) where your entire team can access, manage, and refine. This reduces the space for errors and mistakes as you measure digital transformation and make progress with your digital initiatives.

Next Steps to Measuring Digital Transformation

Digital transformation is the next big step for many businesses. Believe it or not, we’re still on the cusp of the digital age. Although it may feel like the tools and tech have been around forever, the truth couldn’t be further from this.

Now, you may be saying, “I already know that, and I’m no stranger to digital initiatives, it’s the 21st century after all!” and we hear you loud and clear. But knowing how to measure digital transformation is a different ball game.

With the tips and techniques outlined in this guide, you can totally revolutionize how you measure your efforts and make the appropriate changes to improve your strategy. If we can leave you with one final thought, here’s our biggest piece of wisdom:

• Find an analytics tool that helps you measure digital transformation.
• Choose the right KPIs for your business and industry.
• Avoid and overcome the common challenges around tracking digital initiatives.