Digital transformation is a term that has been around for some time, but it is only in the last 24-months that it has become something that business leaders have started paying more attention to. Digital transformation is an important shift of organisational activities, processes, competencies and models in order to maximise the opportunities presented by new digital technologies.
Digital transformation isn’t simply about enhancing traditional approaches to whatever your organisation does, but about using digital technology to find new, innovative and creative ways of approaching, accomplishing, and accelerating your organisation’s activities, processes, and competencies. In a business context, it’s about finding and using new – digital – ways to grow and strengthen profitability; whether this be through digital extensions of product lines, or better use of omni-channel commerce.
Even though your organisation may already be paying attention to digital transformation, and may even have a digital transformation strategy in place, it is still possible that you aren’t properly measuring your organisation’s digital strength. Traditional metrics are just that: traditional. Long-standing methods of monitoring and measuring your organisation’s performance are seldom adjusted to take into account the impact of digital. This leaves your organisation vulnerable to more agile competitors and disruptors.
There are three key digital metrics that aren’t commonly monitored, but should be since they are strong predictors of revenue growth. They are:
- Digital magnitude – essentially the size of your digital footprint and impact. It is the sum total of your website visits, page views, social media visits, views, shares, etc. However, you also need to calculate and monitor the digital magnitude of your competitors in order to create a peer set. You want to be able to understand your digital magnitude in relation to your competitors, and competitor peer set.
- Digital share – the competitor peer set mentioned in the previous point is also a crucial component of your digital share. Your digital share is calculated by dividing your organisation’s digital magnitude by the sum of your competitor’s peer set magnitude. The result is then compared to your organisation’s market share.
- Digital momentum – is your digital strength increasing or decreasing in relation to your competitors, and how quickly is this happening? Calculate this by tracking customer interactions – likes, followers, etc. – for both your organisation, and your competitors. Use a variety of measures to monitor this – from month-to-month, to year-on-year – so that it is easier to discount seasonal changes in momentum.
Digital transformation is not simply about creating a website, or having a social media presence. As noted earlier, it is about using digital technology to transform every aspect of your business, while also identifying new opportunities presented by digital technology. Digital transformation is not a once-off project that you can abandon once you’ve achieved your objectives. It requires a strategy that is set up to be sustainable, and adaptable, with a non-traditional approach to monitoring metrics. If you aren’t monitoring your digital growth, you will never know if your business is gaining digital share, which could ultimately affect your overall market share. Your market will change, and your audience will change, but there will always be agile competitors and disruptors vying for a share.
An IDC survey shows a connection between higher revenue growth and a positive attitude toward digital technology adoption.
And while many of us are quite familiar with how largely digital brands such as Amazon, Netflix, Uber, and Lyft are disrupting industries, some surprising insights into the impact of digital transformation can be found in the airline industry. Southwest Airlines holds 13 percent of the US market among all airlines, but has a 22 percent digital share of the US airline industry. This suggests that Southwest Airlines is poised to start eating into the market share held by larger airlines. And in Europe, EasyJet is seen as a leader in digital innovation, helping it to grow customer loyalty and revenue, while also impacting on cost efficiencies.
What does this mean for you and your business? It implies that you should be looking at the following:
- Are you tracking the digital metrics highlighted above? Work with a digital transformation agency to put the metrics in place, help measure them on an ongoing basis, and to help you understand how to grow each of them.
- Do any of your internal reports, proposals, and projects take into account the cost of doing nothing in terms of digital transformation? Digital share is measured against market share, so you need to consider whether a loss of market share is being driven by a lack of commitment to digital.
- Are you trying to monetise your investment in digital too soon? The one thing most tech startups have in common is their initial pursuit of scale and strength, ahead of profitability. Facebook did not start monetising their platform immediately, and while Amazon and Netflix have always generated revenue, they are both still heavily focused on scale and strength, not profit.
Finally, by not managing your business against digital strength, you are not managing your business for future growth and sustainability. As pointed out by the IDC survey, digital transformation is continual; making digital strength something that has to be maintained, rather than achieved.