What are the industry standards for digital innovation metrics and KPIs?

1 Why measure digital innovation?

Measuring digital innovation is essential for several reasons. First, it helps you align your digital strategy with your business objectives and customer needs. Second, it enables you to monitor and evaluate your progress and performance against your goals and benchmarks. Third, it provides you with data and insights to inform your decision making and optimize your digital solutions. Fourth, it demonstrates your value proposition and competitive advantage to your stakeholders and customers.

2 What to measure in digital innovation?

There is no one-size-fits-all approach to measuring digital innovation, as different domains and stages may require different metrics and KPIs. However, a general framework to guide your measurement strategy is the balanced scorecard, which consists of four perspectives: financial, customer, internal process, and learning and growth. Each perspective can be linked to specific digital innovation outcomes, such as revenue growth, customer satisfaction, operational efficiency, and organizational agility. Within each perspective, you can select relevant metrics and KPIs that reflect your digital innovation objectives and activities.

3 How to measure digital innovation?

To measure digital innovation effectively, you need to follow some best practices. First, you need to define clear and SMART (specific, measurable, achievable, relevant, and time-bound) goals for your digital innovation initiatives. Second, you need to identify and collect reliable and valid data sources and methods for your metrics and KPIs. Third, you need to analyze and visualize your data in a meaningful and actionable way, using tools such as dashboards, reports, or charts. Fourth, you need to communicate and share your results and insights with your team, management, and customers, using storytelling techniques and feedback loops.

4 Examples of digital innovation metrics and KPIs

To demonstrate how you can use the balanced scorecard framework and best practices to measure digital innovation, here are some examples of metrics and KPIs for different domains and stages. For digital product innovation, you can measure the financial perspective with metrics such as return on investment (ROI), cost per acquisition (CPA), or lifetime value (LTV). The customer perspective can be tracked with metrics such as net promoter score (NPS), customer retention rate, or customer effort score (CES). To measure the internal process perspective, you may track time to market, product quality, or feature usage. And for the learning and growth perspective, employee engagement, innovation culture, or skill development are some of the metrics you can use. For digital service innovation, you can measure the financial perspective with metrics such as revenue per user (RPU), gross margin, or profitability. Customer satisfaction, customer loyalty, or customer lifetime value (CLV) are metrics that can be used to track the customer perspective. Service delivery time, service quality, or service utilization are some of the metrics that can be used to measure the internal process perspective. And employee satisfaction, service innovation capability, or knowledge sharing are good metrics for tracking the learning and growth perspective. Finally, for digital process innovation you can measure the financial perspective with metrics such as cost reduction, revenue increase, or productivity improvement. The customer perspective is trackable with metrics such as customer experience, customer feedback, or customer value. Process efficiency, process effectiveness, or process innovation are some of the metrics that can be used to measure the internal process perspective. And employee empowerment, learning culture, or digital transformation are good choices for tracking the learning and growth perspective.

5 Challenges and pitfalls of measuring digital innovation

Measuring digital innovation comes with its own set of challenges and pitfalls, such as choosing too many or too few metrics and KPIs, focusing on vanity metrics or lagging indicators, neglecting qualitative data or user feedback, failing to align your metrics with your business strategy, and forgetting to review and update your metrics regularly. These issues can lead to confusion, overload, missed opportunities, false success or failure, lack of understanding of customer needs and behaviors, misaligned incentives, and outdated metrics.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?