Digital Transformation Objectives: Measuring Digital Transformation Success

Digital transformation has accelerated globally, forcing organizations and employees in every sector to face constant changes. Some organizations successfully deploy digital transformation strategies, improving their customer experience by collecting and analyzing data. By expanding the customer-focused data collection, organizations are also able to deliver innovative business models and move to the next phase of digital transformation by adopting insight and automation focused artificial intelligence/machine learning solutions.

Other organizations, however, face cultural acceptance-related obstacles to digital transformation. This hesitancy can be traced to constantly changing coals, the lack of aligned key performance indicators, and unclear transformation goals. It is also important for individuals to understand the associated changes in job duties, coupled with an intentional investment in building and applying new employee skills.

Embracing failure is common in digital transformation but few have put it into practice. Successful digital transformation allows for mistakes, encourages transparency and supports open communication. The failure of new initiatives due to lack of focus or irrelevance need to be investigated at both team and organization level and promote open discussions to gain insights. This annual survey aims to explore and evaluate candid insights from IT leaders addressing these challenges, and serve as guide to digital transformation.?

The Covid-19 pandemic accelerated digital transformation in many organizations, leading companies to expedite technology initiative, implement changes to processes and reexamine the role of culture in the new business world. The fourth annual digital transformation survey by Harvard Business Review Analytic Services (January 2022) found that 92% of the participating executives from around the world expect digital transformation of their organizations to become more important for business success over the next year. Additionally, amid shifting business goals, companies are found to be prioritizing objectives that deliver business value and evolution, contrary to 2021 business goals, which focused on internal processes.

Despite the shift in business goals, serious challenges preventing organizations from adopting and successfully implementing digital transformation strategies, such as perennial culture, retention and hiring challenges, remain unsolved, and should be prioritized by organizations in 2022 and beyond.

Meanwhile, technologies that streamline processes with the potential to deliver more business value, such as business process automation and artificial intelligence (AI) and machine learning (ML) are prioritized, in accordance with the shift of business goals.

The evolution of digital transformation since 2021, the main challenges faced by companies and how the leading organizations differ, as well as steps businesses can take to identify and address key areas for the year ahead are the main topics explored below.

New Priorities and Challenges Arise Amid Success?

After the pandemic, digital transformation progress characterized many companies, as businesses began to evaluate and assess the impact of their investments and decisions, adjusting their priorities and fine-tuning their strategies. The Harvard Business Review Analytic Services survey indicates that more executives rank their digital transformation efforts in 2021 as being more effective than those of the year prior (38% versus 23%).

As organizations reevaluate their business models, strategies and processes, the new priorities are being reflected in changing digital transformation goals. While internal processes such as productivity and efficiency increase (37%), business continuity and resiliency improvement (32%), and agility (30%) where being prioritized in 2021 in an attempt for organizations to establishing and adjusting to major technological, cultural and process changes, in 2022 organizations are shifting the business goals of their transformation efforts towards enhancing customer satisfaction (32%), analyzing enterprise data to uncover new business and operation insights (33%), and continuing to increase productivity/efficiency (33%).

These findings are consistent with an economy emerging from a period of constrained activity, with organizations having more room to optimize their data strategies, adopt innovation and improve customer experience.?

These business goals, however, are hindered by the digital transformation challenges that still remain. The main challenge reported is embracing digital transformation efforts across an entire organization (46%). In addition, there are personnel challenges both in finding and securing talent for new digital initiatives across industries and in creating and supporting a continuous learning culture. Combined with the difficulty in acquiring necessary resources to effect digital transformation and the unwillingness to pivot from legacy systems towards newer and more relevant ones that meet current needs, organizations risk falling behind their evolving business priorities and losing their competitive edge.?

Revisiting Persistent Cultural Issues

Another area organizations need to reevaluate is that of aligning digital transformation with business objectives and key performance indicators, since without clear alignment, decision making will slow and the value of digital transformation will decline. All these challenges inhibiting the success of digital transformation will need to be addressed by organizations over the next year.

While many organizations are reported to struggle at embracing digital transformation throughout, 46% of those admit it as a challenge, and 37% claim they are tackling it. This discrepancy can be attributed to the stage at which the digital transformation has progressed in organizations. Respondents who were not classified as leaders, however, tend to cite these obstacles at even higher levels, indicating that in many companies, the organizational changes needed for digital transformation are even more significant.

According to the survey, leaders are less likely to indicate that digital transformation across the organization is a challenge, and more likely to indicate “higher” organizational commitment to cultural change. This can be attributed to the fact that leaders are constantly communicating a digital transformation story, compared to regular employees.

Besides defining the organization’s vision, organizations’ leaders aim to inspire and incentivize employee teams to embrace change and adopt the transformation culture. This culture involves failure, and top organizations recognize this element, as digital transformation includes adopting innovation and taking risks.

The survey finds that leaders who rate their organizations high at digital transformation efforts, having progressed on these cultural challenges, have been more successful in modernizing their workspace cultures in 2021 compared to the rest (63% vs 23%).

Tackling Hiring Challenges with Employee Training

An important factor to implement change is having the right people in the right positions. This became clear after the labor shortages of 2021, when a large number of employees reevaluated their careers. This is indicated by the survey, as 43% of respondents recognize the difficulty in finding and securing top talent to support the digital initiatives of organizations as a major digital transformation challenge. However, only 32% of the respondents’ organizations are actively addressing the problem, according to the survey. The reasons many organizations are not addressing this issue is the fact that they have not yet determined what talent they need to support their new technologies and business initiatives. This indicates the effects of improper allocation of resources to the right transformational areas, which is also cited as a top challenge by 43% of the respondents, according to the survey.??

A potential solution to the current hiring challenges is upskilling and internal talent training. However, the survey indicates that upskilling and training is not among the primary business goals for most organizations over the next year among the least-cited priorities (14% of respondents). By prioritizing upskilling and training over the next year, organizations could close skills gaps without needing to contend with a highly competitive talent market. Top organizations are generally committed to training and improving or modernizing employees’ skills sets for the future, which is a separating factor from other organizations and underscores the positive impact this practice has (70% vs 44%),accordingtothesurvey. Whileemployeetrainingisnotatopdigitaltransformationbusinessgoalfor2022, organizations plan to improve employee education (52% of the respondents).

Reassessing hiring strategies and increasing employee education opportunities should be a top priority for organizations in 2022, otherwise competitiveness retention can be jeopardized.?

Measuring Digital Transformation Success

Moving forward, organizations will need to consider how they align digital transformation with business objectives and key performance indicators (KPIs), which is also a major digital transformation challenge (45%), according to the survey.

Many organizations suffer from lack of clarity regarding their business objectives and relevant KPIs, which directly affects the alignment between business goals and technology. Successful organizations, in this respect, align business objectives and KPIs across the entire organization before aligning these with the digital transformation objectives. According to the survey, the top KPIs remain similar over the years, although growth/revenue generation, and profitability fell from 55% to 46% and from 48% to 38% from 2020 to 2021, respectively.

Furthermore, organizations may be focusing on the wrong KPIs, such as operational efficiency, the most-cited KPI (52%), which is a process-oriented benchmark that is deemed unsuitable for companies to gauge their digital transformation progress. On the contrary, the 5th most-cited KPI in the survey, namely employee satisfaction, is a reliable metric organizations should use to measure digital transformation success.

Leading organizations are indeed shown to cite this metric at a higher rate (45% vs 35%). In addition, leaders are more likely to claim that they will be using a wider range of KPIs such as market position versus competitors (42% vs 27%), customer lifetime value(33%vs17%) and customer retention/loyalty(49%vs35%)to measure the success of their digital transformation efforts, which is a common tendency among disruptive organizations, focusing on future customers.?

Technology Priorities Endure

Organizations are expected to continue to invest in technologies that streamline processes and deliver more business value in the next year. According to the survey, 50% of the respondents’ organizations plan to invest in business process automation in 2022, followed by investments in AI and ML technologies (44%).

Labor shortages are partly responsible for investments in business process automation, while shifting business goals is one of the reasons behind investments AI and ML technology, with better analyzing enterprise data to uncover new business and operation insights still being a primary digital transformation goal (2nd in 2022, according to the survey). Leaders also prioritize investments in AI and ML technologies (with 52% vs 42%), according to the survey. Overall, they appear more likely to indicate much higher organizational commitment to technology advancements (38%vs 18%).

While implementing modern technological solutions is critical to the success of digital transformations, organizations should proceed in such investments with caution and a clear strategy for growth, lest they hinder their productivity and efficiency by accumulating technical debt without proper utilization strategies. Thus, the three main criteria investments in new technologies should fulfill are: productivity, improved employee experience, and improved customer experience.?

Moving into the Future

Digital transformation is becoming more critical to the business success of organizations as companies emerge from the constrained business activity of the previous years and transition their business goals from internal, process-driven objectives to goals that deliver more business value and are more customer- and employee-oriented.

The top challenges blocking organizations from achieving more success from their digital transformation efforts need to be addressed in 2022. Thus, organizations will need to confront and actively address cultural challenges preventing digital transformation efforts from being embraced across the entire organization, as well as reevaluate their hiring strategies and support reskilling and upskilling to alleviate current hiring-related challenges. Additionally, organizations should adopt the right technologies with a clear application strategy, and reassess the alignment of their transformation efforts with business objectives and KPIs. Digital transformation for successful companies is an ongoing process, as they constantly move forward into the future.?