How to focus digital transformation (DX/DT) on what matters? Let’s review some examples of digital transformation strategies, possible performance metrics, and automation ideas beyond large spreadsheets.
Key topics of the article:
Transformation Starts with Strategy and Leadership, not with Technology
Digital transformation is how the organizations call their efforts in implementing digital technologies. In practice, the term might refer to anything “digital,” from improving presence in social media to implementing AI-powered tools or investing in a data-driven culture.
There are many digital tools that promise an increase in performance… Where should the organizations focus their efforts? McKinsey, in their research has defined 21 factors of successful digital transformation.
- Few of those factors refer to the technical side, such as implementing digital tools, modifying operating procedures, or implementing digital self-serve technologies.
- Most of the success factors belong to the overlap of leadership and strategy domains.
On the high level, the goals are:
- Establishing clear priorities,
- Encouraging experiments and collaboration,
- Formulating transformation initiatives.
On the low level, we are talking about:
- KPIs with clear targets, and
- Specific initiatives with deadlines
Using The Balanced Scorecard for Digital Transformation Strategy
Strictly speaking, there is no such thing as a separate digital transformation strategy – there is an overall strategy of an organization that focuses on the “digital” aspect as one of the ways to satisfy customers’ needs and increase employees’ productivity.
The classical K&N Balanced Scorecard does a great job as a strategy execution framework.
The drivers in the context of digital transformation can be:
- The business systems that need to be reinvented ( Internal Business Systems perspective)
- The technologies, skills, and infrastructure needed for digital transformation ( Learning and Growth perspective)
The expected outcomes are:
- Improvements for external and internal customers ( Customer perspective) that lead to
- Better financial performance and/or achieving stakeholders’ interests ( Stakeholders interests or Financial perspective)
Below, we discuss the practical implementation of DX strategy with the Balanced Scorecard framework. We will also discuss how other strategic planning frameworks, like PESTEL or Five Forces, add value in this case.
Practical Implementation for a Digital Transformation Strategy
We started with some general ideas about the success factors of digital transformation, like focusing on strategy, leadership, and culture in the first place.
Now, I’ll show how to convert those ideas into strategy using the Balanced Scorecard framework. Let’s start with the drivers of digital transformation and map them into the Learning and Growth and Internal perspectives.
Learning and Growth Perspective
|Goal L1:||Implement the culture of data-driven decisions|
|Possible risks:||Vanity metrics; manipulation of KPIs|
Learn more about the goal…
|Goal L2:||Implement strategy automation tools|
|Possible risk:||Migration of legacy KPIs from spreadsheets|
Learn more about the goal…
|Goal L3:||Detect new opportunities early|
Learn more about the goal…
In the Internal processes perspective, we’ll align the digital strategy with the efforts of all business units involved.
The goals for this perspective will come from high-level goals of other relevant scorecards. For example, we can align digital transformation with these scorecards.
|Goal I1:||Mitigate data security and data protection risks|
|Possible risk:||The data breaches caused by unknown factors|
|Goal I2:||Improve big data processing performance|
|Possible risk:||Misalignment with business strategy|
|Goal I3:||Keep Remote Team Effective|
|Possible risk:||No connection to the customer value|
If you are using BSC Designer as an automation tool:
- You can align digital transformation strategy with another scorecard by copying and pasting the required goal/indicator between two scorecards.
- Teams responsible for these sub-strategies will be able to define their own indicators and initiatives.
- The automation software will report their performance to the high-level digital transformation scorecard.
As we discussed below, a good strategy is a process, so let’s add an additional goal to the Internal perspective formulated as:
Learn more about this goal.Customer PerspectiveFor the Customer perspective, the goals will be unique for the organization. The goals in this perspective should focus on the needs of:
- Internal (your team) and
- External (end users of the product) customers.
That’s where you will need your customer engagement and product complexity metrics that we discussed in the cases below.
|Goal I4:||Implement regular strategy meetings|
|Metric:||The goal can be monitored by Monthly strategy meeting KPI that can be adjusted to monthly reporting interval and binary (yes/no) measurement unit.|
|Possible risk:||Focusing too much on the technology|
Metric 2: Product complexity for customers, %
|Goal C1:||Satisfy the needs of internal and external customers|
|Metric 1:||Customer engagement, %|
Finance or Stakeholder’s Perspective
In this perspective, formulate the results for the stakeholders that you plan to achieve.
- Commercial organizations will have certain financial goals like cost avoidance or increase of revenue.
- Nonprofit organizations could focus on the needs of their stakeholders and sponsors.
For this example, we can formulate the goal as:
|Goal F1:||Financial sustainability|
|Metric 1||Cost avoidance achieved, $|
|Metric 2||Relevant revenue increase, $|
|Metric 3||Annual technology budget, $|
Explanation of Goals and Strategies
Let’s discuss in detail some of the goals suggested for the scorecard.
Implement The Culture of Data-Driven Decisions [Learning and Growth Perspective]
“Digital” implies that the decisions being made are based on some data. In other words, it’s not just:
- “We need to implement an AI-powered chatbot”
It’s implementing (see a case 5 below) a chat bot
- to answer 70% of the basic questions
- to cut the costs of the first-level support by 30%
To formulate an initiative for this example, your team will need to have a lot of data ready for analysis:
- the type and percentage of the frequently asked questions,
- the costs of first-line support,
- the readiness of self-service on the website.
Make sure the culture of data driven decisions is effectively implemented in your organization, and your team is trained to look for the right data:
- Start with the discussion of the difference between the leading and lagging indicators.
- Use the prioritization frameworks.
Data-driven culture doesn’t mean having many KPIs for all possible goals, if that’s your case, you’re probably facing some kind of KPIs misuse. Start with a few important metrics that resonate with the ambitious goals of your organization.
Detect New Opportunities Early with PESTEL, Five Forces and VRIO Analysis [Learning and Growth Perspective]
Digital transformation is about detecting relevant challenges early. These days, most of the challenges come in a “digital” form – the cyber security risks, remote work, new regulations on managing personal data.
A regular PESTEL analysis helps to find those opportunities and convert them into an actionable strategy.
In the beginning, I mentioned that the digital strategy should be focused on customer needs in the first place. At the same time, to solve those needs, your team needs to be aware of existing technologies and test new ideas regularly. That’s where the regular PESTEL analysis and disciplined approach to innovations help.
The focus of the transformation also depends on the competitive landscape; like in the case with MSC Cruceros, the early adoption of the new technologies moved them one step ahead of the competitors. In this case, Porter’s Five Forces framework and VRIO analysis will be of great help.
Implement Strategy Automation Tools: How to Digitalise a Strategy Itself? [Learning and Growth Perspective]
It would be paradoxical to plan digital transformation using electronic spreadsheets. Yes, they look like a digital tool, probably suitable for prototyping but not applicable for scaling strategic planning.
A strategy can be anything but not a boring 100+ document or a bulk of KPIs in a large spreadsheet document or a huge slide deck. At least the core part of a strategy should be a one-page strategy map with few supporting documents.
Professional strategy planning tools like our BSC Designer will provide an organization with a solid “digital” base for further strategy development. Here is how it can help:
- Keeping everything – KPIs, initiatives, strategy maps, dashboards – in digital format
- Accountability and traceability are built in – there is flexible access rights control, audit track functionality on the level of KPIs and scorecards
- Automatic reporting for the stakeholders
- Ready-to-use templates for strategy scorecards (like the ones we discuss below for the Internal perspective)
- The strategy scorecards can be easily aligned (cascaded) with an overall strategy
Align Transformation Strategy Across the Organization: Ready to Use Strategy Templates [Internal Perspective]
Any strategy is unique, but with those templates, you can get started faster. Here are some templates that will help to focus digital transformation efforts:
- Cybersecurity scorecard to quantify digital risks and formulate a response strategy
- Social media strategy to measure and improve customer engagement
- Search engines optimization to focus content strategy
- Brand KPIs to quantify brand potential beyond basic awareness metric
- Innovations strategy to make sure that there is a disciplined approach for analyzing new ideas
- Remote team scorecard to better measure the performance of the distributed team
- Training KPIs to quantify training results according to Kirkpatrick’s 4-level model
- Customer service scorecard to design the transformation of the company’s help desk
- KPIs for IT and big data to make sure the technologies support the transformation strategy
Aligning an additional scorecard with an overall scorecard is as easy as copying and pasting the relevant indicator/goal between two scorecards. We have an onboarding tutorial where we give some specific guidance.
Strategy as a Process – Strategy Meetings [Internal Perspective]
What’s the difference between a bad strategy and a good strategy?
- Bad strategy is a document that is created and then reviewed only at the annual meetings.
- Good strategy implies a repetitive process that starts with an analysis of the challenges and ends with a learning loop.
Such strategy meetings require certain discipline and automation tools. In the previous article, we shared our approach to strategy meetings for a distributed team.
Examples of Digital Transformation Focused on Customer Experience
In this part, I share some cases of digital transformation. The idea is not to talk about some impressive technologies but to master the skill of finding the alignment (quantified by metrics) between the transformation efforts and solving customer needs.
- Case 1. Using a Smartphone App to Optimize Interaction with Guests – Bahia Principe
- Case 2. Overcoming Barriers of Voice Assistant – Zoe at MSC Cruceros
- Case 3. Transformation vs. Building From Scratch – Fintech
- Case 4. Transformation of Communication Channel – Clinical Analysis Laboratory
- Case 5. Strategy is Choosing What Not To Do – Our Case
- Case 6. Digital Transformation Should Reduce Complexity for Customers
- Case 7. Gap Analysis – Before/After Digital Transformation
Case 1. Using a Smartphone App to Optimize Interaction with Guests – Bahia Principe
Bahia Principe is a chain of resorts managed and owned by the Spain-based Piñero group. Their smartphone app speeds up check-in time significantly – guests can upload the photos of their passports, and the system recognizes necessary data; once in a hotel, only legal verification of the guests is required and takes less than a minute. The app also manages the booking of the hotel’s restaurants – less stress for the guests and fewer things to manage for a concierge service.
- Lagging metric: Check-in time, minutes.
- Lagging metric: The average number of guest-concierge iterations.
Case 2. Overcoming Barriers of Voice Assistant – Zoe at MSC Cruceros
Another example is Swiss-Italian company MSC Cruceros and their voice assistant called Zoe. The technology is new, and there are still certain barriers to overcome. The first implementation (I tried it in December 2019) was far from being perfect. The voice assistant was a physical device that occupied valuable space on the cabin’s table and was not easy to use even for an IT savvy person.
The good thing is that MSC Cruceros headed towards this digital transformation before COVID-19, so they were one step ahead of the competitors who had to invest in digital tools as part of a COVID response strategy in a more urgent manner.
The possible metrics for the management:
- Leading: Number of key functions that can be automated via voice assistant
- Leading: Potential decrease of costs by serving guests via assistant, $ (to justify future development)
- Lagging: % of guests who unlocked the key function of a digital assistant (e.g. used it beyond basic curiosity tries)
Case 3. Transformation vs. Building From Scratch – Fintech
Before, we discussed how the fintechs are winning customers of the classical retail banks.
While classical banks have to think in the context of digital transformation, fintech startups build the required digital platform from scratch.
- How does it look in practice?
I experienced this using a card issued by London-based fintech company Wise during our last trip to the Dominican Republic. The service provided competitive exchange rates for paying in Dominican peso and for ATM withdrawals. The app, the balance top-up, even managing a chargeback request, was just a few clicks away. Excellent customer experience!
In this case, the customer’s perception of the service could be quantified by:
- Leading: Pricing transparency, %
- Lagging: Cost avoidance, $
These are exactly the metrics that the service promotes to their customers via app and emails sent after a transaction.
Compare this to the experience with the cards of some classical Spanish banks that simply failed to work or added significant commission on non-Euro payments…
Case 4. Transformation of Communication Channel – Clinical Analysis Laboratory
In some cases, digital transformation is all about the communication channels used.
To fly back home in January 2022, I had to do a PCR test. It was interesting to see how the local laboratories approached digital transformation.
An established lab did not do really well. They offered a fast turnaround (up to 18 hours), but the appointments were accepted via the always busy phone line.
Hotels offered promised results in 24-48 hours (would not work for my flight). There was a possibility of scheduling an appointment via smartphone for a specific date and time, but they warned that the waiting time might be up to 1 hour.
The offer of a mobile lab was something different. The communications were via Whatsapp; to take the probe, they came directly to the hotel’s room and accepted card payment. They had few physical labs in the country; their focus was on mobile teams.
What would be the possible metrics to use in these cases?
- A common metric: call to appointment conversion rate, %.
- For the hotel: % of travelers who did a probe somewhere else.
- Mobile lab could track % of no shows, and if high, consider implementing online payment. A general number of returning problems and other quality metrics would also help to find the weak spots of the service.
Case 5. Strategy is Choosing What Not To Do – Our Case
As Michael Porter said – “the essence of strategy is to choose what not to do.” The digital transformation strategy is not an exception. For example, at BSC Designer, we chose not to implement an AI-powered chatbot on our website.
It was not clear if an AI chatbot would really help our customers, so we decided to try its best possible version – a live chat with a real person. We used the excellent JivoChat platform for this experiment, and it helped us get an idea about what our users are looking for.
Long story short, it appeared that most of our target audience needed quick guidance for the software, e.g., helping to get started with a scorecard and adjusting some KPIs. The human operator was able to solve such problems, but it was not something that a neural network could be trained for. The experiment helped us improve the software, it also appeared that some pre-recorded onboarding videos worked better than live chat.
We did not implement an AI-powered chatbot on our website; instead, we found an even better way to solve our users’ challenges.
The metrics we were looking at in this case were:
- Time to resolve customer’s challenge, hours
- % of customers who used self-service – we compared a number of certain types of questions before and after implementing onboarding tutorials
Case 6. Digital Transformation Should Reduce Complexity for Customers
As an early adopter of a platform to hire freelancers, I saw it changing from a minimalistic product to a well-designed service. Unfortunately, its latest version is overloaded with “digital” features:
- Annoying pop-up dialogs
- Long feedback forms
- Social sharing buttons all over the interface
It looks like they are moving in the wrong way… More features don’t always result in a better user experience.
To detect such cases early, have complexity metrics on your scorecard. Do you want an example of a complexity metric? Look at the typical customer’s path and quantify the interactions needed.
For example, in this case, the complexity metric could be as simple as the number of clicks or time needed to place a new order.
The complexity is a tricky metric – it depends on the stakeholders we are looking at. Our goal is to decrease the complexity for the customers (new and existing) by optimizing processes and product (removing complexity) or increasing the internal complexity.
Case 7. Gap Analysis – Before/After Digital Transformation
I have two Internet lines for different locations and wanted to update to a better service plan. A few years ago, a similar change took a 15-minute phone call.
I checked out the Internet provider’s website, who were proudly offering a digital (WhatsApp chat) way to contact them. The change request was formulated with all necessary details. A response was quick, the operator confirmed a few things and insisted that the free visit of a specialists was required. Wasn’t a good thing during Covid-19 time. We exchanged a few more messages, but it seemed like there was no option for avoiding the visit… When the Internet specialist came, he was not sure what he was supposed to do, as there was no need for his visit… It was just the beginning of the story, but let me get to the end:
A simple operation that required a 15-minute call before now took 2 visits of specialists, 3 calls from the Internet company, and 4 WhatsApp chats.
In a few days, I got a survey email with a single question: “How satisfied are you with the Internet service that you recently contracted?” Are you kidding? I’m giving 5 stars as I’m completely happy to finally have faster Internet!
Let’s look at this case from the business perspective:
- Surveys are good to learn what customers think, but need to be done in the right way
- % of returning problems metric is a must for the customer service scorecard
- Gap analysis of performance before/after transformation would be the simplest way to detect the failures of digital transformation
Successful digital transformations should give priority to customer needs, not the technology. We discussed how a classical K&N Balanced Scorecard framework helps formulate and implement a transformation strategy.
To prepare your team for the transformation journey:
- Implement the culture of data-driven decisions
- Find your user engagement and product complexity metrics
- Detect new challenges and emerging technologies with regular PESTEL analysis
Start digital transformation with a proper toolkit for your strategy:
- Having many KPIs in a spreadsheet software works on the prototype stage only
- Strategy is a repetitive process – use automation tools to support your regular strategy meetings
- Try our BSC Designer software for automation of your strategic planning process
Describe and implement digital transformation strategy:
- Convert insights into strategy using the Balanced Scorecard framework
- Create strategy scorecards for cybersecurity, social media presence, remote work, etc — use other templates available in BSC Designer to get started faster
- Align high-level goals from specific scorecards with an overall transformation strategy
- Access templates. Sign-up with a free plan at BSC Designer for immediate access to 31 scorecard templates, including Digital Transformation Scorecard discussed in this article.
- Master skills. Check out free video tutorial for the Balanced Scorecard. Master your strategy planning and execution skills with Strategy Execution training.
- Automate. Learn what Balanced Scorecard software is and how it can make your life easier by automating strategy execution, KPIs, and strategy maps.
Strategy Map Wizard – Balanced Scorecard in 6 Minutes
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More About Strategic Planning
- ^ “Unlocking success in digital transformations,” McKinsey & Company, 2018
- ^ “Comparison of Strategic Planning Models and Frameworks,” Aleksey Savkin, BSC Designer, 2020
- ^ How do you measure success in digital? Five metrics for CEOs, Matt Fitzpatrick and Kurt Strovink, McKinsey & Company, 2021
- ^ “Digital Transformation Is Not About Technology,” Behnam Tabrizi, Ed Lam, Kirk Girard, Vernon Irvin, Harvard Business Review, 2019