Digital Performance Measurement Pitfalls

To avoid varying performance measurement pitfalls, ensure that digital performance measures are both qualitative and quantitative.

Digital transformation is a journey, from digital strategy crafting to organizational structure tuning, it has to permeate into the business vision, strategy, mindset, culture, communication, action, process & capability, and last, but not least, performance measurement and management. There are a lot of additional parameters, correlations, and context that should be taken into account as digital transformation is dynamic, complex and holistic. How to avoid performance measurement pitfalls and make the objective assessment of digital organizational maturity?

• Only measure the part of the story from the finance perspective: Keep in mind performance measures are stories, not just data. Historically, performance measurement systems for most businesses have been financing driven. However, in many business situations, financial indicators only cover part of the story. The holistic performance measurement approach is fundamental to avoid "a one size fits all solution." It's fair to say any organization that didn't have a systematic approach to measurement and analysis at both the strategic level and operational level has a giant blind spot that is impairing their performance. In addition to having some kind of basic measurement in each level, the holistic approach from top down is excellent to manage business performance systematically. But the tactical level of measures has to be in alignment with the business goals to present multidimensional business value. The ultimate goal of performance management is to implement business strategy effectively through well defining the right set of measures at both strategic and tactical level, to make a holistic assessment via telling the full story objectively. Even if you choose the right KPIs, you must change them from time to time accordingly. Otherwise, your business is going to be driven by that specific set of KPI. You are going to focus on them only, but ignoring the bigger picture of the dynamic business reality.

• Assume the collective functional performance is equal to the sum of pieces - the individual’s performance, or unit performance, which is not always the case: There’re always two sides of measurement. The measures to motivate teams to achieve more and the measures to distract management from the ultimate business goals. The performance measurement setting should focus on achieving the ultimate goals of the organization as a whole, not just the individual or the team’s performance. Performance management, when used in an individual context, tends to focus on all that is good, that has been achieved by the individual. It is rare that an individual emphasizes what they haven't achieved. When the managers changed the focus of the organization after poor company results. They asked people to explain why if the overall performance was so good, was the company failing? Top executives asked the managers to start explaining what they had not achieved and why? Because often PEOPLE DO WHAT YOU INSPECT, NOT WHAT YOU EXPECT! Don’t just scratch the surface to manage the numbers, always understand the whole story behind the scene, and ensure the business as the whole is superior to the sum of pieces. So, the measurement and incentive should serve the ultimate business goals. Celebrating success is important, but understanding what’s blocking overall business achievements, targets and performance are paramount, in order to make a leap of digital transformation.

• Wrong selection of key performance setting could get the devastating effect to the business: The most dangerous part of performance measurement is when performance system is connected with the motivation system on an operational level, but disconnected from the strategy management. Evaluate the potential risks from performance measurement setting. The one way to find out that the performance measurement setting is ineffective is by looking at the behavior and culture the KPI is driving. If behavior and culture are off, and politics is becoming more and more dominant, then you know that performance indicators are perhaps just not the right one to achieve business effectiveness. Build an intuitive dashboard to monitor the performance via better visualization. Always attempt to identify areas in which measurable improvements can be realized, providing demonstrable value is essential, in some instances, these areas have been low-hanging fruit. The organization performance management dashboard usually includes:

(1) Well selected metrics and performance measures

(2) The organizational P&L

(3) Employee Turnover/ Attrition percentage

(4) Key challenges and relevant information

(5) Top accomplishments for strategy execution

To avoid varying performance measurement pitfalls, ensure that digital performance measures are both qualitative and quantitative, and implement whatever mechanisms you need to be able to gather the relevant information. Your measures should cover all areas that contribute to business success. Hence, don’t just play the number game, but connect the contextual dots and focus on the overall business objectives and strategic goals.

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The Monthly “Thinkingaire” Book Tuning: The Digital Leadership Mindsets 2017

Leadership is the state of the mind.

With the increasing speed of change in the hyperconnected digital ecosystem, some industrial mindsets with “status quo” types of thinking, authoritarian attitude, and bureaucratic decision-make, are outdated, turn to be a "dragger" of the business innovation and a laggard of the digital paradigm shift. But how to identify the authentic digital leaders who can bridge the perception gaps, and how to select the right people with the RIGHT MINDSET, capabilities, and skills to the right position for leading forward and accelerating digital transformation?

The Digital Leadership Mindsets

Leadership is a Mindset Leadership is about CHANGE. It is a basic human ability to inspire self and others to look beyond limitations and make continuous improvement. This ability becomes a capability if we constantly nurture our basic human instincts of HUMILITY, CURIOSITY, and CREATIVITY. Fundamentally, is leadership an action or a mindset? Is it more about today or the future?  What are you and your organization doing to learn and improve leadership capabilities?  

A Balanced Mind with Emotional Brilliance? We have come to this lovely beautiful planet, Being a human being is great. We can imagine, we can create and we can appreciate many things. We have so many faculties. It is a rainbow, full of colors and fragrances. However, the world is far away from perfect, and most of the problems are caused by miscommunication, poor decision making, or dig deeper, the unbalanced mindsets lack of Emotional Intelligence. So what’s Emotional Intelligence, and how to cultivate a balanced mind with emotional brilliance?

A Maturity Mind What is maturity basically? Is it a perception depending on our understanding? Or is there any scientific attribute which decides maturity level? Is it possible to develop maturity? Will it come automatically through the experience and people or is it gained over a period of time? Is it always true when you get older, you get more mature? How to decide a person's maturity level? It is subjective or is there any objective standard?.

An Intellectual Mind Intellectual as an ADJECTIVE is about “possessing or showing intellect or mental capacity, especially to a high degree: or characterized by or suggesting a predominance of intellect.” Intellectual as a NOUN describes “a person who places a high value on or pursues things of interest to the intellect or the more complex forms and fields of knowledge, as aesthetic or philosophical matters, especially on an abstract and general level.” (dictionary.com). But is it the concept of intellectualism so subjective that it depends solely on the individual placing the label? Is there some universal set of rules that makes someone an intellectual?  What does it mean to be an intellectual? Is it the knowledge you possess? Is it the vocabulary that a person uses to hold a discussion? Is it the level of education the person has attained? Is it the ability to create ideas that surpass one’s consciousness?  What is an intellectual? Are you an intellectual or are you equipped with an intellectual mind

A Discerning Mind? Discernment means the ability to judge well. Many times people make a poor judgment, not because of ignorance, but because of the lack of insight and discernment. More specifically, what's the difference between judgment and discernment? Can judgment or being judgmental have a right or wrong or moral aspect to it? Do you think discernment frees us from any fear of being wrong? Is discernment more detached, more creative, or free

The “Future of CIO” Blog has reached 1.8 million page views with about 3700+ blog posting in 59+ different categories of leadership, management, strategy, digitalization, change/talent, etc. The content richness is not for its own sake, but to convey the vision and share the wisdom. Blogging is not about writing, but about thinking; it’s not just about WHAT to say, but about WHY to say, and HOW to say it. It reflects the color and shade of your thought patterns, and it indicates the peaks and curves of your thinking waves. Unlike pure entertainment, quality and professional content takes time for digesting, contemplation and engaging, and therefore, it takes the time to attract the "hungry minds" and the "deep souls." It’s the journey to amplify your voice, deepen your digital footprints, and match your way for human progression.

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Brainstorming The IT Role in Building Business Competency via Inquiries

The role of IT today for many organizations is a business solutionary and the builder of digital capability & competence.

Nowadays, information permeates into every corner of the business, it is the gold mine organizations need to dig for capturing the next business growth opportunities. Technology is often the disruptive force of digital innovation, as well as the crucial component of building the business capability. Hence, Information Technology should be seen by any business as a “digital transformer.” Here are a few inquiries to clarify the IT role in building business competency and improving organizational maturity.

What demand does strategy create for new information technology-enabled business capability, and how will you bring that to reality? Organizations rely more and more on technology; the IT department has more and more to overcome. The goals of running IT are about leverage information to improve decision effectiveness and apply digital technologies to lower costs, improve operations, and increase revenue. IT needs to rethink itself as an innovative and business leading organization. It has to provide both business and technical insight into how they bring success to the company as a whole instead of being a support center. There are very few businesses today that can state that IT does not play a significant role in the day to day operations or even long-term strategic positioning. Organizations need to take that into consideration when establishing strategic goals to manage their digital transformation. Forward-looking organizations declare they are in the information management business. Information comes from the analysis of the data, technologies allow for the storing, retrieving, processing, manipulation, and presentation of data. Information and technology catalyze today's digital businesses. This requires a cross-functional customer-centric paradigm for managing and operating IT/technology, drive all sorts of innovations, proactively push ideas on how to leverage technology to drive revenue growth, increase business productivity, flexibility, and agility.

What limitations are imposed on business strategy by the constraints of the IT currently used by the company and in its digital ecosystem? Modern organization has its own sophistication: The silo functions, the sea of data, the continuous digital disruption, and the pool of talents. The board and top executive team should be informed of what benefit is being delivered by IT and aware of constraints and risks. Hence, those roundtable discussions on the top should not be only centered around cost, but also on productivity improvement, business growth, talent strategy, and GRC as well. They need to scrutinize which limitations are imposed on the digital strategy by the constraints of the IT and how to empower IT for driving changes and leading digital transformation. IT plays an important role in interpreting business issues into a technology solution and an IT-enabled business capability. Also, leverage the necessary resources to solve those problems. IT has an important role to play in both improving business competency and achieving operational excellence. Make continuous attention to technical excellence and keep IT digital fit through consolidation, integration, modernization, optimization, and innovation.

What role does IT or the various functional groups play in risk management/governance in general, and in overseeing change and digital transformation of the organization? IT is in a unique position to oversee the underlying functions of the entire business, improve business efficiency, and connect the wide dots to enforce business innovation. The abundance of information brings unprecedented opportunities and risks to the organization today. Unpredictability, uncertainty and the probability of surprising emergent properties increase with the complexity of the digital ecosystem. Hence, IT needs to manage risks and practice governance discipline effectively. Understanding business as a dynamic and adaptive complex system is the starting point. IT organizations that have their own house in order and have absorbed compliance and operational risk management can move on to greater, more strategic business needs. IT is not limiting the business’s creativity, but encouraging out of the box thinking as well as systematic solutions. Those organizations that feel stifled by governance may not have matured beyond operational risk and control. Controls feel stifling not because they are trying to be innovative, rather that they are undisciplined. The effective GRC effort shouldn’t stifle innovation, rather, they have built the right mechanism to harness innovation via framing the right problems as well as setting the right prioritization, incorporated a process for change and innovation. By implementing effective GRC programs, corporations can deliver immediate benefits to the entire organization.

The role of IT today for many organizations is a business solution and the builder of digital capability & competence. IT leaders are invited to the big table for contributing to strategy making. IT staff are encouraged to think out of the box and discover a better way to do things. Still, IT is the means to the end, the real goal of running a high-performance IT organization is to improve business effectiveness, efficiency, agility, and maturity.

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The Popular Quotes Collection XIII of “Digital Master” Book Series

High mature digital organizations stretch out in every business dimension.

“Digital Master” is the series of guidebooks (15+ books) with five pillars to perceive the multifaceted impact digital is making to the business and our society, help forward-thinking organizations navigate through the digital journey in a systematic way, and avoid “rogue digital.” Here is the set of popular quotes for conveying the digital vision and sharing the unique insight about the digital transformation.

Digital Gaps: Bridging Multiple Gaps to Run Cohesive Digital Business

“Today’s digital organizations simply just can’t stand still. Bridging the 'gap of opportunity' between where you are and want to become is a welcomed challenge.”

― Pearl Zhu, Digital Gaps: Bridging Multiple Gaps to Run Cohesive Digital Business

“Bridging innovation gaps is a strategic imperative for business execution.”

― Pearl Zhu, Digital Gaps: Bridging Multiple Gaps to Run Cohesive Digital Business

“Learning becomes the knowledge builder and we can define learning through the information it absorbs and the capability it builds.”

― Pearl Zhu, Digital Gaps: Bridging Multiple Gaps to Run Cohesive Digital Business

“We still live in the era in which information is rich and insight is poor.”

― Pearl Zhu, Digital Gaps: Bridging Multiple Gaps to Run Cohesive Digital Business

“In the real, physical world or business world, most relationships are nonlinear.”

― Pearl Zhu, Digital Gaps: Bridging Multiple Gaps to Run Cohesive Digital Business

Decision Master: The Art and Science of Decision Making  by Pearl Zhu

“No decision in the world outlives the time, place, and person’s constituents on the basis of which it was made.”

― Pearl Zhu, Decision Master: The Art and Science of Decision Making

“It is often said that a wrong decision taken at the right time is better than a right decision taken at the wrong time.”

― Pearl Zhu, Decision Master: The Art and Science of Decision Making

“Decision makers with emotional excellence have the ability to dispassionately examine alternatives via fact finding, analysis, structured planning, objective evaluations, and comparison.”

― Pearl Zhu, Decision Master: The Art and Science of Decision Making

“High EQ decision makers can leverage multifaceted thought processes in making sound judgments and improving the overall decision-making maturity.”

― Pearl Zhu, Decision Master: The Art and Science of Decision Making

“Decision making is an art only until the person understands the science.”

― Pearl Zhu, Decision Master: The Art and Science of Decision Making

100 Creativity Ingredients: Everyone’s Playbook to Unlock Creativity by Pearl Zhu

Being optimistic is the view looking for the best, it comes with the “never give up” attitude.

― Pearl Zhu, 100 Creativity Ingredients: Everyone’s Playbook to Unlock Creativity by Pearl Zhu

Innovations succeed when failure is seen as a learning step to great success.

-100 Creativity Ingredients: Everyone’s Playbook to Unlock Creativity by Pearl Zhu

Dissatisfaction with status quo is the psychology behind creative disruptions.  

-100 Creativity Ingredients: Everyone’s Playbook to Unlock Creativity by Pearl Zhu

It’s probably better and more accessible to measure change readiness rather than change progress.

-100 Creativity Ingredients: Everyone’s Playbook to Unlock Creativity by Pearl Zhu

Being “misfit” with advanced thinking and forward-thinking influence is a digital fit.

-100 Creativity Ingredients: Everyone’s Playbook to Unlock Creativity by Pearl Zhu

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How to Set Performance Indicators to Measure Return on Digital Transformation

A well-defined set of measurement for digital transformation should contain a good mix of the long-term strategic measures along with the short-term operational measures.

Change is inevitable, and the speed of change is increasing. The digital transformation is now spreading rapidly to enable organizations of all shapes and sizes to reinvent themselves, but it is the thorny journey with many bumps and curves on the way. How do you measure return on digital transformation in order to make the timely adjustment and improve its success rate? A well-defined set of measurement for digital transformation should contain a good mix of outcome measures or the long-term strategic value along with performance drivers to track the progress in the short term (operational measures). The performance indicators for the digital transformation could include:

Return on strategy execution capability and capacity: Digital transformation is now affecting all aspects of business operations from innovation within and around the business ecosystem, to customer engagement, to business models and processes. Hence, the ROI performance management should take into account both financial and non-financial measures, assessing internal improvements, past outcomes and ongoing requirements as indications of future performance. In this regard, a Balanced scorecard offers a way for a corporation to gain a wider perspective on its strategic decisions by considering the impact on finances, customers, internal processes and employee satisfaction.  In spite of capturing multiple business perspectives, the balanced scorecard must still retain a strong emphasis on financial outcomes. A well-defined scorecard should contain a good mix of outcome measures (or long-term strategic value) along with performance drivers to track the progress in the short term (operational value). If the measurement result shows that the strategy is not moving forward as desired, an organization has a cleaner structure to traverse in an attempt to identify the root cause and take mitigating actions.

Return on Innovation: Innovation is the core business capability of digital organizations. Hence, it’s important to set guidelines for developing a customized suite of innovation metrics. Select the few (3-5) KPIs, to keep the measures simple and understandable. Some choose innovation process KPIs, process KPIs could link to the digital strategy management performance, to make the progress on the percentage of projects in the total innovation portfolio which contained a major part of external innovation. The innovation metrics in the context of business impact include such as % of revenue from new products/services introduced. You could also change the variables and create something like % of the profit from new ideas implemented. The goal of the innovation measurement is to create new revenue and drive early success to create a positive spiral. Measure failures as well. Some say each successful innovation needs, at least, nine failures. If the organization allows these reasonable failures, not repetitive mistakes, it will be more successful in innovation! You choose the right set of KPIs by deciding which are seen as critical to making the trackable progress in order to deliver more innovations. The fewer the better, but they have to be credible and relevant also in the eyes of the stakeholders.

Return on customer-centricity: Forward-looking organizations strive to become customer-centric digital businesses. Thus, it is important to set metrics to clarify the plan of customer-centric process implementation, control and measures, such as How many processes or customer touch points are included, how many staff people are involved, what are company internal performance versus customer experience (their expectations/ satisfaction)? Is it possible to measure it at each touch point? What activities can be done to improve processes to save time and money? Net Promoter Score (NPS measures the willingness of customers to recommend a company's products or services to others) is the closest thing for leadership teams who want to see a link between customer experience and strategy management. NPS, if properly executed, can deliver valuable input. NPS also measures success in terms of Customer Equity. Customer Equity looks at the lifetime value of customers, the cost to attract new customers and the cost to retain customers over a given outlook period.

Return on Risk management: The increasing speed of changes and overwhelming growth of information bring both opportunities and risks to businesses. Organizations that are able to flex the risk-reward balance predominantly through being risk aware more effectively can achieve the digital strategy and build the competitive advantage because they are better placed to walk away from high-risk situations or possibly transfer risk to lower cost. The point is that they are more risk-conscious and, therefore, they are able to make more informed decisions. The bottom line of return on investment (ROI) should be achieved and can be measured if there is a marked improvement in reducing/streamlining the processes, and managing the risks to an acceptable level by the enterprise management oversight. Often the real return on investment doesn't occur until you reach the "pro-active" features, which reduce cost and increased impact on the enterprise. Those would be some of the areas being considered successful. The most commonly used dimensions to measure risk management consist of:

-Strategic: Risk & compliance posture, risk enabled decision-making, etc.

-Financial: Reduced cost of risk & compliance, improved bottom-line, value to stakeholders, etc.

-Operational: Operational efficiency, program visibility, reduced turn-around-time.

-Regulatory: Reduced audit failures, predictive compliance, the ability for early diagnose of non-compliance, etc.

Return on employee engagement: Digital is the era of people. Generally speaking, there are two types of measurement of employee engagement: The first type of measurement of employee engagement in the workplace is through the outcomes of productivity or creativity. What value have those new things designed and implemented (products, services, processes, business models) brought to customers or users? The second type of assessment is through the performance drivers, the elements that enhance an organization's execution capacity. The metrics for talent management improvement include engagement, cost control, return on incentives, recruiting efficiency, speed in revising performance objectives, clarity of organizational structure, the depth of backups in succession plans, the culture of creativity measurement. By tracking these measures, you can focus on where targets are not being met that support planned revenue and profit levels, and what actions might be taken to improve at the individual, functional, and corporate levels.

Return on digital maturity and measurement: Digital transformation extends to every direction of business management. Which management metrics should you apply to measure organizational overall health and maturity? Who and what tools are being applied to measure business performance? Historically, performance measurement systems for most businesses have been financing driven. However, in many business situations, financial indicators only cover part of the story. The effective measurements selected should be part of a link to cause-and-effect relationships, ending in financial objectives that ultimately affect the growth and long-term perspective of the organization. A KPI must last while the process it is measuring lasts. It must be constantly reviewed and improved. Outcome-related KPIs are as relevant as, even become more relevant than process-related KPIs, in order to measure the end to end business performance effectively.

Digital transformation is a journey. Well defining the right set of metrics will never be an easy job, but always keep in mind of the SIMPLICITY principles, and do not confuse the means with the end. Measure the right things, and measure them right, for encouraging positive behaviors, breaking down silo thinking, leveraging trade-offs, to ensure the business as a whole achieving the optimal business result and manage a seamless digital transformation.

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What Should the Board of Director’s Skills Matrix Include?

The collective skills and capabilities of BoDs make a significant impact on both the business’s survival and thriving, and setting the leadership tone for business transformation.

The board of director plays a significant role in overseeing organizational strategy, setting policies, practicing governance and exemplifying leadership disciplines. The contemporary corporate boards need to focus on both performance and compliance, monitoring business performance and improving management effectiveness. Due to the “VUCA” digital new normal, the directorship in any organization must have the ability to inspire, guide, and motivate. What should the board of director’s skill matrix include to improve the directorship maturity individually or collectively?

Leadership Competency: The effective functioning of a board depends on a number of factors, including the mix of knowledge and experience among the directors, Diversity in thought processes, experiences, industries, and situations are more important as a team. Leadership is all about the future and change. Strategic thinking, governance, auditing, risk management, regulatory issues, mentoring and coaching, openness to communication are some of the areas of director competencies though it may be contextual. They should have abilities to probe issues in depth, disagree without being disagreeable, mentoring and be mentored, understanding risks, building skills & capabilities, and promoting teamwork. Vision is an integral part of the directorial role, BoDs as the digital visionary can make a better influence on guiding the organization toward the right direction and bring profound insight in transforming the business up to the next level of business maturity.

Critical thinking and strategic thinking capability: The contemporary board plays a crucial role in overseeing business strategy. The strategy is definitely a different beast nowadays. With the increasing speed of changes, many organizations are inundated with tactical tasks and daily operational duties, they don’t spend enough time on scrutinizing the long-term strategy and identify disastrous blind spots in order to make a smooth business transformation. Hence, critical thinking and strategic thinking capability are important for BoDs as the business critic, who can provide excellent feedback which gives the top management accurate information to improve; great questions to contemplate, and keen insight to gain the in-depth understanding of the digital business ecosystem. "Group-thinking" and lack of courage to ask the tough, strategic questions is the chief weakness on Boards today. The Board has to have a good understanding of the organization’s strategic direction and its strategic alternatives. The digital BoDs need to present strategic wisdom to pinpoint pitfalls in strategy management and keep track of the strategy-execution continuum.

Decision effectiveness: Governance disciple enables better decisions. Governance is a sophisticated process that if well executed, will lead to better decisions. It will allow not only to protect the existing value but also to create new value for its shareholders. It is important to emphasize that governance is fundamentally about having a systematic approach to making decisions within the corporate entity. The boards play crucial roles in having the oversight of the business assessment, gauging conditions and choices; oversight of appropriation, matching priorities and resources; oversight of accountability, scoring activity and net results. Governance is like the steer-wheel to ensure organizations running in the right direction and head to the destination. Good governance must create excellent performance, especially for long-term business growth. In a world of rapid changes, directors are required to exercise leadership influence and improve decision effectiveness over volatility, manage uncertainty, simplify complexity, and resolve ambiguity in the "VUCA" digital environment.

Changeability: Change capability is a strategic skill in leadership qualities. While there are many components of leadership, one of the most important ones is the ability to adapt, model and influence change. We live in a world where change is the norm and if we don't embrace it, accept it, roll with it or make it happen, we're not going to be successful. Nowadays, the speed of change is increasing and digital transformation is an inevitable journey, BoDs should set the tones for change and proactively drive change to ensure the organization is moving in the right direction with an accelerated speed. The leadership team such as board must push the business’s change agenda, but pull the resources to achieve it. It also makes it possible for everyone to be on the same page speaking the same language and fosters an atmosphere of accountability.

The collective skills and capabilities of BoDs make a significant impact on both the business’s survival and thriving, and setting the leadership tone for business transformation. Boards are getting better as the awareness grows of how important board composition is in order to lead in today’s digital dynamic. The more a board represents or mirrors its stakeholders, the better served will be the organization. It’s all about leadership from the top which sets the leadership tone and steers the business in the right direction to achieve long-term business prosperity.

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