Thursday, April 6, 2017

The Performance Quadrants of Running the Digital Organization

Performance metrics are numbers in context, results are related to your strategic goals.

Forward-looking organizations are on the journey of digital transformation. Digitalization is not a single dimensional effort to using the cool digital technologies, but a multi-dimensional pursuit to embed digital into the very fabric of the business, and run a high-effective, high-responsive, and high mature digital organization.  The dynamic digital organizations today need to get away from letting things fall through and start creating an “integrated wholes” by utilizing the dynamic processes to build the differentiated business competency, bridging the chasm between strategy and execution, and achieve the high-performance business result. If you can only manage what you measure, here are the principles to set performance quadrants for assessing the status of the digital transformation of the business.

A: Provide transparency into the digital organization: Organizations evolve digital with the different attitude, aptitude, and speed. Digital technology makes the world hyperconnected, open and transparent than ever, at both individual and organizational level. Businesses are always on and interdependent, there is no shortcut, transparency is a must. The intent behind transparency should always be connected to business performance. From the digital organizational performance perspective, transparency can help digital leaders tell a story of the journey from current state to future state, of enablement, of improvements, of accomplishments, of the implementation of digital business strategies, etc. Top executives will spend time on communicating with the board, between the management teams, and communicate with employees and customers to explain the digital shift in thinking, present the performance result, and ask for feedback. The business executives should understand the major performance metrics that the business uses to measure their performance. While these metrics are not necessarily for evaluating digital transformation, understanding them will enable the digital organization to have a better business conversation about what they are doing and the progress they make to drive digital transformation.

B: Setting the direction for the digital transformation journey: The performance metrics are not just number but tell stories, and the good measurement aids setting direction for digital transformation journey. By studying the performance metrics and result, the business management can place a higher prioritization of the development needs and customer relationship management skills that align with the organization's strategy, it helps drive people (customers, employees) engagement throughout the enterprise for improving business performance ultimately. The performance metrics is the means to end - once the KPIs are selected and finalized, decision-making based on the results of the KPIs is of utmost importance. If the decisions are not made correctly, the performance metrics perhaps do not contribute to setting directions for the digital organization or help in improving the ultimate business result. Digital is the age of customers. Digital organization metrics should get focused on the end-users. The end-user continues to be the key component of any customer-centric business. This is where the metrics need to focus on -the end-user experience. Digital is also the age of innovation, to measure innovation, you should choose those KPIs by deciding which are seen as the critical element to making progress in order to deliver more innovations.

C: Drive continuous performance at the journey of the digital transformation: Tracking KPIs and benchmarking are essential to digital transformation. But you need to measure the right things and measure them wisely. It is important to track the right metrics and know what to do with them to see the performance improvement. 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 measure setting should focus on achieving the ultimate goals of the organization as a whole, not just the individual or the one team’s performance or even digital organization performance only. It needs to ensure the business as a whole is superior to the sum of pieces. The digital organization needs to expand the capacity by improving operation efficiency and effectiveness with the KPIs to resolve problems, increase in the number of problems successfully resolved, improve the project success rate, optimize the digital organization’s scalability and changeability for further catalyzing the business growth.

D: Communicate the performance result to varying business audiences: Historically, performance measurement systems for most businesses have been financing driven. However, in many businesses, financial indicators only cover part of the story. The right sets of metrics are those used to inform the multidimensional performance result tailoring varying business stakeholders. Your performance measures should cover all areas that contribute to business value creation including products/services quality, employee engagement, customer satisfaction and financial outcomes, etc. The digital organization needs to build the measurable metrics around these key focus areas. Digital leaders today need to be trusted experts who understand a lot about the performance dynamics to be seen as value added participants in making data-based business conversations regarding the need to increase in business capacity, market penetration, risk management, and increasing the velocity/effectiveness of every dollar spent. Hence, measure what matters for the business, to reflect the business priority, and strike the right balance of the long-term business growth and the quick win.

Performance metrics are numbers in context, results are related to your strategic goals. The fewer the better, but they have to be credible and relevant also in the eyes of the stakeholders. The metrics have to accommodate digital organization investment outcomes that have a higher level of business value for the long run, Always keep in mind, people matter, achieve progresses by measuring the key objectives and drive the continuous improvement.


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