Organizational Agility: The Importance of Measurement

In the digital world, organizations need robust, accurate metrics to help them understand real-time performance. Digital KPIs will not replace traditional metrics for every organization, but the complexity of digital products and services, including a new array of data sources, means businesses must rethink what they measure.

With digital transformation on the rise, traditional benchmarks for success often fail to account for the challenges and nuances of our changing world.

For instance, in an agile organization, the challenge for the CFO is to assess the success of new digital initiatives in real-time and provide this information back to the business to inform decision-making. The business must be able to understand how individual investments contribute to overall performance, so they can manage the risk across the whole portfolio, prioritizing investments and assigning resources accordingly. The bottom line: To keep up, today’s organizations must rethink their performance measures.

Measure, Guide, Succeed

Our recent research,“Organizational Agility at Scale: The Key to Driving Digital Growth,”reveals that only a quarter of organizations have made significant headway establishing performance metrics for digital revenue growth. This slow pace of adoption risks compromising the shift to agile for those organizations that aren’t able to see what’s working and what’s not—and act on it with speed.

Today’s organizations must be able to evaluate the performance of their digital efforts quickly to know where to channel resources and when to pull the plug if necessary. If they lack the right metrics, organizations risk not knowing if they are successful at all.

It’s helpful to understand the importance of KPIs for the digital age, how leading organizations are measuring and guiding their businesses for success, and why the right metrics are key to unlocking organizational agility at scale.

Only a quarter of organizations have made significant headway establishing performance metrics to measure digital revenue growth.

Barriers to Digital Performance Measurement

To ensure digital efforts lead to financial success—and that innovation evolves to meet customer needs—businesses must adopt an agile approach that lets them respond to challenges and opportunities in real-time.

Our research finds that while nearly three-quarters of organizations have adopted the tools to measure the performance of their digital products and services, more than half feel their KPIs are not reflective of the digital era in which they now operate. This misalignment is concerning, as accurate measurement is critical to identify what’s working (and what’s not).

These challenges are not dissimilar to those experienced in the pre-digital world where, for years, businesses struggled to standardize KPIs to ensure a unified approach to measurement.

Many organizations struggle to integrate workforce and financial data to build an all-encompassing snapshot of their financial and human resources. Not having the right tools to measure digital KPIs is bad enough, but having too many tools—none of which are unified—creates an enormous headache when it comes to measuring KPIs.

Promisingly, our research finds a small number of firms are leading the way in this area. These organizations exhibit several key capabilities that enable them to evaluate digital initiatives in real-time and pivot accordingly.

A “fail-fast” approach is a key characteristic of these leading organizations, which have subsequently unlocked higher levels of digital revenue growth than all other respondents. Our study finds near-consensus among these leading organizations that theirs is a culture in which learning from failure is encouraged and that they are quick to pivot away from unsuccessful projects.

Steps to Digital Performance Measurement

Not only are leading organizations more in control of their digital performance measurement, they are also highly likely to establish higher digital growth targets and to have already made progress deriving a significant share of their revenue from digital products and services. These organizations:

1. Challenge existing performance measures and KPIs.Having the tools alone to measure performance is not enough. Leading organizations in our study know which indicators illustrate digital growth performance and which signal the need to reallocate resources.
2. Standardize digital performance KPIs.Without a standard set of digital metrics, a business can’t get a good handle on its health which requires understanding the impact of each digital service line and how resources are being utilized to improve employee productivity. For example, this means charging all costs in a consistent and repeatable manner, and overhead must be allocated in the same way.
3. Inspire a culture of “fast failure” to maximize digital performance.Not only does thiscultural shiftdepend on having the right metrics to assess projects, it hinges on the ability to encourage new product innovations and accept failures as necessary learning opportunities for future success.
4. Realize the role of measurement and control.The ability to guide and control digital initiatives is not at odds with organizational agility. In fact, evaluating success is a critical enabler in making calculated, real-time decisions required of an agile business.
   

Organizations that have the right metrics are better placed for digital success. By unlocking agile capabilities, these firms are empowered to respond to evolving customer and business needs in real-time, to understand how projects are performing and allocate resources accordingly, and pivot to meet the demands of our dynamic business world.

Get an overview of“Organizational Agility at Scale: The Key to Driving Digital Growth”findings or download the full report.