How To Create A Digital Strategy – How to focus digital transformation (DX/DT) on what matters? Let’s look at some examples of digital transformation strategies, possible performance metrics and automation ideas off the charts.
Transformation Starts with Strategy and Leadership, not Technology Digital transformation is the name given to organizations’ efforts to apply digital technologies. In practice, the term can refer to anything “digital,” from improving your social media presence to implementing AI-powered tools or investing in a data-driven culture.
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There are many digital tools that promise performance improvement… Where should organizations focus their efforts? McKinsey, in their research
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Using the Balanced Scorecard for a 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 meet the needs of customers and increase employee productivity.
An example of a strategy map for digital transformation. Learning and Internal perspectives are the drivers of strategy. Customer and Financial perspectives are expected outcomes. Source: Digital Transformation Scorecard.
Below we discuss the practical implementation of the DX strategy with the Balanced Scorecard framework. We will also discuss how other strategic planning frameworks
We started with some general ideas about the success factors of digital transformation, such as focusing on strategy, leadership and culture.
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Now I’ll show you how to turn these insights into strategy using the Balanced Scorecard framework. Let’s start with the drivers of digital transformation and map them to the Learning & Development and Internal perspectives.
‘Time to Market’ indicator with ‘minimization’ as a performance function (lower value results in higher performance). Source: Digital Transformation Scorecard.
From an internal processes perspective, we will align the digital strategy with the efforts of all business units involved.
The goals for this perspective will come from the high-level goals of other relevant scorecards. For example, we can align digital transformation with these scorecards.
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The “Align digital strategy…” objective has three lagging indicators that automatically draw their data from the other strategy scorecards – the Data Security, Big Data and Remote Team scorecards. Source: Digital Transformation Scorecard.
As we discuss below, good strategy is a process, so let’s add an additional goal to the internal perspective:
Risk, its description and mitigation plan. Risk is defined in the ‘Extended KPI’ field with the ‘Product Complexity…’ metric. Source: Digital Transformation Scorecard.
Learn more about this goal. Customer PerspectiveThe goals for the customer perspective will be unique to the organization. In this perspective, goals should be focused on the needs of:
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You’ll need the customer engagement and product complexity metrics we discuss below.
From a customer perspective, the goal is quantified by two lagging indicators and the leading indicator “Align digital strategy…” (Outcome of the goal from an internal perspective). Source: Digital Transformation Scorecard.
The goal can be tracked with the Monthly strategy meeting KPI, which can be adjusted to a monthly reporting interval and a binary (yes/no) measurement unit.
In a financial perspective, the goal is measured by two trailing indicators – “Cost avoidance” and “Relevant income increased”. The leading indicator is the result of the objective “Meeting the needs of customers…” from the customer’s perspective. Source: Digital Transformation Scorecard.
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“Digital” implies that the decisions made are based on some data. In other words, it’s not just:
To formulate an initiative for this example, your team needs to have a lot of data to analyze:
Make sure that a culture of data-driven decisions is effectively implemented in your organization and that your team is trained to look for the right data:
The risk of manipulation of KPIs has been determined. Two sub-risks are described in the description. A link to more information is provided in the “Documentation” area. Source: Digital Transformation Scorecard.
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A data-driven culture doesn’t mean having multiple KPIs for every possible purpose, if that’s your case, you’re probably experiencing some kind of abuse of KPIs. Start with a few important metrics that resonate with your organization’s ambitious goals.
Digital transformation is about early detection of relevant problems. Most of the challenges these days come in a “digital” form – cyber security risks, remote work, new regulations on handling personal data.
First, I mentioned that a digital strategy should focus on customer needs first. At the same time, to address these needs, your team must be aware of current technologies and regularly test new ideas. Regular PESTEL analysis and a disciplined approach to innovation helps here.
The focus of transformation also depends on the competitive landscape; As with MSC Cruceros, early adoption of new technologies kept them one step ahead of their competitors. In this case, Porter’s Five Forces framework and VRIO analysis will be of great help.
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It would be paradoxical to plan digital transformation using spreadsheets. Yes, they look like a digital tool, probably good for prototyping, but not for the scale of strategic planning.
A strategy can be anything, but not the bulk of key figures in a boring 100+ document or big spreadsheet document or giant slide deck. At a minimum, the core of the strategy should be a one-page strategy map with several supporting documents.
Professional strategy planning tools like our BSC Designer will provide an organization with a solid “digital” foundation for future strategy development. How it can help:
A performance dashboard for Digital Transformation visualizes customer engagement; the relationship between customer engagement and product complexity; Strategic initiatives on the Gantt chart. Source: Digital Transformation Scorecard.
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BSC Designer is one of the well-known strategy implementation software, now a free plan is available to get you started easily. Align Organizational Transformation Strategy: Ready-to-Use Strategy Templates [Inside Perspective]
BSC Designer users have access to a number of strategy scorecard templates with examples of KPIs and strategy maps.
Every strategy is unique, but with these templates you can get started faster. Here are some templates to help you focus your digital transformation efforts:
Aligning a supplemental scorecard with an overall scorecard is as easy as copying and pasting the relevant indicator/goal between the two scorecards. We have an onboarding tutorial where we provide some specific instructions.
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Such strategy meetings require some discipline and automation tools. In a previous article, we shared our approach to strategy meetings for a distributed team.
In this part, I share some cases of digital transformation. The idea is not to talk about some impressive technology, but to master the skills of finding the fit (measured by metrics) between transformation efforts and solving customer needs.
It is a chain of resorts managed and owned by the Piñero group based in Spain. Their smartphone app significantly speeds up check-in time – guests can upload photos of their passports and the system recognizes the necessary information; Once at the hotel, guests are only required to legally check in and take less than a minute. The app also manages hotel restaurant bookings – less stress for guests and less to manage for the concierge.
And their voice assistant called Zoe. The technology is new and there are still some hurdles to overcome. The first implementation (I tried it in December 2019) was far from perfect. The voice assistant was a physical device that took up valuable space on the cabin desk and was not easy to use, even for an IT-savvy person.
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The good thing is that MSC Cruceros headed towards this digital transformation before COVID-19, so they were one step ahead of competitors who needed to invest in digital tools as part of their more urgent COVID response strategy.
While classic banks have to think in the context of digital transformation, fintech startups are building the required digital platform from scratch.
I experienced this during our recent trip to the Dominican Republic using a card issued by London-based fintech company Wise. The service provided competitive exchange rates for paying in Dominican pesos and withdrawing money from ATMs. Applying, topping up a balance, even managing a refund request was just a few clicks away. Great customer experience!
These are the metrics that the service provides to its customers through post-transaction apps and emails.
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Compare this to the experience of some classic Spanish banks with cards that simply don’t work or add significant fees for non-euro payments…
Case 4. Communication Channel Transformation – Clinical Analysis Laboratory In some cases, digital transformation refers entirely to the communication channels used.
I had to do a PCR test to fly home in January 2022. It was interesting to see how local labs approach digital transformation.
A set up lab didn’t really do well. They offered quick turnaround (up to 18 hours), but appointments were always taken on a busy phone line.
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Hotels offered promised results within 24-48 hours (wouldn’t work for my flight). It was possible to make an appointment via smartphone for a specific date and time, but they warned that the wait could be up to 1 hour.
The mobile lab proposal was different. Communication was via Whatsapp; take a probe
