(01) How the Wrong KPIs Doom Digital Transformation Flashcards
What is the key message of the article?
Successful digital initiatives demand that leaders frame performance targets around data-defined business objectives rather than technological capabilities.
What stands out among the many reasons why so many companies report poor results from their digital initiatives?
How many aspiring transformers seek to measure the wrong things.
They consistently pick poor and misleading key performance indicators, such as the number of users per license purchased or the number of processes performed using new software. These digital KPIs miss the point.
The writers argue that for some legacy companies the legacy KPIs are counterproductive. Explain how these KPIs can become counterproductive.
They find KPIs undervalued and underutilized as analytic assets for leading digital change. Most legacy companies treat KPIs as reporting and accounting mechanisms rather than strategic decision drivers; they’re used more to keep score than change the game. Clinging to these legacy KPI perspectives gets in the way of successful digital transformation strategies.
What should top management do according to the writers of the article?
KPIs should lead, not track, digital initiatives.
Top management must define and communicate both the key performance that is required to execute its strategic plan and the digital capabilities that will enable that performance.
The real transformation opportunity lies in making strategic enterprise metrics both individually and collectively more visible and valuable. Dramatically increasing ROKPI — return on KPIs — should be the leadership’s goal.
State x effects of better and smarter strategic KPis.
Main effect:
Better and smarter KPIs lead to better and smarter digital transformation.
As a result of:
(1) Strategic KPIs invite more rigorous oversight of data governance.
(2) Ongoing improvements in predictive/prescriptive analytics ensure better and more effective decision-making.
(3) Effective transformations turn balanced scorecards into digitally dynamic KPI portfolios with the power to learn.
The writers developed a four-component leadership framework for KPI-driven digital transformation. Name the four components.
(1) Create a strategic KPI portfolio.
(2) Commit to data as a digital asset.
(3) Orchestrate data flows to make KPIs shareable, visible, and dynamic.
(4) Commit to continuous KPI improvement
What questions should you ask when you go through the process of creating a “Strategic KPI portfolio”?
(1) What is the overall strategic vision for your transformation?
Draft a one- or two-sentence statement that articulates an explicit mission.
(2) What tangible goals link to that statement?
Quantitative clarity is key
(3) What key inputs and actions correspond to each tangible goal?
Whenever possible, tangible goals should be broken into two or three high-level inputs that will enable that goal.
(4) What is the possible universe of metrics that can reliably measure each key action?
This is where enterprise stakeholders collectively brainstorm possible KPIs (leading and lagging) corresponding to each key action.
(5) What is the prioritized portfolio of metrics?
Objective criteria that can help you narrow the list include measurement feasibility, the ability to minimize unintended consequences, and the ability to facilitate alignment.
Mapping quality data assets to the strategic KPI portfolio is the surest path to effective transformation alignment. Asking executives two questions is indispensable to this task.
What are the questions and why should they be asked?
(1) What are your most valuable data sets?
This question proves most revealing once leaders define their portfolios. Product and process owners alike are pushed to reevaluate their current data sets in light of their relevance to new KPIs.
(2) What one thing would make your data more valuable?
Transformation teams should take more holistic and systemic views of data’s potential impact.
What is required for the successful orchestration of KPI data flows?
Name two requirements
(1) Successfully orchestrating strategic KPI data flows requires that data governance principles be intentionally aligned with desired performance outcomes.
That is, individuals and teams must ensure the quality, visibility, lineage, and timeliness of the data informing a performance metric.
(2) Well-designed data flows not only aggregate internal systems data but update and integrate relevant external data from third parties or novel sources.
The framework’s four components enable a virtuous cycle.
Explain the working of the virtuous cycle.
Better data and analytics improve and enhance KPIs; –>
better data orchestration encourages the discovery of and access to new data sources that strengthen strategic metrics; –>
seeing KPIs as dynamically evolving encourages leaders to look for new KPIs to track new kinds of value the company can create; –>
and ongoing improvement and growth is baked in, so the digital transformation is ongoing. –>
