What people get wrong about digital transformation

Buddy Brewer Profile picture for user Buddy Brewer February 5, 2020
Too many companies choose the wrong goalline, says New Relic's Buddy Brewer, but choosing the right business metrics for your customer KPIs can be a real game-changer.

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My career has been spent focused on the business of digital performance and helping companies modernize and transform to reach their customers. When watching these transformations, the vast majority start the same way. A business leader wakes up one morning, looks around, and discovers that his or her company is surrounded by competitors that are all moving faster. So they tap someone to lead a digital transformation initiative.

So far so good. But all too often, that leader makes a mistake that seems rational at the time, but will prove costly. They set the wrong goals. They fall prey to a common misconception: that digital transformation is about adopting new technology. It's not. Real transformation is about using technology to improve business outcomes.

Here’s the most common scenario. The transformation leader, looking for a big, strategic win, starts a process to retire on-premise data centers and migrate to the cloud. That's a good thing. Enterprises can't wait months for their IT teams to stand up new servers. They can't allow themselves to be weighed down by infrastructure. The cloud gives them agility they could never achieve on their own.

But what usually happens next is that digital transformation leaders look at the progress they've made — the number of data centers retired, the percentage of data moved to the cloud, and so on — and declare victory. They think that by moving to the cloud the organization will automatically become more agile, more customer-centric, and better able to compete with all those upstarts that have been gaining on them. They may even think they’ve just saved their companies a bundle of money.

And of course they'd be wrong on all counts.

Moving the business needle

To really get those business benefits, the first step is to figure out what to measure. IT teams have grown comfortable with a set of metrics for technology-related goals. They track metrics, events, logs, and traces, to make sure their software — whether its a monolithic legacy ERP program, or a customer-facing website comprised of thousands of microservices — is operating properly. They tend to define success by how much code they ship each day or whether they maintain five-9s up-time. (That's not a knock on IT teams, by the way — this is what they're being asked to do by business leaders.)

Yet most organizations fail to connect those metrics, events, logs, and traces to real business outcomes. Did that code refresh you worked on for six weeks actually move the needle? Did it improve the customer experience? Did it reduce churn, or improve time on site? Is it driving measurable business results?

Most organizations don't know the answers to those questions. And that is why their digital transformation efforts will ultimately fall short.

Improving customer outcomes

To be fair, company leaders have focused on technology-related metrics because they didn’t know it was possible to take the next step, to tie them to business results. That’s no longer the case with modern performance monitoring tools. As I like to explain to people I meet who've never heard of New Relic, our software digitizes the experience of their customers. It captures the metrics that help determine whether customers are getting what they need from the company's products, and what the company needs to change if that's not happening.

This creates a feedback loop that can help a company avoid or quickly correct missteps. For example, often businesses will expand into a new global region and bring their old goals along with them. This is often misguided. For example, users in Australia might not have the same expectations as users in the United States. This could be for cultural reasons, infrastructure reasons, or others. What's needed is to understand how performance metrics drive business metrics in each new market in order to set the right goals. Digital businesses can only do this when they are instrumenting both technical and business metrics.

Once you've figured out the right KPIs and added them to the dashboards of your technical and business leaders, you can use these real-time insights to ask some really interesting questions. Like, what's the value to the business if you reduce customer support calls by 30%? What's the value of 100% up-time? How will it impact your bottom line if you increased employee engagement by 25% or spent 40% more time generating new ideas?

And once you’re monitoring the right metrics, you can move quickly to address the things that really matter. Say you release a new batch of code that delivers terrible results for customers. If your infrastructure is properly instrumented, you could roll back the update 10 minutes after you deployed it, instead of weeks later. It's hard to put a dollar figure on the amount of reputational damage that would prevent — but trust me, it’s a lot.

KPIs change the game

There's a nice side benefit to having everyone working off the right KPIs — it makes your developers become even more invested in the success of their products. In the absence of actual data, engineers are left to wonder (with justification), “Why are we building this thing that people may never use?” After they get aligned with business KPIs, the conversation becomes, “What can we do to move these numbers?”

They're no longer merely order takers — now they're using data to decide how to deliver business value. They have a voice in how their code impacts the customer experience, and they know it's going to be measured. As a result, the feedback loop shortens, and the number of product features and engineering projects that move the needle for customers goes up dramatically.

When organizations start to measure the right KPIs, and use that data to drive their businesses, it's a game changer. That's what real transformation is all about.

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