Let’s assume you’ve realized that in order to stay ahead of the competition and help scale your organization, you need to take your company through a Digital Transformation. In other words, you not only want to digitize your communication and transactions with your customers, but you also aim to automate much of the process with the goal of increasing customer satisfaction and gaining a larger market share.
You also know what is Digital Transaction Management (DTM), what role it plays in your organization’s transformation and how it differs from Paperless process initiatives of days past. Now you’re planning the transformation, how you’ll manage the change, and demonstrate success.
But how do you plan for this? What tools do you use to ensure success?
Starting with this post, we’ll begin to cover how you can bring about this change starting with building a Business Acceleration Adoption Plan (BAAP), the combined technology and change management plan, and how to execute on it. Here are the steps at a high level:
- What Success Metrics to Select
- How to Determine Your Organization’s DTM Maturity Index
- How to Use the DTM Maturity Index to Define Your Plan
- How to Prioritize Your Use Cases
- How to Deploy Your Solutions to Ensure Success
- Why Iterate & How to Refine Your Deployments
Today, we’ll take up the first of these topics, the metrics to use. Before that though, we first need to answer why you should build out a plan to begin with.
Why Build a Plan
It may be a foregone conclusion for some that you should build a plan for deploying any solution that changes your business processes, but the plan I’m referring to is not just another project plan. This isn’t a plan with a Work Breakdown Structure, in Project Management parlance, or a Product Backlog, borrowing from SCRUM Agile processes. Taking a step higher, this isn’t a Project Charter either.
What I’m referring to as a plan is something quite utilitarian and down to the brass tacks of data you’ll use to crystalize what goals you want to accomplish by pursuing the business process changes, why it’s important to make the change, what are the areas or use cases you’ll improve, which of those areas are of highest priority, and what business gains you’ll get from making the changes.
The intent is to develop something that you’ll continuously use to monitor success and correct, where necessary.
So, why is this important?
Far too often, we set out to change processes in our organization with little to no real results, aside from showing that we changed something. Is it enough that we no longer print paper? Not unless we demonstrate that the paper reduction cut company costs by $1M annually, which, in turn, allowed us to fund more research and development for our new products.
Is it enough that we can now track who made what changes when or when they signed an agreement? Not unless we can demonstrate that our sales staff previously closed 10 deals a month because each deal took that long to get approvals on the terms and conditions, but after only a short week-long training on the new processes and systems, they’re able to close 15 deals a month , a 50% increase in sales volume delivered “overnight”!
In general, what we’ve learned is that often the lack of success on various business process changes is associated with a lack of direction on how to prepare and promote such changes benefiting the workforce and customers. That means, we have to not only define what we’ll change, but also how we’ll prepare everyone for the changes ahead.
Then, after we make the change, we can always come back and see whether we were successful and, where we weren’t fully, we can then assess why and incorporate the lessons on better measurements, better maneuvering of the politics, better training, or any other steps to improve adoption and change management into the next set of use cases we wish to tackle.
So, why make a plan?
Because you need to know what would define success, how you can get there, whether you achieved it, and how you’ll apply the lessons to future changes.
What Success Metrics to Select
The selection of success metrics is completely dependent on what the business believes are of highest priority and value at any point in the company’s growth. Do you wish to reduce company expenditures to use funds for other purposes, or to increase profitability? Are you having trouble scaling your sales process and need to automate and better track their mundane activities? Is your customer satisfaction suffering, thus leading to losing sales and reducing your company valuation?
Here are some common metrics to consider:
1. Turn-Around Time (TAT) or Time To Close (TtC)
Turn-Around Time is, quite simply, how long it takes to complete something. It’s a phrase borrowed from computing, but can be applied to many activities. For example, how long does it take to create a new contract, send it out for review by a customer, capture corrections, make revisions, get approvals and signatures?
Your goal may be to reduce a TAT of 30 days on sales contracts by 75%. Why is this important?
It’s because the axiom of Time Value of Money tells us money has value today than the same amount in the future, given money can earn interest or it can be used for other projects or activities of value to a business.
Let’s demonstrate the importance of this measure with an example. Let’s say that our company has 5 sales staff. They close an average of 5 deals each month with an Average Deal Size (ADS) of $100k. Each deal takes about 30 days to close from the time the customer decides to buy to when we have a signed contract. That means we have an annual sales booking of $30M.
Now, with our new systems and automated processes rolled out that cost us $25k, we’re able to reduce our TAT from 30 days to 8 days. That’s a saving of 22 days. How much more value does that equate to?
Let’s calculate our Present Value of each contract. Assuming an average of 3% inflation, for the 30-day closing period under our legacy process, we get a present value of $99,754 for a $100k deal. Once we reduce our TAT from 30-days down to 8 days, we get a present value of $99,934 per deal, equal to a net gain of $180 per deal. Across the sales staff, that’s an increase in annual value of $54k or about half of a head count.
So, TAT may be a good measure.
2. Return on Investment (ROI)
What about ROI, one of management’s favorite measures of profitability? This could certainly be a part of the metrics to track, especially if we’re talking about cost savings in a process.
In our previous example, let’s add the note that our new digital process also equates to an average reduction in printing and overnight FedEx package savings of $28.94 per transaction. We now have an annual paper and printing cost savings of $8,682 with our new process. Coupled with our value gain of $54k earlier, that’s a total value gain of $62,682.
Purely looking at a single year’s return, we have an ROI of 151%. If we use the traditional calculation of technologies having a 3-year lifecycle, that’s a 452% ROI over 3 years.
ROI is certainly a good metric so long as we can measure and attribute the benefits gained as part of the new solution rollout.
3. Customer Satisfaction Index (CSI) or Net Promoter Score (NPS)
All of the above have been the tangible metrics for a solution. But what about how satisfied are your customers? How much is that worth?
Even though the value here is a bit tougher to calculate, most folks inherently understand how satisfied customers have a multiplier effect in the market by not only increasing the odds of that customer providing with repeat business, but also for acting as a reference as well as recommending your products or services. The intangible aspects of customer satisfaction are what affect your company reputation and its valuation.
What we typically see are goals to increase CSI by 10 to 20% points or to turn an acceptable NPS Of 10 or 20 to a 60 or 70. These are significant gains when you consider companies such as Apple are notorious for having NPS of mid 70’s.
So, which metric should you use? The answer may very well be more than one if not all of the above. As you can see, they work hand-in-hand and can have significant consequences on one another, as well as your bottom line.
What’s more, there are other tangential metrics that may be of interest. What should be the new ADS goal? Given it’s easier to do business with you, will the sales staff be able to negotiate higher prices or offer more products and services that increase your ADS?
What should be your new total sales volume since your sales staff can now close faster? After all, it used to take 30 days to close each deal, giving each sales rep a velocity of 5 deals per month. Can they now double that amount? It depends whether the previous process had an affect on the volume. If nothing else, it may mean that they will have more time for prospecting. In that case, what should be the new number of open deals per sales rep, their pipeline value, or their win rate?
The importance to grasp here is that no matter which metric you choose, you should choose something that you can measure, baseline and aim to improve with direct calculations of what benefits the whole organization gains once your solution is fully deployed.
Stay tuned as we continue with our posts on how to build and execute on your Business Acceleration Adoption Plan.