There’s something about entering a new year. Unbridled optimism, renewed hopes, and general positivity about having a fresh start are typical emotions. But 2023 is not like any other year.
The pandemic-fueled growth that many firms experienced in 2022 appears to have come to a halt as organizations enter 2023 facing the prospect of an economic contraction. Already, we’ve seen big layoffs, hiring freezes, and massive cost reduction programs across organizations.
In Forrester’s Digital Business Strategy Survey, 2022, 75% of North American digital strategy professionals estimated their budgets wouldn’t decrease next year. If anything, inflation means the cost of digital increases while digital budgets are flat in real terms — and digital execs will face more pressure from boards and senior executives to show the ROI of these investments.
For digital execs, having well-defined digital metrics is crucial to understanding how successful their digital strategies are, what they need to improve, and to secure ongoing budget. However, most digital measurement frameworks haven’t kept up with organizational demands. They’re often overly tactical and operational and lack alignment to broader organizational goals.
So, it’s not surprising that digital execs continue to struggle to demonstrate the value of digital to the business. A digital leader from a large global bank told Forrester, “We track metrics such as monthly active users and time spent on the app but struggle to demonstrate the link between these metrics and revenue or cost when measuring digital success.”
It’s time for a digital measurement reset. To succeed in 2023 and beyond, firms’ digital measurement frameworks must address four types of organizational metrics:
- Revenue (how a firm makes money from digital)
- Cost (how a firm incurs cost from digital)
- Operations (how a firm operates its digital business)
- Customer experience (CX) (how customers perceive digital interactions with a firm)
Don’t just focus on bottom-up measurements like tracking customers’ digital activities. Instead, embrace a top-down approach by defining digital metrics that align with the four types of organizational metrics (revenue, cost, operations, and customer experience).
In my recently published report, The Anatomy Of Digital Metrics, I break down each type of organizational metric and explain the difference in metrics for digital business (typically tracked by the chief digital officer or head of digital) and digital product/experience (typically tracked by digital product owners or digital product leads). For instance, the chief digital officer should track revenue metrics such as the overall value of digital product sales; digital sales as a percentage of net sales; and digital customer lifetime value across journeys. Digital product owners will instead track revenue metrics such as churn rate; retention rate; and average number and value of products per customer at the individual journey level. For more, read this report.
But be sure to put metrics into context and consider any potential tradeoffs. For instance, an increase in the adoption of a digital service is a metric for digital success, but it could be detrimental to overall CX and lead to churn if your firm is forcing customers to use digital services when they want to speak to a human employee.
Questions? Book an inquiry with me for a discussion.