March 2021


Digital: ROI is the secret sauce for sustainable digital transformation

Digital transformation is a broad term that can mean vastly different things to different people.

Burke, Z., Radix Engineering and Software

Digital transformation is a broad term that can mean vastly different things to different people. Within a given company, it is easy to gain consensus that such a thing is necessary to stay competitive, but it is tremendously difficult to define what it looks like in practical terms—much less where to begin.

Of course, it is infeasible to lay out a sequence of steps that is right for every company in every industry. Rather, it is more useful to talk about digital transformation in terms of levels of maturity, each centered around the key variable needed to make the process sustainable: return on investment (ROI). For digital transformation to be beneficial and long-lasting, it has to complement business goals. It is important to keep expectations realistic with respect to the current level of digital maturity. Five such levels of digital maturity are discussed here.

The experimental stage

An organization in the experimental stage has acquired some basic digital tools but still lacks a cohesive vision for what it hopes to achieve. Solutions built during this stage are commonly built by intellectually-curious individuals attempting to solve small-scale problems. These efforts can provide an ROI that is well-aligned to business priorities within this individual’s area of responsibility, but these contributions are unlikely to be easily scalable or repeatable.

The aggregation stage

Organizations in this stage are recognizable by their ongoing efforts to collect increasingly more data in one place. Some may narrow their focus to a specific target area of the business so they can quickly move on to the next phase of this maturity model within this scope. Meanwhile, others will attempt to collect as much data as part of a broader scope. Either way, for ROI to be realized at this stage, discipline is critical. It is important to try and add context to the collected data, where possible. This extra information will help ensure it can be effectively wielded by as large a group as possible.

The KPI stage

Well-designed key performance indicators (KPIs) reflect how well something is doing within a given scope (i.e., enterprise, division, area or unit). An organization in the KPI stage would hopefully leverage them in two ways. First, these KPIs should guide both short-term and long-term strategy. ROI here comes from strategic decisions being backed by evidence. Secondly, by setting tolerable ranges for KPIs, the business can be alerted when a particular group may be falling behind and needs assistance. The ROI is realized here by ensuring everyone in the organization is able to play their part in the overall business strategy and is getting the help they need.

The prediction stage

Once enough data is available to form KPIs that reflect how individual groups are contributing towards overall business goals, organizations in the prediction stage are in a good position to forecast what state a system will be in and when. This impacts ROI in two ways. The first lies in the triggering of interventions in the process—it is possible to carry these out pre-emptively if a downward trend with respect to an important KPI is detected early enough (whether this means mobilizing resources or changing strategy). The second impact revolves around the refinement of this strategy. More robust models of the interplay between variables means evidence can be more effectively wielded to achieve the intended outcome.

The actuation stage

Unlike the preceding levels of digital maturity, organizations in the actuation stage are much more able to start using digital tools not just for knowing, but for doing. This means an organization’s prediction capabilities have earned so much confidence that digital tools no longer just inform decisions but are able to carry them out in real time. An excellent example of this is an advanced process controller (APC). Instead of people having to specify set points for their control systems to hit, tools at this stage can calculate a set point based on a set of optimization criteria for the process. The ROI seen at this stage can be quite lucrative. Not only does automation allow for a much finer level of control that can more rigorously optimize for business-critical output variables, but it frees up human operators’ attention for other things.


Needless to say, advancing through these stages can be quite an undertaking. Again, ROI should be a key variable for prompting leaders on where to focus. Having a good grasp of the ROI in a specific situation provides an idea of what resources can be viably committed, as well as what expectations should be along the way. Digital transformation is a journey and being able to promise and deliver on ROI is key to sustaining it over the long term.

However, the skills needed for such an effort can be hard to find. Fortunately, there is a rich ecosystem of vendors and service providers that offer the tools and the expertise needed to develop a transformation plan, put it into action and keep it on track. Even if the intent is to build these capabilities in house, there may be a clear ROI to supplementing teams with expertise from outside. HP 

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