Digital Transformation ROI: A Comprehensive Guide for Business Leaders

As digital transformation reshapes industries, companies must strategically navigate this shift. A whopping 70% of companies have already implemented digital transformation strategies or are working on some. With organizations already on this path, mastering this approach is essential. This blog offers a comprehensive guide to your digital transformation strategy in 2024. As a leader, learn more about:

• What digital transformation is;
• Its pillars, technological investments, and critical benefits; and,
• How to maximize its ROI potential.

What Is Digital Transformation?

Digital transformation is the integration of technologies into business operations to improve processes, products, and/or services. It empowers your employees and satisfies your clients or customers. Ultimately, it can be instrumental to your overall business success.

However, digital transformation isn't just about investing in digital tools and technological resources. It's about leveraging these tools and resources to transform your company for operational efficiency, business productivity, and organizational success.

McKinsey defines digital transformation as a "long-term effort to rewire how an organization continuously improves and changes" with technological integration into the business realm. This means consistently reinventing and optimizing business models, organizational structures, and business processes. 

According to Grand View Research, the global digital transformation market could grow from $880.30 billion in 2023 to $4.62 trillion by 2030 at a 27.6% compound annual growth rate (CAGR). This market growth is due to the growing adoption of cutting-edge technologies, such as artificial intelligence (AI), big data analytics, business Intelligence (BI), and cloud computing.

Main Pillars of Digital Transformation

Digital transformation is no longer just a buzzword in business. It's an imperative implementation among companies and organizations across different industries. However, Flexera cites some factors affecting its pace of implementation, as follows:

Although there are some potential challenges, the key drivers of digital transformation encourage organizations to invest in technologies. But what are the ingredients to make a recipe for business success? Below are the main pillars of digital transformation:

• Technological adoption and innovation: Digital transformation involves practically utilizing the latest tools and technologies. However, it also calls for constant technological progress and development.

• Operational agility and flexibility: Digital transformation is essentially the integration of technologies into business operations. However, it requires companies and organizations to be more flexible and agile.

• Enhanced human experience: Digital transformation seeks to improve the plight of various stakeholders. It empowers employees in their work and enhances the customer experience.

• Organization's cultural transformation: Digital transformation aims to foster a culture of technological innovation. The ultimate goal is to transform your business for long-term scalability and sustainability.

Some Popular Technologies to Invest for Digital Transformation

Below are some of the popular technologies to adopt for digital transformation.

1. Artificial intelligence

AI is the simulation of intelligence into computer systems, allowing them to think and work like humans. See those chatbots answering questions online, ChatGPT writing articles, or robots assisting customers in restaurants? 

About 80% of leaders use AI for various business strategies and decisions.

2. Robotic process automation

RPA automates business functions to reduce manual tasks and accelerate processes. Many companies and organizations employ RPA for process automation by using automated software solutions.

3. Internet of Things

IoT comprises network-enabled devices connected to the internet. It paves the way for a more intelligent, interconnected future by breaking down communication barriers between businesses and consumers. 

Its global market size might grow from $1.17 trillion in 2024 to $2.37 trillion by 2029 at a 15.12% CAGR.

4. Extended reality

XR opens the doorway for the metaverse—short for the digital universe. This technology comes in three types: virtual reality (VR), augmented reality (AR), and mixed reality (MR). 

These technologies allow consumers to have a highly immersive experience online via a 3D virtual realm.

5. Blockchain technology

This secured digital ledger records data in blocks linked together via cryptography. It's known for its encryption, decentralization, transparency, immutability, and security. 

Its global market could expand at a nearly 60% CAGR, potentially growing from $17.57 billion in 2023 to $469.49 billion by 2030.

Key Benefits of Digital Transformation for Business

Digital transformation benefits companies and organizations in more ways than one. Finances Online cites the top benefits of adopting a digital model: improved operational efficiency, meeting customer expectations, and improved product quality. 

However, there is more to these than meets the eye.

Below are the transformative benefits of undergoing digital transformation:

• Informed decision-making: Data is valuable in business. Need to make well-educated decisions? Use predictive analytics tools powered by machine learning (ML) and deep learning (DL). They offer data-driven insights for business forecasting and reporting.

• Guaranteed data accuracy: Companies deal with a vast amount of information. Do you need to ensure complete, accurate, and up-to-date business and customer data? Customer relationship management (CRM) platforms help you save and secure these details, while data analytics guarantees precise reporting.

• Boosted productivity and efficiency: Looking to make your workforce more efficient and productive? Empower your employees with the use of software automation. As cited, RPA gets rid of manual work and speeds up processes.

• Ensured employee empowerment: Digital transformation benefits your most important stakeholders—the employees who manage your day-to-day operations. Digital tools and technologies assist them in accomplishing their tasks.

• Enhanced customer satisfaction: Digital transformation extends to consumers. It empowers your employees and satisfyes your customers. By improving your products and services, you can ultimately make customers happy.

• Increased business profitability: Technological investments might be costly at the onset. However, they will pay off in the long run, especially if you start seeing ROIs. Through digital transformation, business improvements translate to business profits.

• Business scalability and growth: Digital transformation doesn't only focus on technological investments. It involves scaling your business operations up and down. You'll be surprised at how constant optimization helps your business to survive and thrive over time!

How To Maximize the ROI of Your Digital Transformation?

Digital transformation is worth investing in, as the multiple benefits above prove. That's why over 90% of businesses employ some form of digital initiative. Likewise, 87% of senior leaders believe digitalization is a top priority. Gartner even offers some key steps for a successful business transformation:

However, it's crucial to examine and measure the impact of digital transformation on your business. Does it yield high returns? How do you boost your ROI, then? What crucial steps should you take?

Here's how to maximize the ROI of your digital transformation strategy:

1. Define your Goals

Reviewing your core business goals is vital when planning your digital transformation initiative. What do you aim to achieve for your company from this implementation? Then, set the objectives and key results (OKRs) for this initiative:

• To increase work efficiency (reduce AHT to 8 mins.)
• To promote data accuracy (achieve XX% accurate data)
• To boost business productivity (deliver # of outputs monthly)
• To minimize expenditures (cut costs for $XX.XX/mo.)
• To maximize ROI (boost sales conversion by XX%)

Chris Aubeeluck, Head of Sales and Marketing at Osbornes Law, recommends setting SMART goals for digital transformation OKRs. "Sure, OKRs allow you to identify your operational objectives and target potential outcomes. But when it comes to goal-setting, make sure these goals are specific, measurable, achievable, relevant, and time-bound."

2. Set your Metrics

Defining your digital transformation OKRs is one thing; setting your key performance indicators (KPIs) is another. List your key metrics to measure your performance and see if you can meet your targets and achieve your goals. The KPIs usually focus on the following:

• Efficiency (how long does it take to accomplish tasks?)
• Quality (how accurate, effective, and exceptional is your work?)
• Customer satisfaction (do you make customers fully satisfied?)
• Cost reduction (Are you able to cut your expenditures?)
• Return on investment (Do you earn more than you spend?

Jeffrey Zhou, CEO and Founder of Fig Loans, suggests aligning KPIs with OKRs for digital transformation. "Once you list your organizational goals and possible results, you'll know what key metrics to use. These targets or benchmarks will guide the implementation of your digital transformation."

3. Invest in Digital Tools

Now, it's time to invest in digital tools and technologies. This requires reviewing your OKRs and KPIs and examining your business needs and requirements. This allows you to decide what products to purchase or services to hire. Below are examples of technology used for digital transformation.

• Automated software: Some companies purchase software apps for workflow automation, while others employ software-as-a-service (SaaS) from a reputable service provider.

• Analytics tool: Some invest in web analytics to track website activities; Others use data analytics to analyze information, forecast work, and make informed decisions.

• CRM platforms: Many organizations use centralized platforms to save, sort, and secure data and manage customer interactions.

• CTI systems: Contact centers capitalize on computer-telephony integration systems for customer service. They offer advanced features like automatic dialing and intelligent routing.

• VR and AR platforms: Businesses employ virtual and augmented realities for an immersive online experience. They utilize XR technology in real estate, e-commerce, and even education.

Reyansh Mestry, Head of Marketing at TopSource Worldwide, emphasizes the need for critical selection in technological investments. "Investing in digital tools and technologies can be costly. Ask yourself: Can they make a difference in your business transformation? Perform due diligence before your team finally decides."

4. Integrate Technologies

After investing in digital tools and technologies, you can now incorporate them into your business operations. However, there are a few crucial steps you would need to take. These steps ensure a successful deployment or integration with your existing systems:

• Examine your legacy systems. What outdated systems do you need to replace? Or what new technologies should you integrate? 
• Review your existing processes. Are your current workflows effective in terms of efficiency, quality, and CSAT? How can tools and technologies further improve them?
• Design technological integration. What steps do you need to take for the deployment? Plan your digital transformation in specific areas like data extraction for business enterprises.
• Integrate and run technological testing. Start integrating tools and technologies into your systems. But what better way to ensure a successful deployment than to conduct robust tests?
• Launch the actual implementation. You can implement your digital transformation strategies once everything goes as smoothly as possible.

Axel Lavergne, Founder at ReviewFlowz says: “Incorporating AI and automation goes beyond just boosting efficiency. It’s essential to ensure these technologies comply with current regulations. This means conducting regular audits, thorough compliance checks, and implementing strong data protection measures to keep client information safe. Doing this improves our operations and builds trust and reliability with our clients.”

5. Implement your strategies

The work doesn't end with technology deployment or technological integration. You're just getting started with your implementation. Take some digital transformation case studies and learn how some companies implemented their strategies. For the most part, here are the steps you'd need to take:

• Incorporate tools and technologies. You did this in step 4, which means your systems are ready for implementation.

• Orient and train employees. Employees will use the tools and technologies. Proper training must be performed to teach them how to use these resources.

• Set workflows and processes. You must also streamline your business operations with the help of technology. For example, automate document processing and remove manual human work.

• Launch your strategies. Finally, you can keep your newly optimized business operations up and running.

• Monitor your performance. Learn more about this in the next section.

Jesse Hanson, Content Manager at Online Solitaire & World of Card Games, cites the value of a solid digital transformation strategy. "The digital tools and technologies are at your disposal to trigger your business transformation. However, true success lies in how you plan, design, and implement your strategies." 

6. Track your Performance

Performance monitoring is a critical part of the overall equation. This step helps you assess if your digital transformation strategies make a difference in your business. Do they work in the first place? Here's what you need to do:

• Review performance dashboard: See if you're hitting your targets and reaching your goals every month. 

• Generate business reports: These detailed reports will give you a clear picture of your performance.

• Employ real-time analytics: Use analytics tools to see how your employees perform.

• Create a feedback loop: Get employee insights about using digital tools and technologies.

• Conduct team meetings: If possible, hold one-on-one sessions with each employee to examine whether the tools help.

Brooke Webber, Head of Marketing at Ninja Patches, underscores the importance of performance monitoring in digital transformation. "This allows you to see if the invested tools can help improve your employee performance. Otherwise, technologies are not worth investing in…or you need to optimize your workflows."

7. Measure your ROI

Performance measurement is the most critical part of your digital transformation strategy. This step allows you to see if your technological investments yield high returns. Have you earned more than you've spent on your investments? Take the following steps:

• Crunch the numbers. You might have set your key metrics and tracked your performance, but now it's time to process and analyze the numbers.

• Calculate the ROI. Employ the cost-benefit ratio as in the equation ROI = (benefits - costs). In other words, deduct your expenses from your income to get your ROI.

• Boost the numbers. Adjusting your digital transformation tactics will increase your ROI. Optimize your tools and streamline your processes! 

Albert Kim, VP of Talent at Checkr, believes ROI is the most important metric in your digital transformation initiative. "What good are your technological investments if they don't improve your business performance? More importantly, have you boosted your profits after all the expenditures you've made for digital transformation?"

8. Drive Continuous Improvements

Your digital transformation strategy might have been working. You might have boosted your ROI for all your technological investments. However, you must ensure a consistent implementation to drive constant improvements. Here's how:

• Audit your digital tools and technologies. Are they still working? Are they still up-to-date or already outdated?

• Update existing or invest in new technologies. If not, either upgrade them or purchase new tools.

• Optimize your workflows and processes. You must enhance your business operations consistently with the aid of technology.

• Provide regular training and development. Foster a culture of continuous learning, especially when leveraging tools and technologies.

• Work with business and tech experts. They know the ins and outs of the tech industry. They can help you make informed decisions on digital transformation.

Volodymyr Shchegel, VP of Engineering at MacKeeper, believes digital transformation is a continuous business strategy. "It isn't a one-time investment in tools and technologies. Neither is it a one-time implementation for your business. With rapid technological advancements and evolving business trends, you must constantly transform your business for a competitive edge."  

Final Thoughts

There's no denying the imperative of digital transformation in today's business landscape. Start investing in technologies and integrating them into your business operations. Doing so can translate to employee empowerment, customer satisfaction, improved performance, and overall success.

However, to maximize your ROI in digital transformation, follow the abovementioned steps. Start by setting OKRs and KPIs and end by addressing areas for improvement. Likewise, make sure to deploy digital tools and employ effective strategies. Plus, don't forget to monitor your performance and measure your ROI.