Use these indicators and formulas to tell your boss what value digitalization has actually brought.

Often in the group, CIOs are seen asking for help: How can the value of an enterprise's digital transformation construction be reflected? What are the evaluation indicators? These troublesome questions have been plaguing the information department. In most cases, the information department feels good about itself. It has introduced a system and put it into operation normally, and the business department is also using it. However, when it comes to performance appraisal, HR doesn't recognize it, and neither does the leadership. They require detailed indicators, data, and evidence. At this time, the CIO is very frustrated and has to reluctantly search the Internet for some solutions. But these solutions are often theoretical and lack practical evaluation indicators. Today, Lao Yang will tell you how to calculate the digital value in the most popular language and with the most practical formulas.

This is the core issue that every boss cares about the most. After investing so much money in digitalization, is it really worth it? This involves the issue of return on investment. In many cases, CIOs think like this: Digitalization requires a long - term perspective! But will the boss give you time? Bosses need to see the highest return in the shortest time. If a CIO says that the introduction of a digital system has achieved cost reduction and efficiency improvement, then where has the cost been reduced? Where has the efficiency been increased? I think many CIOs can't explain clearly. Due to the lack of data support, many explanations seem very weak. Therefore, CIOs need a set of formulas to intuitively show the boss the value of digitalization. Lao Yang summarizes as follows:

1. Cost savings

Indicator: Unit cost decline rate Formula: (Original cost - Cost after digitalization) / Original cost × 100%

For example: After a factory introduced the MES system, the production cost per unit decreased from $120 to $98 → a decrease of 18.3%

2. Improvement in labor efficiency Indicator: Growth rate of per - capita output value Formula: (Per - capita output value after digitalization - Original per - capita output value) / Original per - capita output value × 100%

For example: After a company introduced RPA process automation, the average number of documents processed per person in the finance department increased from 200 per day to 350 → an increase of 75%

3. Revenue growth

Indicator: Proportion of digital channel revenue Formula: Digital channel sales / Total sales × 100%

For example: The proportion of sales from a retail company's mini - program increased from 15% to 38% → an increase of 23%

4. Compression rate of process cycle Formula: (Original cycle - Cycle after digitalization) / Original cycle × 100%

For example: After a company implemented online approval, the contract approval cycle was shortened from 5 days to 1.2 days → a compression of 76% 5. Utilization rate of production equipment Formula: Actual operating time / Planned operating time × 100%

For example: After predictive maintenance through IoT devices, the utilization rate of machine tools increased from 65% to 82%

6. Decline in product defect rate Formula: (Original defect rate - Defect rate after digitalization) / Original defect rate × 100%

For example: After a company introduced AI quality inspection, the defect rate of mobile phone screens decreased from 3.2% to 1.1% → a decrease of 65.6%

7. Data accuracy rate Formula: Number of accurate data entries / Total number of data entries × 100% For example: After a company carried out master data governance, the accuracy rate of relevant core data increased from 72% to 98%

8. Improvement rate of customer service experience

Formula: (Percentage of recommenders - Percentage of detractors) For example: After the APP of a retail company was redesigned, the NPS increased from 32 to 51

9. Service response time Formula: Average problem - solving time (after digitalization - original time) For example: After a company applied an intelligent customer service system, the average response time decreased from 45 minutes to 8 minutes

10. Customer retention rate Formula: (Number of repeat - purchase customers after digitalization - Original number of repeat - purchase customers) / Original total number of customers × 100% For example: After a company's membership adopted digital operation, the annual repeat - purchase rate increased from 28% to 43%

11. Shortening rate of R & D cycle Formula: (Original cycle - Cycle after digitalization) / Original cycle × 100% For example: After an automobile company adopted 3D simulation design, the R & D cycle of a new car was shortened from 36 months to 28 months → a shortening of 22%

12. Automation rate = Number of automated processes ÷ Total number of automatable processes

For example: A company has 100 processes, and 40 of them are automated → 40%

13. Proportion of data - driven decision - making = Decisions made with data ÷ Total decisions

For example: Among 10 topics in a company's senior management meeting, 6 used data analysis → 60%

14. System knowledge reuse rate = Number of knowledge entries called ÷ Total number of knowledge entries

15. Density of digital talents = Number of employees with data analysis/AI and other capabilities ÷ Total number of employees

For example: There are 100 solutions in a company's knowledge base, and 70 of them have been used by employees → 70%.

Now that we have the formulas, how can the information department formulate a systematic digital special balanced scorecard? How to conduct a comprehensive evaluation and management of digital value with systematic and data - based indicators? Lao Yang will describe it from finance, customers, internal processes, learning and growth, covering 12 core indicators. The details are as follows:

First, Financial dimension (Return on digital investment)

Second, Customer dimension (Experience and ecosystem)

Third, Internal process dimension (Efficiency and quality)

Fourth, Learning and growth dimension (Organizational capabilities)

Core indicators:

Density of digital talents = Number of employees with data analysis/AI and other capabilities ÷ Total number of employees (Goal: 8% annual increase)

Knowledge reuse rate = Number of times the digital knowledge base is called ÷ Total amount of the knowledge base (Goal: ≥70%)

Weight distribution suggestions:

Finally, to summarize:

If you have different opinions on digital value, welcome to leave a message in the comment section!

This article is from the WeChat official account "Xiangjiang Digital Review" (ID: benpaoshuzi), author: Lao Yang. It is published by 36Kr with authorization.