As companies lean into digital transformation, they have to answer two questions that sound simple but are quite complex: Where are we, and where do we want to go?
The organizations best positioned to answer these questions make use of real-time dashboarding, according to a new research briefing by Peter Weill and Stephanie L. Woerner of the MIT Center for Information Systems Research.
In particular, these organizations monitor two critical aspects of digital transformation. One is what value is created, tracked over time. The other is how value is created, measured in terms of the development of organizational and individual capabilities that support digital transformation.
An MIT CISR survey of more than 1,300 firms suggests that enterprises using dashboards most effectively outperform those that do not. Dashboard use is associated with higher profit margins and revenue growth, along with increases in revenue from new products and cross-selling. Internally, effective dashboard use is linked to more mature digital transformation efforts and a more collaborative approach to leadership.
“There are lots of reasons why dashboarding is so effective,” Weill and Woerner write. “But perhaps the most important is that everybody in the company gets to see how it is doing against agreed-upon metrics and works together to make course corrections when necessary.”
The multinational energy company Schneider Electric offers a case in point. Founded in 1836 as an iron and steel mill, the company has pivoted in the last decade from solely selling energy products to selling energy efficiency services through a customer engagement system.
Achieving this kind of transformation required a way for everyone in the organization to understand goals, metrics, and business logic. The company introduced a dashboard, called the Digital Flywheel, to measure the value created through digital initiatives and to help stakeholders understand why certain metrics were important.
Revenue generated from the customer engagement platform has risen from “a very small percentage” of overall revenue in 2016, when the platform debuted, to nearly 50% in 2021. (Schneider Electric’s total revenue exceeded 29 billion euros in 2021.)
5 ways to align dashboards with business initiatives
Using the example of Schneider Electric, Weill and Woerner offer five steps for better aligning business dashboards with digital transformation initiatives.
- Combine what value is created and how. Companies must show how value is created and captured. This will require several rounds of revisions to ensure that executives are aligned on definitions and metrics.
- Stay persistent. As with any cultural shift, introducing dashboards will face resistance. Position the dashboard as a way for business units to see how their performance connects to that of other groups.
- Use the dashboard to manage the company. To give the company a “common language,” base performance reviews for managers on the same metrics tracked in the dashboard.
- Communicate the dashboard’s value. Wide-ranging and consistent communication drives effective dashboard use, both to increase adoption and to improve company performance on key dashboard metrics.
- Provide modern functionality. Combining real-time data updates with drill-down menus customized for business units will increase dashboard effectiveness in decision making while minimizing the impact of course correction.