Apigee Institute Survey | Special Report
KPIs, Conviction, and Competitive Advantage
On enterprise KPIs including revenue and customer satisfaction, the leaders at deploying apps,
operating APIs, and using data analytics dominate past outperformance and expectations for high
impact from digital in the future. In this special report we share three ways to build skill using
digital to drive performance on enterprise KPIs: embracing market trends with conviction; adopting
best practices for decision-making; and following patterns exhibited by strong performers.
The measures that matter most to global enterprises are usually variations on the same short list:
revenue and margin, customer satisfaction, market share, and innovation. As examples of digital
transformation changing the game in every industry grow, conviction that digital capabilities can
drive enterprise key performance indicators (KPIs) has become nearly as universal. Two-thirds of
executives expect digital business to increase operating income over the next three years, and more
than eight in ten CIOs say mobility will significantly improve customer interactions.1
As we noted in a previous report that 99% of marketing and IT executives in large companies see
digital capabilities having an impact on their enterprise’s overall results in the next 12 months, and
99% expect the level of impact to continue or increase over the next five years.2 Those reporting
stronger current skill connecting digital investments to enterprise KPIs anticipate more impact and
express much greater confidence in their company’s competitive trajectory. This report drills down
on establishing a framework to better digital investments to enterprise KPIs in order to provide tools for action
in our analysis for those who want to build a similar level of confidence and results.
KPIs: digital competitors lead on past performance, dominate future impact
Segmentation
Past Outperformance
Future Digital Impact
63%
81%
53%
37%
47%
Digital Competitors
We segmented companies on
strength
deploying
apps,
operating APIs, and using data
analytics into Digital Competitors
(top half) and Digital Dabblers
(bottom half). [Percentages are
53% and 47% due to tie scores.]
1
2
19%
Digital Dabblers
Digital Competitors account for
nearly 2/3 of companies reporting
strong
outperformance
on
customer satisfaction, margin,
revenue, share, or delivering
new products and services in the
last 12 months.
Among companies expecting a
big impact from digital
on
enterprise KPIs over the next 12
months that will also increase a
lot over the next five years, Digital
Competitors dominate by more
than four-to-one.
McKinsey Global Survey Results: “Bullish on Digital,” McKinsey & Company, August 2013.
Accenture Mobility CIO Survey 2013: “Business Opportunities in the Maturing Mobility Market,” Accenture, February 2013.
Situation Analysis
“Establishing a framework to connect digital
investments more directly to enterprise KPIs” is one of
three building blocks for using data analytics, deploying
apps, and operating APIs well—along with alignment
between marketing and IT and best practices for
assessing the ROI of digital investments.3
Targeted KPIs similar…
KPI most impacted by digital (top three)
Digital Competitors—companies in the top half of current
skill on digital capabilities—are much more confident in
their ability to establish this framework well, reporting an
average score of 7.5 (on a 10-point scale where 10 is
“very strong” and 1 is “very weak”) on this metric. By
contrast, companies in the bottom half (what we call
“Digital Dabblers”) report an average of only 5.2.
Financial
75%
73%
Share
76%
65%
65%
72%
Satisfaction
Efficiency
64%
65%
Comparative
66%
59%
At the same time, KPIs identified as those that
technology-enabled capabilities will impact most are
similar between Competitors and Dabblers. Financial
KPIs lead, cited by three out of four companies overall
(74%), followed by market share (71%), and customer
satisfaction (68%).
50%
41%
Employee
0%
40%
Digital Competitors
80%
Digital Dabblers
Despite similarity in the KPIs most affected, Competitors anticipate more impact overall and dominate
expectations for maximum impact. More than a third (37%) versus fewer than one-in-ten (9%)
Dabblers see a “big” impact on KPIs in the next 12 months that will also “increase a lot” over five
years. This appears to reflect using digital to better effect rather than general company performance:
comparing only “high-performers”—companies reporting strong outperformance versus
competitors in the past 12 months—widens the gap. The percentage of Dabblers expecting
maximum impact remains the same (9%) while among Competitors it rises to nearly half (48%).
…But Digital Competitors expect much greater impact
14%
33%
9%
9%
71%
Moderate impact
or less
6%
Big impact
Digital Competitors
3 Apigee
2
48%
20%
Increase a
lot
37%
21%
High performers by digital impact expectations
14%
27%
Increase
somewhat
or less
Increase
somewhat
or less
Increase a
lot
All companies by digital impact expectations
5%
71%
Moderate impact
or less
Digital Dabblers
Institute Survey Report: “An Emerging Digital Divide,” Apigee Corporation, May 2013.
Apigee Institute | September 2013
9%
6%
Big impact
Methodology
We asked IT and Marketing executives to identify the top three areas of enterprise results that technologyenabled capabilities such as “big data” and analytics, digital marketing, app, or APIs will impact in the next 12
months and five years, respectively, from a list of six. (Respondents could offer fewer than three in both
cases.) The full text from the survey and the short labels used in this report are listed below.
Label
“Efficiency”
“Comparative”
“Satisfaction”
“Financial”
“Share”
“Employee”
Full Text
Efficiency goals such as reducing time-to-market or increasing re-use of existing assets
Comparative targets such as competitive parity or matching best in class benchmarks
Perception goals such as customer satisfaction or brand reinforcement
Financial goals such as increasing revenue or margin
Share or market penetration goals
Employee productivity goals
Our analysis of ROI criteria for evaluating digital investments found using certain criteria are
associated with confidence in a company’s decision-making (for example, the use of real options
approaches to financial modeling and ad hoc criteria correlate with more and less confidence,
respectively). 4 In contrast, this analysis shows that no single KPI predicts perceived strength
connecting digital to enterprise results simply by being cited as one of the top three areas of impact.
The implication that no “one size fits all” KPI will be optimally independent of a company’s
distinctive strategy is consistent with other research. Peter Weill and Stephanie Woerner at MIT’s
Sloan School of Management identified four types of CIO, each associated with outperformance on
a different metric: for example, leadership on return on capital is associated with a CIO spending
more time on cross-company strategy (what they call “Embedded” activities). Leaders in sales from
new products have CIOs that spend more time building relationships with external customers.5
Implications
That no KPI is a “magic bullet” may be cold comfort,
however, to those looking for ways to build the level of
confidence exhibited by those who have mastered
connecting digital to business results. The odds of
executives from high-performing companies feeling
very confident that their company will achieve a much
stronger competitive position over the next five years
triple if they report performance in the top half (6-10)
of a point scale on connecting enterprise KPIs to
digital. This jumps to five-to-one when scores on
choosing effective ROI criteria is included as well.
KPIs + ROI = confidence
Change in odds of expressing maximum
confidence in competitive trajectory
5.2
3.5
Connecting digital to Connecting digital to
We explored three ways to increase skill and confidence
KPIs scores=6-10 KPIs + Using good ROI
criteria scores=6-10
connecting digital to KPIs:
• Implications of our analysis of ROI best practices;
• Whether broader indicators of organizational alignment contribute to stronger or weaker
performance connecting digital to enterprise KPIs; and
• Patterns for sequencing selected KPIs among leaders.
4Apigee
5P.
Institute Special Report: Three ROI Criteria for Digital Success, Apigee Corporation, June 2013.
Weille and S. Woerner, “The Future of the CIO in a Digital Economy,” MIS Quarterly Executive, June 2013.
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Apigee Institute | September 2013
Conviction matters: Digital Competitors fully embrace trends
Digital Competitors embrace key trends as critical to their company’s competitive position much more
than Dabblers. As we explain in the “Recommendation” section, the overall extent of to which these
four trends are perceived as relevant predicts reported strengths connecting digital to KPIs.
Relevance to their company’s competitive position over the next five years on a five-point scale,
where “5” is “extremely” relevant and “1” is “not at all” relevant.
The number of connected devicesfrom smartphones to smart cars and
5
4
3
even wearable computing devices-is Competitors
53%
40%
7%
heading for a tipping point at which
most work, play, and commerce will
have a digital dimension. As a result,
5
4
3
software will touch nearly all social
Dabblers
25%
43%
21%
interactions
or
commercial
transactions, with the potential to
generate data of unprecedented
0%
25%
50%
75%
100%
scope.
Mastering a fast feedback loop will be
a key differentiator. Companies that
quickly deliver digitally instrumented
products or services, harvest data
from market interactions, and use
insights to rapidly iterate and optimize
their value chain will gain competitive
advantage that continuously builds on
itself.
5
53%
Competitors
5
24%
Dabblers
0%
Apps will drive brand, share, and
revenue. When one company sets a
new industry standard for digital
experiences, others must either
challenge them for leadership or risk
that network effects from reaching a
critical mass of users or developers
will entrench them in a dominant
position.
5
15%
5
17%
Dabblers
0%
4
50%
Apigee Institute | September 2013
3
9%
75%
4
39%
4
48%
25%
100%
3
32%
5
43%
Competitors
75%
4
45%
4
41%
25%
3
2%
3
15%
50%
5
46%
0%
The dynamics that drive winner-takeall results in the technology sector will
come into play in many industries.
Turning products into platforms that
sustain an ecosystem of developers or
partners will become a way to seize a
dominant market position and a
disproportionate share of a sector's
profit.
4
56%
25%
Competitors
Dabblers
4
45%
50%
100%
3
14%
3
25%
75%
100%
Recommendations
We undertook this special report to identify ways to strengthen marketing and IT leaders’ ability to
establish a framework to connect digital investments more directly to enterprise KPIs. We conclude
with three recommendations based on patterns in our data from executives at 200 large companies.
1. Adopt ROI Best Practices
Using ROI best practices predicts stronger reported
performance connecting digital to enterprise KPIs as
well. Plotting average scores on both metrics for
those using selected ROI criteria uncovers an almost
one-to-one relationship between beating and falling
short of the overall average score on each.
ROI best practices matter
ROI best practice predicts strength
connecting digital to KPIs (Index mean = 1) 1.25
Score on connecting digital to KPIs
In our report Three ROI Criteria to Drive Digital Success
we found use of specific ROI criteria to be
associated with executives’ ratings of their
company’s strength making decisions about digital
investments. Using three criteria, together—a real
options approach to financial evaluation, customer
satisfaction, and internal efficiency—is associated
with higher scores. Conversely, using ad hoc criteria
is associated with below-average scores, while using
competitive benchmarking is associated with slightly
better than average perceived performance.
NPV,
Sat,Effic
ROV,
Sat,
Effic
w/Comp
1.00
w/Ad
Hoc
Neither
Sat nor
Effic
0.75
0.75
1.00
1.25
Score on digital ROI decisionmaking
This complements our finding that no KPI is itself a
“magic bullet” for success. Rather impact follows
from robust decision-making: better decisions about “what” to invest in and more clarity about
“how” digital investments will move the enterprise forward are related. If so, we would expect that
in addition to anticipating more impact, leaders will also show signs of tighter strategic alignment.
Competitors lead on ROI/KPI alignment
ROI criteria increase the odds of focus on related KPI
Efficiency Satisfaction
C
D
C
D
C
2.7
2.7
3.1
4.1
1.9
5
Share
D
1.4
Financial Competitive
C
D
C
1.2
1.4
2.5
D
2.1
This pattern surfaces in a comparison of
the odds that a company frequently using a
digital ROI criterion also targets the
corresponding KPI as one of those most
impacted. The odds are directionally higher
for Digital Competitors (C) compared
Digital Dabblers (D) (with the exception of
Comparative and a tied point estimate for
Satisfaction).
Moreover,
Competitors
dominate cases where the odds reach or
approach statistical significance (in the
chart at left, the bars show 95% confidence
intervals and those that do not overlap the
baseline are significant at that threshold).
Apigee Institute | September 2013
2. Conviction Matters
Unsurprisingly, the importance that executives report is assigned to connecting digital investments to
enterprise KPIs at their company predicts performance doing so. Motivated by the patterns we saw
relating to ROI criteria and strategic
alignment, we added performance on
Conviction gives Competitors an edge
choosing ROI criteria that drive
Embracing trends predicts strength connecting digital
better decisions about digital
to enterprise KPIs: relative contribution of each variable
investments to our model and
confirmed its strong correlation with
performance connecting digital to
enterprise KPIs.
Importance
of
connecting
digital to
enterprise
KPIs
Performance
using ROI
criteria that
drive better
decisions
about digital
investments
Conviction
that key
trends are
relevant to
competitive
position
Based on coefficients from linear regression, adjusted R-squared 0.53
We have seen what we call “polite
fictions” put the competitive
trajectory of enterprises at risk. This
can occur at companies that have
been aggressive initiating digital
projects, but do not transition from
experimenting to scaling to the level
needed to transform the business.
Pilots and discovery are valuable, but
we argue only as a means to an end.
Leaders must wrestle with questions
invoking the full implications trends:
• If a digital native like Amazon were to enter our industry, how long would it take for us fight back effectively?
• If a traditional competitor were to go digital—such as Michelin’s foray into a cloud-based service for fleet
management—could we counter their launch of a higher margin line of business?
We find that incorporating a measure of the degree to which executives embrace four market trends
as critical to their company’s future into our model shows that conviction drives an edge connecting
digital to KPIs. This is intuitive if we take the sum of ratings of the relevance of these trends to
their company’s competitive position as an indicator of the urgency placed on understanding market
trends, assessing opportunities and threats, and making “big bets” that depart from business as usual
(e.g., embracing the shift of consumer attention and computing power from the desktop and the
web to the mobile phone and the location-aware app). ROI best practices provide the tools to make
decisions that move the enterprise forward: conviction provides the motivation.
Why “Competitors” and “Dabblers?”
We previously explored an emerging digital divide by comparing “Top Digital Performers”—those
in the top quartile of reported strength deploying apps, operating APIs and using data
analytics—with the “Weakest” (those in the bottom quartile). In this report, we want to frame a
call to action respecting the fact that for some, becoming a top performer overnight is
unrealistic. At the same time, there is a material difference in trajectory based on whether a
company achieves digital performance in the top versus bottom half of the competitive set.
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Apigee Institute | September 2013
3. Learn from Leaders
Proceeding from the finding that no individual KPI cited as an area target for digital impact is a
“magic bullet,” we analyzed the distribution of expected impact across time solely among those
companies who identified a KPI as one of their top three: either: within the next 12 months; over
the next five years; or both within the next 12 months and over the next five years. Almost across
the board most frequently a KPI was cited as impacted “both” within the next 12 months and over
the next five years. However, there are three notable departures from this pattern:
Next 12 Competitors are more likely than Dabblers to focus on efficiency in 12 months
versus next 5 years—among those citing this KPI as a top area of impact, 33% of
Months Competitors versus 19% of Dabblers specifically focus on the next 12 months.
Next 5 Competitors are more likely than Dabblers to target financial metrics over the next
five years versus the next 12 months—among those citing this KPI as a top area of
Years impact, 32% of Competitors versus 17% of Dabblers focus on the next five years.
Competitors and Dabblers are united in citing satisfaction most frequently a focus
Both both in the next 12 months and over the next five years (53% and 54%, respectively).
We see this reflecting a pattern for winning competitive advantage through digital transformation:
An efficiency “edge”…
Leaders use digital strategy to build an edge in efficiency—including re-using
or externalizing existing assets, bringing new products and services faster,
and greater velocity attracting external developers or integrating with
partners in order to create multi-party experiences. Amazon CEO Jeff Bezos’
2002 mandate that all internal interfaces must be designed from the ground
6
up to be externalized is a canonical (and successful) example.
Fuels a satisfaction or share “gap”…
An edge on efficiency positions leaders to exploit shifts in customer
expectations, partnership opportunities, or a competitors’ misstep—or to
create their own disruptive attacks—with speed and scale that competitors
are unable to match. This can drive a sudden, dramatic shift in satisfaction,
share, or both. Netflix’ ability to project its streaming content nearly
ubiquitously across devices (over 250 by one report) is an example that has
entrenched its dominant share.
Which drives a revenue & profit “chasm”…
In the IT sector the share and ecosystem leader seizes a disproportionate
share of revenue and profit (e.g., Microsoft during the PC era and Apple in the
mobile sector today). As digital brings platform dynamics into play in every
industry, the same patterns will manifest. Digital native Amazon continues to
penetrate deeper into the retail sector. Nike—by far the largest sports
company in the world by revenue—may be a bellwether for how a traditional
product company uses digital transformation to turn products into platforms
and win a decisive platform advantage.
Graphs show conceptual shape of leader versus laggard KPI curves over time assuming start at parity.
Conviction that today’s trends create opportunities of this magnitude explains why leaders make
connecting digital to enterprise KPIs a top priority—and expect a big and increasing impact from it.
6See
for example “the Secret to Amazon’s Success Internal APIs,” The API Evangelist, January 2012.
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Apigee Institute | September 2013
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