Digital KPIs For The Automotive Industry Of The Future

Car companies are now moving further afield in their digital transformation journey, and are setting new metrics and goals to measure how successful they are in pursuit of their digital future. As a close observer of this growth trajectory, I have been particularly interested in understanding the digital key performance indicators (KPIs) they will adopt to test the effectiveness of their efforts.  Some of what I have learnt is summarised below.

Customer Is Still King

The automotive industry needs digital KPIs across its value chain, both upstream and downstream. These are also required across all departments from supply chain management, R&D, production, and sales & marketing, to vehicle life cycle management.

To my mind, the killer KPI that OEMs have never tracked—and could never track in the past as they lacked access to vehicle drivers—is the Customer. This entity needs to be their No. 1 focus. Customer satisfaction, which was consistently identified as the most important management KPI in previous years (and has now been substituted by Net Promoter Score), will now organically transform into a more sophisticated metric. In this avatar, it will not be a single, monolithic KPI.  Instead, multiple customer-focused KPIs will offer more granular or nuanced insights into specific segments like customer spend or loyalty.

Another of my findings is that vehicle manufacturers’ goals for setting digital KPIs need to evolve in line with industry vision. In other words, their KPIs need to mirror a changing landscape: from current digital services to car-as-a-service and, from there, to mobility-as-a-service, in which the car becomes a part of a larger, multi-modal transport solution.  Eventually, KPIs will need to reflect the role of a car as an integrated element of connected living solutions. Such connected living KPIs will include elements like energy management solutions, in-vehicle media access, and connectivity to smart home devices like Alexa.

My research also shows that there need to be two types of KPIs:

– Current (analogue) business practices that are optimised through digital infusion. This could take the form, for instance, of devising digital KPIs for existing finance or business operational metrics.

– New digital functions and business models that create or require new capabilities and KPIs. For example, a connected car would mean that, as car companies move their sales online, they will need to embrace new digital KPIs like digital leads, or the conversion ratio of online inquiries into actual purchases.

With these two types of digital KPIs, it will be important to measure performance metrics that differentiate results between the new digital model vs the non-digital one.

Using Digital KPIs to More Effectively Set and Realize Goals

A pitfall I notice is that, sometimes, companies do not understand or differentiate between business KPIs and enterprise KPIs.   The enterprise measures of an organisation like revenue and profit margin do not change. But, in a digital world, one can better measure the effectiveness of how to achieve these objectives through clearly defined metrics.

It is equally important to have a set of KPIs for the management and leadership team, including the CEO and board. Unlike in the past, when management bonuses in the car industry tended to be subjective, with digital KPIs, the results of a management team’s efforts are easier to quantify and manage. Today, as a result, the leadership team’s effectiveness in implementing change or new strategies is more easily measurable, facilitating rapid course correction when required.

Striking A Balance

Adopting digital KPIs will help companies understand how digital they really are and how much more they really can be.  Like they say, if you can’t measure, you can’t manage. Digital KPIs will also help organisations understand the financial, productivity and business benefits they can achieve as a result of embracing the digital future.

Digital transformation is opening up new revenue sources for the car industry, such as data monetisation from cars or selling parts online. These trends are sparking the need for new KPIs. Companies are finding that, in many cases, the best way to learn about these KPIs is from adjacent industries.  For example, reinventing your own KPIs in an e-marketplace seems fairly redundant when Amazon and eBay can teach you better how to measure them and benchmark yourself.

A word of caution as digital KPIs become the idea of the moment. Car companies need to be aware of the downsides of digital transformation.  Over engineering existing measures of success and KPIs is certain suicide.  Striking a fine balance is critical as a “too much, too soon” approach might just cause your vehicle to steer off course.

Frost & Sullivan is currently conducting a deep dive analysis on this topic. If you are an industry executive and would like to participate in our research, please get in touch.