KPIs pulling double duty: Expansion meets transformation
Are you tasked with steering an international expansion and transformation of an organization at the same time? That’s a formidable challenge. Brace yourself. Make sure you monitor the “right” metrics from the get go.
Here's a suggested ranking of the top five performance indicators (KPIs) based on priority and potential impact during a simultaneous international expansion and transformation:
KPI #1: Revenue Growth from New Markets
Why it's #1: Revenue is the most direct indicator of success of an international growth initiative. If the expansion doesn’t cumulate in revenue growth, the expansion effort could be flawed. Even though external factors can impact revenue growth (competitors launch a surprise product), and CAC (customer acquisition costs) can be hefty, this sales indicator should be closely monitored.
The potential impact of revenue growth from new markets can be significant, as it directly ties to a company expansion's commercial success. The potential impact underscores the importance of this KPI.
KPI #2: Employee Engagement & Adoption Rate
Why it's #2: Transformations often fail due to the resistance to change of employees. Change fatigue can also be a factor, manifesting in low employee engagement. Ensuring that members of the workforce are on board with new systems and processes is essential to the transformation and thus, the expansion's long-term success. For example, local finance teams may find it challenging to adapt to a new ERP (enterprise resource planning) system. But such streamlined systems consolidate data and automate workflows between finance, supply chain, HR, and logistics - efficiencies that are badly needed when a company expands beyond its domestic borders.
The potential impact of employee engagement & adoption rate is very high. This underscores the critical role of employees in the transformation. If employees disengage, the transformation could falter, leading to operational inefficiencies and low morale.
KPI #3: Market penetration rate
Why it's #3: Tracking how well the organization is gaining a foothold in new markets is essential for long-term growth. If the penetration rate is too low, the products / services might need to be adjusted to better meet local demand. At times, tweaking the marketing strategy and the sales process might remedy low penetration rates.
The potential impact of market penetration rate is medium to high. This KPI highlights the importance of adapting to local demand, as reaching high penetration rates might take longer than immediate revenue growth.
KPI #4: Operational Efficiency
Why it's #4: Operational improvements often result from successful transformation efforts. Measuring operational efficiency during expansion ensures that your internal processes are optimized and scalable as you grow.
Potential impact: Medium. While necessary for long-term stability and growth, short-term revenue and employee engagement typically take precedence.
KPI #5: Customer Satisfaction & Retention Rate
Why it's #5: Customer satisfaction reflects how well your company adapts to new markets and serves existing customers post-transformation. While critical, it can often be a lagging indicator of overall success. In particular its manifestations such as the net promoter score (= how customers perceive the customer experience) in new markets only appear once the new market has been served for a while.
Potential impact: Medium. It reflects both transformation and expansion success but often becomes more critical after the initial phases.
Creating a dashboard consisting of these five KPIs can help you see the forest for the trees. Its ranking balances immediate commercial success (revenue growth) and long-term sustainability (employee engagement, operational efficiency, customer satisfaction). Revenue tends to take priority early in an international expansion, while employee engagement and operational efficiency are crucial for the sustained success of the transformation.
Keep in mind that these KPIs are not independent of each other. For example, high employee engagement can lead to better operational efficiency, which in turn can improve customer satisfaction and retention rates. That is why you need to closely monitor all five of them. Never negate “soft” factors such as employee engagement and customer satisfaction.