CHAPTER 4 : MEASURING THE SUCCESS OF STRATEGIC INITIATIVES

Definition

Measuring Information Technology`s Success: Key performance indicator - measures that are tied to business drivers.

Benchmarking: A process of continuously measuring system results, comparing those results to optimal system performance (benchmark values), and identifying steps and procedures to improve system performance.

Efficiency IT metric: Measures the performance of the IT system itself including throughput, speed, and availability.

Effectiveness IT metric: Measures the impact IT has on business processes and activities including customer satisfaction, conversion rates, and sell-through increase.

Efficiency Versus Effectiveness

BASIS FOR COMPARISON	EFFICIENCY	EFFECTIVENESS
Meaning	The virtue of being efficient is known as efficiency.	The magnitude of nearness of the actual result with the intended result, is known as effectiveness.
What is it?	Work is to be done in a correct manner.	Doing accurate work.
Emphasis on	Inputs and Outputs	Means and Ends
Time Horizon	Short Run	Long Run
Approach	Introverted	Extroverted
Ascertainment	Strategy Implementation	Strategy Formulation
Orientation	Operations	Strategies

Efficiency IT Metrics

Efficiency IT metrics focus on technology and include:

• Throughput

          - The amount of information that can travel through a system at any point.

• Transaction speed.

          - The amount of time a system takes to perform a transaction.

• System availability

          - The number of hours a system is available for users.

• Information accuracy

          - The extent to which a system generates the correct results when executing the same transaction numerous times.

• Web traffic

          - Includes a host of benchmarks such as the number of page views, the number of unique visitors, and the average time spent viewing a Web page.

• Response time

          - The time it takes to respond to user interactions such as a mouse click.

Effectiveness IT Metrics

Effectiveness IT metrics focus on an organization`s goals, strategics, and objectives and include:

• Usability

          - The ease with which people perform transaction and find information. A popular usability metric on the internet is degrees of freedom, which measures the number of clicks required to find desired information.

• Customer satisfaction

          - Measured by such benchmarks as satisfaction surveys, percentage of existing customers retained, and increases in revenue dollars per customers.

• Conversion rates    

          - The number of customers an organization "touches" for the first time and persuades to purchase its products or services. This is a popular metric for evaluating the effectiveness banner, pop-up, and pop-under ads on the internet.

• Financial

          - The financial such as return on investment ( the earning power of an organization`s assets), cost-benefit analysis ( the comparison of projected revenues and costs including development maintenance, fixed and variable), and break-even analysis ( the point at which constant revenues equal ongoing costs). 

Metrics For Strategic Initiatives.

Metrics for measuring and managing strategic initiatives include:

(a) Web site metrics

•  Abandoned registrations.
• Abandoned shopping cards.
• Click-through.
• Conversion rate.
• Cost-per-thousand.
• Page exposures.
• Total hits
• Unique visitors.

(b) Supply chain management (SCM) metrics

• Back order.
• Customer order promised cycle time.
• Customer order actual cycle time.
• Inventory replenishment cycle time.
• Inventory turns (inventory turnover).

(c) Customer relationship management (CRM) metrics

• Sales metrics.
• Service metrics.
• Marketing metrics.

(d) Business process reengineering (BPR) metrics.

(e) Enterprise resource planning (ERP) metrics.