CHAPTER 4

MEASURING THE SUCCESS OF STRATEGIC INITIATIVES

Measuring Information Technology's Success : 

• Key Performance Indicator - measures that are tied to business drivers
• Metrics are detailed measures that feed KPIs
• Performance metrics fall into the nebulous area of business intelligence that is neither technology, nor business centered, but requires input from both IT and business professionals

EFFICIENCY & EFFECTIVENESS :

• 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 increases

BENCHMARKING - Baselining Metrics :

• Regardless of what measured, how it is measured, and whether it is for the sake of efficiency or effectiveness, there must be benchmarks - baseline values the system seeks to attain
• 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
• E-government benchmarks

THE INTERRELATIONSHIPS OF EFFICIENCY & EFFECTIVENESS 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 focus on an organization's goals, strategies, and objectives and include  :

              * Usability - the ease with which people perform transactions and/or 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 customer

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

              * Financial - such as return on investment, cost-benefit analysis and break-even analysis 

• Security is an issue for any organization offering products or services over the internet
• It is inefficient for an organization to implement internet security, since it slows down processing 

                  - to be effective it must implement internet security

                  - Secure Internet connections must offer encryption and Secure Sockets Layers

• Interrelationships of Efficiency & Effectiveness 

METRICS FOR STRATEGIC INITIATIVES :

• Metrics for measuring & managing strategic initiatives include :

1. WEB SITE METRICS
2. SUPPLY CHAIN MANAGEMENTS (SCM) METRICS
3. CUSTOMER RELATIONSHIP MANAGEMENT (CRM) METRICS
4. BUSINESS PROCESS REENGINEERING (BPR) METRICS
5. ENTERPRISE RESOURCE PLANNING (ERP) METRICS

WEB SITE METRICS

• Web site metrics include :

              * Abandoned registrations - number of visitors who start the process of completing a                                                                         registration page and then abandon the activity

              * Abandoned shopping cards - number of visitors who create a shopping cart and start                                                                           shopping and then abandon the activity before paying for                                                                       the merchandise

              * Click-through - count of the number of people who visit a site, click on an ad, and are                                                     taken to the site of the advertiser

              * Conversion rate - percentage of potential customers who visit a site and actually buy                                                          something

              * Cost-per-thousand - sales dollars generated per dollar of advertising. This is commonly                                                        used to make the case for spending money to appear on a search                                                            engine

              * Page exposures - average number of page exposures to an individual visitor

              * Total hits - number of visits to a Web site, many of which may be by the same visitor 

              * Unique visitors - number of unique visitors to a site in a given time. This is commonly                                                    used by Nielsen/Net ratings to rank the most popular Web sites

SUPPLY CHAIN MANAGEMENT METRICS

• Back order - an unfilled customer order. A back order is demand against an item whose current stock level is insufficient to satisfy demand
• Customer order promised cycle time - the anticipated or agreed upon cycle time of a purchase order. It is a gap between the purchase order creation date and the requested delivery date
• Customer order actual cycle time - the average time it takes to actually fill a customer's purchase order. This measure can be viewed on an order or an order line level
• Inventory replenishment cycle time - measure of the manufacturing cycle time plus the time included to deploy the product to the appropriate distribution center
• Inventory turns (inventory turnover) - the number of times that a company's inventory cycles or turns over  per year. It is one of the most commonly used supply chain metrics

CUSTOMER RELATIONSHIP MANAGEMENT METRICS

• Customer relationship management metrics measure user satisfaction and interaction and include 

               * Sales metrics

               * Service metrics

               * Marketing metrics

BPR & ERP METRICS

• The balanced scorecard enables organizations to measure and manage strategic initiatives