CHAPTER 4

MEASURING THE SUCCESS of STRATEGIC INITIATIVES

In this chapter, we learned about :

• Compare efficiency IT metrics and effectiveness metrics

• List and describe five common types of efficiency IT metrics

• List and describe four types of effectiveness of IT metrics

• Explain customer metrics and their importance to an organization

MEASUREMENT 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 and EFFECTIVENESS

• Efficiency focuses on the extent to which an organization is using its resources in an optimal way, "Doing things right"

• Effectiveness focuses on how well an organization is achieving its goal and objectives, "Doing the right things"

• 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 it is measured,  how it is measured, and whether it is for the sake of efficiency or effectiveness, there must be benchmark - 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 benchmark

THE INTERRELATIONSHIP of EFFICIENCY and EFFECTIVENESS IT METRICS

• Efficiency metrics monitor technology

• Efficiency metric are easier to measure monitor than effectiveness 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 time
- Web traffic ~ includes a host of benchmark 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 information. A popular usability metric on the Internet is the 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 purchase its 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 (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)

• 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 its slows down processing

• However, to be effective it must implement Internet security

• Secure Internet connections must offer encryption and Secure Sockets Layers (SSL denoted by the lock symbol in the lower right corner of a browser)

• Interrelationships between efficiency and effectiveness

METRIC for STRATEGIC INITIATIVES

• Metrics for measuring and managing strategic initiatives include :

• Web site metrics

• Supply chain management (SCM) metrics

• Customer relationship management (CRM) metrics

• Business process reengineering (BPR) metrics

• 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 than abandon the activity
- Abandoned shopping carts ~ 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 side of the advertiser
- Conversion rate ~ percentage of potential customers who visit a site and actually buy something
- Cost-per-thousand (CPM) ~ 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


SUPPLY CHAIN MANAGEMENT METRICS

• Back order - an unfilled customer order. A back order is demand (immediate or past due) 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 that a company's inventory cycles or tuns over per year. It i 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
* number of prospective customers
* number of new customers
* number of retained customers
* number of open leads
* number of sales calls
* number of sales calls per lead
* amount of new revenue
* amount of recurring revenue
* number of proposals given

Service metrics
* cases closed same day
* number of cases handled by agent
* number of service calls
* average number of service requests by type
* average time to resolution
* average number of service calls per day
* percentage compliance with service-level agreement
* percentage of service renewals
* customer satisfaction level

Marketing metrics
* number of marketing campaigns
* new customer retention rate
* number of responses by marketing campaign
* number of purchases by marketing campaign
* revenue generated by marketing campaign
* cost per interaction by marketing campaign
* number of new customers acquired by marketing campaign
* customer retention rate
* number of new leads by product


 BPR and ERP METRICS

The balanced scorecard enables organizations to measure and manage strategic initiatives