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Chapter 4Chapter 4

Measuring the Success Measuring the Success of Strategic Initiativesof Strategic Initiatives

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Learning Outcomes

4.1 Compare efficiency IT metrics and effectiveness IT metrics

4.2 List and describe five common types of efficiency IT metrics

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Learning Outcomes

4.3 List and describe four types of effectiveness IT metrics

4.4 Explain customer metrics and their importance to an organization

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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

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Efficiency and 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

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Benchmarking – Baselining Metrics

• Regardless of what is 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

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Benchmarking – Baselining Metrics

• E-government benchmarks

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The Interrelationships of Efficiency and Effectiveness IT Metrics

• Efficiency IT metrics focus on technology and include:– Throughput– Transaction speed– System availability– Information accuracy– Web traffic– Response time

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The Interrelationships of Efficiency and Effectiveness IT Metrics

• Effectiveness IT metrics focus on an organization’s goals, strategies, and objectives and include:– Usability– Customer satisfaction– Conversion rates– Financial

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The Interrelationships of Efficiency and Effectiveness IT Metrics

• 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– 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)

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The Interrelationships of Efficiency and Effectiveness IT Metrics

• Interrelationships between efficiency and effectiveness

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Metrics 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

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WEB SITE METRICS

• Web site metrics include:– Abandoned registrations– Abandoned shopping cards– Click-through– Conversion rate– Cost-per-thousand– Page exposures– Total hits– Unique visitors

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SUPPLY CHAIN MANAGEMENT METRICS

• Back order

• Customer order promised cycle time

• Customer order actual cycle time

• Inventory replenishment cycle time

• Inventory turns (inventory turnover)

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CUSTOMER RELATIONSHIP MANAGEMENT METRICS

• Customer relationship management metrics measure user satisfaction and interaction and include– Sales metrics– Service metrics– Marketing metrics

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BPR AND ERP METRICS

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

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OPENING CASE STUDY QUESTIONSApple – Merging Technology, Business, and

Entertainment

1. Formulate a strategy describing how Apple can use efficiency IT metrics to improve its business

2. Formulate a strategy describing how Apple can use effectiveness IT metrics to improve its business

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OPENING CASE STUDY QUESTIONSApple – Merging Technology, Business, and

Entertainment3. List three CRM metrics Apple should track,

along with the reasons these metrics will add value to Apple’s business strategy

4. List three SCM metrics Apple should track, along with the reasons these metrics will add value to Apple’s business strategy

5. How can Apply use the balanced scorecard to make its business more efficient?

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CHAPTER FOUR CASEHow Do You Value Friendster?

• Friendster specializes in social networking

• Friendster received over $13 million in VC capital

• Google recently offered to buy Friendster for $30 million

• A venture capital company recently valued Friendster at $53 million

• Friendster has yet to generate any revenue

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Chapter Four Case Questions

1. How could you use efficiency IT metrics to help place a value on Friendster?

2. How could you use effectiveness IT metrics to help place a value on Friendster?

3. Explain how a venture capital company can value Friendster at $53 million when the company has yet to generate any revenue

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Chapter Four Case Questions

4. Explain why Google would be interested in buying Friendster for $30 million when the company has yet to generate any revenue

5. Google purchased YouTube for $1.65 billion. Do you think it was a smart investment? Why or why not?