MGT 300 CHAPTER 4 : Measuring the Success of Strategic
Initiatives
Measuring Information Technology’s Success
v Key
performance indicator – measures that are tied to business drivers
v Metrics
are detailed measures that feed KPIs
v 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
v Efficiency
IT metric – measures the performance of the IT system itself including
throughput, speed, and availability
v Effectiveness
IT metric – measures the impact IT has on business processes and
activities including customer satisfaction, conversion rates, and sell-through
increases
v 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 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 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).
The Interrelationships of Efficiency and Effectiveness
IT Metrics
v Security
is an issue for any organization offering products or services over the
Internet
v 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)
Metrics for Strategic Initiatives
v 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)
WEB SITE METRICS
v 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
v 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.
v 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.
v 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.
v Inventory
replenishment cycle time
Measure of the manufacturing cycle time plus
the time included to deploy the product to the appropriate distribution center.
v 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
v Customer
relationship management metrics measure user satisfaction and interaction and
include
§ Sales metrics
§ Service metrics
§ Marketing metrics
BPR AND ERP METRICS
The balanced scorecard enables organizations
to measure and manage strategic initiatives
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