CHAPTER 4: MEASURING THE SOURCESS OF STRATEGIC INITIATIVE

MEASURING INFORMATION TECHNOLOGY’S SUCCESS: METRICS

METRICS are measurements that evaluate result to determine whether a project is meeting its goals.

·         Two core metrics:

 - Critical Success Factors (CSFs) are the crucial steps companies perform to achieve their goals and objectives and implement their strategies.

- Key performance indicator (KPIs) is a measures that 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 IT and business professionals.

·         Efficiency IT metric- measure the performance of the IT system itself including throughput, speed and availability.

·         Effectiveness IT metric- measure the impact IT has on business processes and activities including customer satisfaction, conversation rates, and sell-through increase.

-Benchmarking is a process of continuously measuring system result, comparing those results to optimal system performance (benchmark value), and identifying steps and procedures to improve system performance.

EFFICIENCY IT METRICS

Focus on technology.

1.      Throughput – the amount of information that can travel through a system at any point.

2.      Transactional speed – The amount of time system takes to perform a transaction.

3.      System availability – The number of hours a system is available for users.

4.      Information accuracy – The extent to which a system generates the correct results when executing the same transaction numerous times.

5.      Web traffic – Includes a host of benchmarks such as the number of page view, the number of unique visitors, and the average time spent viewing a web page.

6.      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.

1.      Usability – The ease with which people perform transactions 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.

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

3.      Conversion rates – The number of customers an organization “touches” for the first time and persuades to purchase its product or services.

4.      Financial – such as return investment (the earning power of an organization’s assets, cost benefit analysis (to 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

·         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 connection must offer encryption and Secure Layers (SSK denoted by the lock symbol in the lower right corner of a browser)

METRICS FOR STRATEGIC INITIATIVE

For measuring and managing strategic initiatives includes;

-          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

1.      Abandoned registrations – Number of visitor who start the process of completing a registration page and then abandon the activity.

2.      Abandoned shopping carts – Number of visitors who create a shopping cart and start shopping and then abandon the activity before paying for the merchandise.

3.      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.

4.      Conversation rate – Percentage of potential customers who visit a site and actually buy something.

5.      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.

6.      Page exposures – Average number of page exposures to an individual visitor.

7.      Total hits – Number of visits to a Web site, many of which may be by the same visitor.

8.      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 (SCM) METRICS

1.      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.

2.      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.

3.      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.

4.      Inventory replenishment cycle time – Measure of the manufacturing cycle time plus the time included to deploy the product to the appropriate distribution center.

5.      Inventory turns (inventory turnover) – The number of time that a company’s inventory cycle or turns over per year. It is one of the most commonly used supply chain metrics.

CUSTOMERS RELATIONSHOP MANAGEMENT (CRM) METRICS

Customer relationship management metrics measure user satisfaction and interaction.

1.      Sales metric

2.      Service metrics

3.      Marketing metrics

BPR AND ERP METRICS

The balance scorecard enables organizations to measure and manage strategic initiative.