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 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
Benchmarks - baseline values the system seeks to attain.

Bench-marking - 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
  • 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 
  • Usability - The ease 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, cost-benefit analysis, and break-even analysis.
 
Metrics for measuring and managing strategic initiatives:
- 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:
  • Abandoned registrations - Number of visitors who start the process of completing a registration page and then 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 site 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.
  • 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 visitor - Number of unique visitors to a site in a given time.

Supply Chain Management metrics:
  • Back order - An unfilled customer order.
  • Customer order promised cycle time - The anticipated or agreed upon cycle time of a purchase order.
  • Customer order actual cycle time - The average time it takes to actually fill a customer's purchase order.
  • 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. 

Customer Relationship Management metrics:
  • Sales metrics
  • Service metrics
  • Marketing metrics
 
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