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 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 self-through increases.

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.

• Customer satisfaction  

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

• Conversion rates (actual buying)

- The number of customers an organization ''touches'' for the first time and persuades to purchase its products or services.

• Financial  

- Financial return to the company. Such as return on investment, cost-benefit analysis and break-even analysis.

METRICS FOR STRATEGIC INITIATIVES

Metrics for measuring and managing strategic initiatives include :

1. Web site metrics
2. Supply chain management (SCM) metrics
3. Customer relationship management (CRM) metrics
4. Business process reengineering (BPR) metrics
5. Enterprise resource planning (ERP) metrics

*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 (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 the same visitor.
• Unique visitors = Number of unique visitors to a site in a given time. It can tell the visitors specific locations.

*Supply chain management (SCM) 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. 

• Inventory replenishment(restock) 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. It is one of the most commonly used supply chain metrics.

*Customer relationship management (CRM) metrics

Customer relationship management metrics measure user satisfaction and interaction and incude

• Sales metrics
• Service metrics 
• Marketing metrics

*Business process reengineering (BPR) & Enterprise resource planning (ERP) metrics

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