CHAPTER 4 MEASURING THE SUCCESS OF STRATEGIC INITIATIVES

Measuring Information Technology's Success

 

A few questions banking executives recently raised regarding their IT systems include:

• Is the internal IT operation performing satisfactorily?
• Should the company outsource some or all of the IT operations?
• How is the outsourcing company performing?
• What are the risk factors to consider in an IT project?
• What questions should be asked to ensure an IT project proposal is realistic?
• What are the characteristics of a healthy project?
• Which factors are most critical to measure to ensure the project achieves success?
  

 key performance indicators (KPIs) are the measures that are tied to business drivers.

 

 

Efficiency and Effectiveness

Efficiency IT metrics measure the performance of the IT system itself including throughput, speed, and availability.

Effectiveness IT metrics measure the impact IT has on business processes and activities including customer satisfaction, conversion rates, and sell-through increases.

 

 

Benchmarking--Baseline Metrics

Benchmarking is 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- measure the performance of the IT system itself including throughput,speed,and         availability.

                                - it focuses on the technology itself.

Types of 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- measure the impact IT has on business processing and activities including customer satisfaction, conversion rates, and sell-through increases.

 

Types of Effectiveness IT Metrics:

• 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: Th 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).
  

 

Metrics for Strategic Initiatives

A few of the more common financial ratios include:

• Internal rate of return (IRR) -- the rate at which the net present value of an investment equals zero.
• Return on investment (ROI) -- indicates the earning power of a project and is measured by dividing the benefits of a project by the investment.
• Payback method--number of years to recoup the cost of an initiative based on projected annual net cash flow.
• Break-even analysis--determines the volume of business required to make a profit at the current prices charged for the products or services.

 

The following metrics will help managers measure and manage their strategic initiatives:

• Website metrics.
• Supply chain management (SCM) metrics.
• Customer relationship management (CRM) metrics.
• Business process reengineering (BPR) metrics.
• Enterprise resource planning (ERP) metrics.
  

  

 

WEBSITE METRICS

 

 

 

 

 

SUPPLY CHAIN MANAGEMENT (SCM) METRICS

 

 

 

 

 

 

CUSTOMER RELATIONSHIP MANAGEMENT (CRM) METRICS

 

 

 

 

 

 

BUSINESS PROCESS REENGINEERING (BPR) AND ENTERPRISE RESOURCE PLANNING (ERP) METRICS

The balanced scorecard is a management system, in addition to a measurement system, that enables organizations to clarify their vision and strategy and translate them into action.

 

The balanced scorecard views the organization from four perspectives,and users should develop metrics, collect data, and analyse their business relative to each of these perspectives:

• The learning and growth perspective.
• The internal business process perspective.
• The customer perspective.
• The financial perspective