Measuring the Success of Strategic Initiatives CHAPTER 4 Measuring the Success of Strategic Initiatives

LEARNING OUTCOMES 4.1 Compare efficiency IT metrics and effectiveness IT metrics 4.2 List and describe five common types of efficiency IT metrics

LEARNING OUTCOMES 4.3 List and describe four types of effectiveness IT metrics 4.4 Explain customer metrics and their importance to an organization

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 sell-through increases

BENCHMARKING – BASELINE METRICS Regardless of what is measured, how it is measured, and whether it is for the sake of efficiency or effectiveness, there must be benchmarks – baseline values the system seeks to attain 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

BENCHMARKING – BASELINE METRICS Comparing efficiency IT and effectiveness IT metrics for egovernment initiatives

THE INTERRELATIONSHIPS OF EFFICIENCY AND EFFECTIVENESS IT METRICS Common types of efficiency IT metrics

THE INTERRELATIONSHIPS OF EFFICIENCY AND EFFECTIVENESS IT METRICS Effectiveness IT metrics focus on an organization’s goals, strategies, and objectives and include…

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 connections must offer encryption and Secure Sockets Layers (SSL denoted by the lock symbol in the lower right corner of a browser)

THE INTERRELATIONSHIPS OF EFFICIENCY AND EFFECTIVENESS IT METRICS Interrelationships between efficiency and effectiveness

METRICS FOR STRATEGIC INITIATIVES Metrics for measuring and managing strategic initiatives include: Website metrics Supply chain management (SCM) metrics Customer relationship management (CRM) metrics Business process reengineering (BPR) metrics Enterprise resource planning (ERP) metrics

METRICS FOR STRATEGIC INITIATIVES

Website Metrics

Supply Chain Management Metrics

Customer Relationship Management Metrics

BPR And ERP Metrics The balanced scorecard enables organizations to measure and manage strategic initiatives

OPENING CASE STUDY QUESTIONS Apple – Merging Technology, Business, and Entertainment Formulate a strategy describing how Apple can use efficiency IT metrics to improve its business Formulate a strategy describing how Apple can use effectiveness IT metrics to improve its business

OPENING CASE STUDY QUESTIONS Apple – Merging Technology, Business, and Entertainment List three CRM metrics Apple should track, along with the reasons these metrics will add value to Apple’s business strategy List three SCM metrics Apple should track, along with the reasons these metrics will add value to Apple’s business strategy How can Apply use the balanced scorecard to make its business more efficient?

CHAPTER FOUR CASE How Do You Value Friendster? Friendster specializes in social networking Friendster received over $13 million in VC capital Google recently offered to buy Friendster for $30 million A venture capital company recently valued Friendster at $53 million Friendster has yet to generate any revenue

CHAPTER FOUR CASE QUESTIONS How could you use efficiency IT metrics to help place a value on Friendster? How could you use effectiveness IT metrics to help place a value on Friendster? Explain how a venture capital company can value Friendster at $53 million when the company has yet to generate any revenue

CHAPTER FOUR CASE QUESTIONS Explain why Google would be interested in buying Friendster for $30 million when the company has yet to generate any revenue Google purchased YouTube for $1.65 billion. Do you think it was a smart investment? Why or why not?