Chapter 4 Measuring the Success of Strategic Initiatives
Learning Outcomes • Compare efficiency IT metrics and effectiveness IT metrics • List and describe five common types of efficiency IT metrics • List and describe four types of effectiveness IT metrics • Explain customer metrics and their importance to an organization
Overview Efficiency and effectiveness IT metrics are two ways to measure the success of IT strategic initiatives • Efficiency IT metrics – measure the performance of the IT system itself including throughput, speed, availability, etc. • Effectiveness IT metrics – measure the impact IT has on business processes and activities including customer satisfaction, conversion rates, sell-through increases, etc.
Benchmarking - Baselining Metrics • 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 How would you determine if the system was performing faster or slower than expected if they were not any benchmarks?
E-government efficiency metrics • includes: • the number of computers • per 100 citizens • the number of Internet hosts • per 10,000 citizens • the percentage of the • citizen population online E-government effectiveness metrics include CRM practices, customer-service vision, approaches to offering e-government services through multiple-service delivery channels, and initiatives for identifying services for individual citizen segments
Efficiency IT metrics focus on technology and include: • Throughput – amount of information that can travel through a system at any point in time • Speed – amount of time to perform a transaction • Availability – number of hours a system is available • Accuracy – extent to which a system generates correct results • Web traffic– includes number of pageviews, number of unique visitors, and time spent on a Web page • Response time – time to respond to user interactions
Effectiveness IT metrics focus on anorganization’sgoals, strategies, & objectives • Usability – the ease with which people perform transactions and/or find information • Customer satisfaction – such as the percentage of existing customers retained • Conversion rates – number of customers an organization “touches” for the first time and convinces to purchase products or services • Financial – such as return on investment, cost-benefit analysis, etc.
The interrelationships between efficiency and effectiveness • 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 time. 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)
Determining IT Efficiency and Effectiveness Customer metrics – assess the management of customer relationships by the organization and include: • Market share • Customer acquisition • Customer satisfaction • Customer profitability
What types of things can an organization monitor to determine the efficiency and effectiveness of its Web sites? • Revenue generation • New customer acquisition • The amount of traffic
Web Traffic Analysis • Cookie – a small file deposited on a hard drive by a Web site containing information about customers and their Web activities • Click-through – a count of the number of people who visit one site and click on an advertisement that takes them to the site of the advertiser • Banner ad – a small ad on one Web site that advertises the products and services of another business, usually another dot-com business • Interactivity – visitor interactions with the target ad
Behavioral Metrics • Click-stream data tracks the exact pattern of a consumer’s navigation through a Web site • Click-stream data can reveal: • Number of pageviews • Pattern of Web sites visited • Length of stay on a Web site • Date and time visited • Number of customers with shopping carts • Number of abandoned shopping carts
How Levi’s Got Its Jeans into Wal-Mart • Formulate a strategy for how Levi’s can use efficiency metrics to improve its business • Formulate a strategy for how Levi’s can use effectiveness metrics to improve its business
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
Case Questions • How could you use efficiency metrics to help place a value on Friendster? • How could you use effectiveness 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 • Explain why Google would be interested in buying Friendster for $30 million when the company has yet to generate any revenue