Chapter 4

Measuring the Success of Strategic Initiatives

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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

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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.

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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 wasperforming faster or slower than expected if they were not any benchmarks?

E-government efficiency metricsincludes:• 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

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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

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Effectiveness IT metrics focus on an organization’s goals, 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

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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)

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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 monitorto determine the efficiency and effectiveness ofits Web sites?

• Revenue generation

• New customer acquisition

• The amount of traffic

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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

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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

Visitor Web site metrics

Exposure, visit, and hit Web site metrics

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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

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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

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Case Questions

1. How could you use efficiency metrics to help place a value on Friendster?

2. How could you use effectiveness metrics to help place a value on Friendster?

3. Explain how a venture capital company can value Friendster at $53 million when the company has yet to generate any revenue

4. Explain why Google would be interested in buying Friendster for $30 million when the company has yet to generate any revenue