Transcript Slide 1

Chapter 4
Measuring the Success
of Strategic Initiatives
McGraw-Hill/Irwin
© 2008 The McGraw-Hill Companies, All Rights Reserved
Learning Outcomes
4.1
Compare efficiency IT metrics and
effectiveness IT metrics
4.2
List and describe five common types of
efficiency IT metrics
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Learning Outcomes
4.3
List and describe four types of
effectiveness IT metrics
4.4
Explain customer metrics and their
importance to an organization
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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
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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
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Benchmarking – Baselining
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
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Benchmarking – Baselining
Metrics
• E-governement benchmarks
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The Interrelationships of Efficiency
and Effectiveness IT Metrics
• Efficiency IT metrics focus on technology
and include:
– Throughput
– Transaction speed
– System availability
– Information accuracy
– Web traffic
– Response time
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The Interrelationships of Efficiency
and Effectiveness IT Metrics
• Effectiveness IT metrics focus on an
organization’s goals, strategies, and
objectives and include:
– Usability
– Customer satisfaction
– Conversion rates
– Financial
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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)
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The Interrelationships of Efficiency
and Effectiveness IT Metrics
• Interrelationships between efficiency and
effectiveness
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Determining IT Efficiency and
Effectiveness
• Customer metric – assess the
management of customer relationships by
the organization and include:
– Market share
– Customer acquisition
– Customer satisfaction
– Customer profitability
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Web Traffic Analysis
• Most companies measure the traffic on a
Web site as the primary determinant of
the Web site’s success
– However, a large amount of Web site traffic
does not necessarily equate to large sales
• Many organizations with high Web site
traffic have low sales volumes
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Web Traffic Analysis
• Web site traffic analysis can include:
– 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
• Clickstream data tracks the exact pattern of a
consumer’s navigation through a Web site
• Clickstream data can reveal the following:
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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
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Behavioral Metrics
• Visitor Web site metrics include:
– Unidentified visitor
– Unique visitor
– Session visitor
– Tracked visitor
– Identified visitor
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Behavioral Metrics
• Exposure metrics include:
– Page exposure
– Site exposure
• Visit metrics include:
– Stickiness
– Raw visit depth
– Visit depth
• Hit metrics include:
– Hits
– Qualified hits
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OPENING CASE STUDY QUESTIONS
Apple – Merging Technology, Business, and
Entertainment
1. Formulate a strategy describing how
Apple can use efficiency IT metrics to
improve its business
2. Formulate a strategy describing how
Apple can use effectiveness IT metrics
to improve its business
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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
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Chapter Four Case Questions
1. How could you use efficiency IT metrics to
help place a value on Friendster?
2. How could you use effectiveness IT 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
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