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

4-3

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 4-5

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-government benchmarks

4-7

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

4-9

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

4-11

Metrics for Strategic Initiatives

• Metrics for measuring and managing
strategic initiatives include:
– Web site metrics
– Supply chain management (SCM) metrics
– Customer relationship management (CRM)
metrics
– Business process reengineering (BPR)
metrics
– Enterprise resource planning (ERP) metrics
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 WEB SITE METRICS
• Web site metrics include:
– Abandoned registrations
– Abandoned shopping cards
– Click-through
– Conversion rate
– Cost-per-thousand
– Page exposures
– Total hits
– Unique visitors
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SUPPLY CHAIN MANAGEMENT

METRICS
• Back order
• Customer order promised cycle time
• Customer order actual cycle time
• Inventory replenishment cycle time
• Inventory turns (inventory turnover)

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 CUSTOMER RELATIONSHIP
MANAGEMENT METRICS
• Customer relationship management
metrics measure user satisfaction and
interaction and include
– Sales metrics
– Service metrics
– Marketing metrics

4-15

BPR AND ERP METRICS

• The balanced
scorecard
enables
organizations
to measure and
manage
strategic
initiatives

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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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OPENING CASE STUDY QUESTIONS

Apple – Merging Technology, Business, and
Entertainment
3. List three CRM metrics Apple should track,
along with the reasons these metrics will
add value to Apple’s business strategy

4. List three SCM metrics Apple should track,

along with the reasons these metrics will
add value to Apple’s business strategy

5. How can Apply use the balanced scorecard

to make its business more efficient?

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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

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

5. Google purchased YouTube for $1.65 billion.

Do you think it was a smart investment? Why
or why not?

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