CHAPTER 4: MEASURING THE SUCCESS OF STRATEGIC INITIATIVES

MEASURING INFORMATION TECHNOLOGY SUCCESS

Key performance indicators (KPIs) are the measures that are tied to business drivers. Metrics are the detailed measures that feed those KPIs. Performance metrics fall into a nebulous area of business intelligence that is neither technology - nor business- centered, but this area requires input from both IT and business professionals to find success.


EFFICIENCY AND EFFECTIVENESS

Efficiency of metrics measure the performance of the IT system itself including throughput, speed and availability. Effectiveness of metrics measure the impact IT has on business processes and activities including customer satisfaction, conversion rates, and sell-through increases.

BENCHMARKING - BASELINE METRICS

Benchmarking is 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.

METRICS FOR STRATEGIC INITIATIVES

WEBSITE METRICS

1. Abandoned registration: number of visitors who start the process of completing a registration page and then abandon the activity.
2. Abandoned shopping carts number of visitors who create the shopping cart and start shopping and then abandon the activity before paying for the merchandise.
3. Click-through: count of the number of people who visit a site, click on an ad, and are taken to the site of the advertiser.
4. Conversion rate: percentage of potential customers who visit a site and actually buy something
5. Cost per-thousand: sales dollars generated per dollar of advertising.
6. Pages exposures: average number of pages exposures to an individual visitor.
7. Total hits: number of visits to a website, many of which may be by the same visitor.
8. Unique visitors: number of unique visitors to a site in a given time.

SUPPLY CHAIN MANAGEMENT (SCM) METRICS

Supply chain measurements can cover many areas including procurement, production, distribution, warehousing, inventory, transportation and customer services. A supply chain is only as strong as its weakest link.

SCM METRICS

1. Back order: an unfilled customer order. A back order is demand against an item whose current stock level is insufficient to satisfy demand.
2. Customer order promised cycle time: the anticipated or agreed upon cycle time of a purchase order. It is a gap between the purchase order creation date and the requested delivery date.
3. Customer order actual cycle time: the average time it takes to actually fill a customer's purchase order.
4. Inventory replenishment cycle time: measure of the manufacturing cycle time plus the time included to deploy the product to the distribution center.
5. Inventory turnover: the number of times that a company,s inventory cycles or turns over per year.

BUSINESS PROCESS REENGINEERING (BPR) AND ENTERPRISE RESOURCE PLANNING (ERP) METRICS

Measuring this type is definitely difficult. One of the best methods is the balanced scorecard. Addressing some of the weaknesses and vagueness of previous measurements techniques, the balanced scorecard approach provides a clear description as to what companies should measure in order to balance the financial perspective.