McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, All Rights Reserved Chapter 4 Measuring the Success of Strategic Initiatives

4-2 Learning Outcomes 4.1 Compare efficiency IT metrics and effectiveness IT metrics 4.2 List and describe five common types of efficiency IT metrics

4-3 Learning Outcomes 4.3 List and describe four types of effectiveness IT metrics 4.4 Explain customer metrics and their importance to an organization

4-4 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

4-5 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

4-6 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

4-7 Benchmarking – Baselining Metrics E-governement benchmarks

4-8 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

4-9 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

4-10 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)

4-11 The Interrelationships of Efficiency and Effectiveness IT Metrics Interrelationships between efficiency and effectiveness

4-12 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

4-13 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

4-14 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

4-15 Behavioral Metrics Clickstream data tracks the exact pattern of a consumer’s navigation through a Web site Clickstream data can reveal the following: –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

4-16 Behavioral Metrics Visitor Web site metrics include: –Unidentified visitor –Unique visitor –Session visitor –Tracked visitor –Identified visitor

4-17 Behavioral Metrics Exposure metrics include: –Page exposure –Site exposure Visit metrics include: –Stickiness –Raw visit depth –Visit depth Hit metrics include: –Hits –Qualified hits

4-18 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

4-19 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

4-20 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