1. Measuring the Success of Strategic Initiatives
Section 24
Measuring the Success of Strategic Initiatives
CLASSROOM OPENER
GREAT BUSINESS DECISIONS – Apple’s Decision to Develop the First Saleable Personal Computer (PC)
Like all great computer companies, Apple began its life in a garage. In 1977, Steve Jobs and Steve Wozniak built the Apple 1, regarded by many as the first real personal computer. This founded the Apple Company and the invention of the Apple 2 and the Apple Macintosh. Apple’s key goal was to make computers accessible to ordinary people. Jobs and Wozniak captured an opportunity and changed the world through a combination of good fortune and technical and marketing brilliance.
Instead of writing commands in computer code, Apple owners invented a mouse to click on easily recognizable icons – for example, a trash can and file folders. Other companies were quick to copy Apple’s competitive advantage, including Microsoft.
The two founders eventually parted, with Wozniak leaving the company to become a teacher and Jobs continuing with the launch of the Apple Macintosh. Unfortunately, Macintosh captured only 20 percent of the desktop market, while Microsoft captured 80 percent of the desktop market with its MS-DOS operating system.
One newspaper described Jobs as a “corporate Huckleberry Finn” and said his early business exploits had already made him part of American folk history. John Sculley, former Pepsi chairman, removed Jobs from Apple in Sculley was removed from Apple in Eventually, after a 13-year exile, Jobs returned to Apple in The man who founded the company had come full circle and was now its only hope for survival.
Jobs’ return brought the creation of the iMac and Apple rediscovered its inventive originality. The iMac sold 278,000 units in the first six weeks and was described by Fortune as “one of the hottest computer launches ever.” The iMac and Jobs’ return contributed to doubling Apple’s share prices in less than a year.
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2. LEARNING OUTCOMES
Define metrics and describe the relationship between efficiency IT metrics and effectiveness IT metrics
Explain why a business would use metrics to measure the success of strategic initiatives
A detailed review of the learning outcomes can be found at the end of the chapter in the textbook

3. METRICS: MEASURING SUCCESS
Project – A temporary activity a company undertakes to create a unique product, service, or result
Metrics – Measurements that evaluate results to determine whether a project is meeting its goals
Ask your students why they would want to define metrics to evaluate a projects success?
What types of metrics would they apply to the following situations? How would the metrics help them determine if their decision was successful?
Buying a new car
Purchasing a home
Renting an apartment
Buying a new office building
Buying employee health insurance

4. METRICS: MEASURING SUCCESS
Measure Effectiveness
Measure Efficiency
Ask your students what categories would they list if they were writing their own personal CSFs?
Potential answers include:
Engage in Continuous Learning – Earn a Degree
Exercising and Practicing Healthy Habits
Building strong relationships and friendships

5. METRICS: MEASURING SUCCESS
Critical success factors (CSFs) – The crucial steps companies perform to achieve their goals and objectives and implement strategies
Create high-quality products
Retain competitive advantages
Reduce product costs
Increase customer satisfaction
Hire and retain the best professionals
Ask your students what categories would they list if they were writing their own personal CSFs?
Potential answers include:
Engage in Continuous Learning – Earn a Degree
Exercising and Practicing Healthy Habits
Building strong relationships and friendships

6. METRICS: MEASURING SUCCESS
Key performance indicators (KPIs) – The quantifiable metrics a company uses to evaluate progress toward critical success factors
Turnover rates of employees
Number of product returns
Number of new customers
Average customer spending
Key points to understand about CSFs and KPIs =
CSFs = are elements crucial for a business strategy’s success and one CSF can have many KPIs
KPIs = measure the progress of the CSFs with quantifiable measurements can focus on external and internal measurements
RESOURCE FOR CLASSROOM ACTIVITY
KPI Library
This is a KPI library or aggregator for finding KPIs in many industry’s. Over 240,000 professionals use this library to research, and share and compare KPI strategies with other executives all over the world

7. KPI vs CSF

8. KPI vs CSF
CSF can be defined as those particular areas or issues which are important to the success of an organization
CSF is very important for achievement of goals and ambitions of an organization.
KPIs are measure the ways to the success of a company
KPIs don’t show how to improve
CSF helps us find the areas which are to be improved so that the success is ensured.

9. KPI vs CSF

10. Efficiency and Effectiveness
Efficiency MIS metric – measures the performance of the MIS system itself including throughput, speed, and availability; Efficiency focuses on the extent to which an organization is using its resources in an optimal way – “Doing things right” – emphasis on process
Effectiveness MIS metric – measures the impact MIS has on business processes and activities including customer satisfaction, conversion rates of new customers, and sell-through increases; Effectiveness focuses on how well an organization is achieving its goals and objectives- “Doing the right things”- emphasis on results
Efficiency focuses on the extent to which an organization is using its resources in an optimal way, “Doing things right”
Effectiveness focuses on how well an organization is achieving its goals and objectives, “Doing the right things”
It is important that your students understand the differences between efficiency and effectiveness if you are going to cover the Business Plug-In for Supply Chain Management. This plug-in deals with efficient vs. effective supply chains.

11. 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 was performing faster or slower than expected if there were not any benchmarks?
They could not, it would impossible to determine
What types of things might egovernment efficiency and effectiveness measure?
Egovernment efficiency metrics includes the number of computers per 100 citizens, the number of Internet hosts per 10,000 citizens, the percentage of the citizen population online
The United States ranks first in terms of egovernment efficiency
Egovernment effectiveness metrics include CRM practices, customer-service vision, approaches to offering egovernment services through multiple-service delivery channels, and initiatives for identifying services for individual citizen segments
Canada ranks number one in terms of egovernment satisfaction of its citizens
Governments wanting to increase efficiency and effectiveness would benchmark themselves against these sorts of metrics

12. The Interrelationships of Efficiency and Effectiveness MIS Metrics
Efficiency MIS metrics focus on technology and include:
Throughput - the amount of information that can travel through a system at any point
Transaction speed - the amount of time a system takes to perform a transaction
System availability - the number of hours a system is available for users
Information accuracy - the extent to which a system generates the correct results when executing the same transaction numerous times
Efficiency metrics monitor technology
Efficiency metrics are easier to measure and monitor than effectiveness metrics
Throughput - the amount of information that can travel through a system at any point
Transaction speed - the amount of time a system takes to perform a transaction
System availability - the number of hours a system is available for users
Information accuracy - the extent to which a system generates the correct results when executing the same transaction numerous times
Web traffic - includes a host of benchmarks such as the number of page views, the number of unique visitors, and the average time spent viewing a web page
Response time - the time it takes to respond to user interactions such as a mouse click

13. The Interrelationships of Efficiency and Effectiveness MIS Metrics (contd.)
Efficiency MIS metrics focus on technology and include: (contd.)
Web traffic - includes a host of benchmarks such as the number of page views, the number of unique visitors, and the average time spent viewing a web page
Response time - the time it takes to respond to user interactions such as a mouse click
Efficiency metrics monitor technology
Efficiency metrics are easier to measure and monitor than effectiveness metrics
Throughput - the amount of information that can travel through a system at any point
Transaction speed - the amount of time a system takes to perform a transaction
System availability - the number of hours a system is available for users
Information accuracy - the extent to which a system generates the correct results when executing the same transaction numerous times
Web traffic - includes a host of benchmarks such as the number of page views, the number of unique visitors, and the average time spent viewing a web page
Response time - the time it takes to respond to user interactions such as a mouse click

14. Effectiveness MIS Metrics
Effectiveness MIS metrics focus on an organization’s goals, strategies, and objectives and include:
Usability - The ease with which people perform transactions and/or find information. A popular usability metric on the Internet is degrees of freedom, which measures the number of clicks required to find desired information.
Customer satisfaction - Measured by such benchmarks as satisfaction surveys, percentage of existing customers retained, and increases in revenue dollars per customer.
Effectiveness metrics are more difficult to measure and monitor, for example, how do you measure customer satisfaction?
Which metrics are more important to a company like eBay – efficiency or effectiveness?
Both - eBay continuously measures both efficiency and effectiveness
The company must ensure constant availability and reliability of its systems
Usability - The ease with which people perform transactions and/or find information. A popular usability metric on the Internet is degrees of freedom, which measures the number of clicks required to find desired information.
Customer satisfaction - Measured by such benchmarks as satisfaction surveys, percentage of existing customers retained, and increases in revenue dollars per customer.
Conversion rates - The number of customers an organization “touches” for the first time and persuades to purchase its products or services. This is a popular metric for evaluating the effectiveness of banner, pop-up, and pop-under ads on the Internet.
Financial - Such as return on investment (the earning power of an organization’s assets), cost-benefit analysis (the comparison of projected revenues and costs including development, maintenance, fixed, and variable), and break-even analysis (the point at which constant revenues equal ongoing costs).

15. Effectiveness MIS Metrics (contd.)
Effectiveness MIS metrics focus on an organization’s goals, strategies, and objectives and include:
Conversion rates - The number of customers an organization “touches” for the first time and persuades to purchase its products or services. This is a popular metric for evaluating the effectiveness of banner, pop-up, and pop-under ads on the Internet.
Financial - Such as return on investment (the earning power of an organization’s assets), cost-benefit analysis (the comparison of projected revenues and costs including development, maintenance, fixed, and variable), and break-even analysis (the point at which constant revenues equal ongoing costs).
Effectiveness metrics are more difficult to measure and monitor, for example, how do you measure customer satisfaction?
Which metrics are more important to a company like eBay – efficiency or effectiveness?
Both - eBay continuously measures both efficiency and effectiveness
The company must ensure constant availability and reliability of its systems
Usability - The ease with which people perform transactions and/or find information. A popular usability metric on the Internet is degrees of freedom, which measures the number of clicks required to find desired information.
Customer satisfaction - Measured by such benchmarks as satisfaction surveys, percentage of existing customers retained, and increases in revenue dollars per customer.
Conversion rates - The number of customers an organization “touches” for the first time and persuades to purchase its products or services. This is a popular metric for evaluating the effectiveness of banner, pop-up, and pop-under ads on the Internet.
Financial - Such as return on investment (the earning power of an organization’s assets), cost-benefit analysis (the comparison of projected revenues and costs including development, maintenance, fixed, and variable), and break-even analysis (the point at which constant revenues equal ongoing costs).

16. The Relationships of Efficiency and Effectiveness Metrics – Security
Security is an issue for any organization offering products or services over the Internet
Purely from an efficiency IT metric point of view, security generates some inefficiencies
From an organization’s business strategy point of view, security should lead to increases in effectiveness
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)
Purely from an efficiency IT metric point of view, security generates some inefficiencies
From an organization’s business strategy point of view, security should lead to increases in effectiveness
CLASSROOM EXERCISE
Measuring Efficiency and Effectiveness
Break your students into groups and ask them to create a plan to measure the efficiency and effectiveness of this course and recommendations on how they would improve the course to make it more efficient and more effective. Student answers to this exercise will vary. They will need to determine ways to benchmark current efficiency and effectiveness and ways to continuously monitor and measure against the benchmarks to determine if the course is becoming more or less efficient and effective (class quizzes and exams are the most obvious benchmarks). Ask your students to present their plan and recommendations to the entire class. Be sure students’ plans and recommendations address the following:
Design of the classroom
Room temperature
Lighting and electronic capabilities of the classroom
Technology available in the classroom
Length of class
and instant messaging
Students’ attendance
Students’ preparation
Students’ arrival time
Quizzes and exams (frequency, length, grades)

17. The Interrelationships of Efficiency and Effectiveness MIS Metrics
Interrelationships between efficiency and effectiveness
Ideally, an organization should operate in the upper right-hand corner
Operating in the upper left-hand corner or the lower right-hand corner may be in line with an organization's particular strategies
No organization would want to operate in the lower left-hand corner

18. The Interrelationships of Efficiency and Effectiveness MIS Metrics (contd.)
Ideally, an organization should operate in the upper right-hand corner
Operating in the upper left-hand corner or the lower right-hand corner may be in line with an organization's particular strategies
No organization would want to operate in the lower left-hand corner
Ideally, an organization should operate in the upper right-hand corner
Operating in the upper left-hand corner or the lower right-hand corner may be in line with an organization's particular strategies
No organization would want to operate in the lower left-hand corner

19. Metrics for Strategic Initiatives
Metrics for measuring and managing strategic initiatives include:
Website metrics
Supply chain management (SCM) metrics
Customer relationship management (CRM) metrics
Business process reengineering (BPR) metrics
Enterprise resource planning (ERP) metrics
Reviewing the metrics for measuring strategic system initiatives will help your students understand why these critical business systems are important to a running a business. Understanding inventory turnover, customer turnover, and sales opportunities and that these are all measured and managed by IT systems will help them understand why they need this course and need these systems to run their businesses.
Ask your students how these strategic initiatives were maintained, managed, and measured prior to IT systems?

20. WEBSITE METRICS Website metrics include:
Abandoned registrations: Number of visitors who start the process of completing a registration page and then abandon the activity.
Abandoned shopping carts: Number of visitors who create a shopping cart and start shopping and then abandon the activity before paying for the merchandise.
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.
Abandoned registrations: Number of visitors who start the process of completing a registration page and then abandon the activity.
Abandoned shopping carts: Number of visitors who create a shopping cart and start shopping and then abandon the activity before paying for the merchandise.
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.
Conversion rate: Percentage of potential customers who visit a site and actually buy something.
Cost-per-thousand (CPM): Sales dollars generated per dollar of advertising. This is commonly used to make the case for spending money to appear on a search engine.
Page exposures: Average number of page exposures to an individual visitor.
Total hits: Number of visits to a website, many of which may be by the same visitor.
Unique visitors: Number of unique visitors to a site in a given time. This is commonly used by Nielsen/Net ratings to rank the most popular websites.

21. WEBSITE METRICS Website metrics include (contd):
Conversion rate: Percentage of potential customers who visit a site and actually buy something.
Cost-per-thousand : Sales dollars (in thousands) generated per dollar of advertising. This is commonly used to make the case for spending money to appear on a search engine.
Page exposures: Average number of page exposures to an individual visitor.
Total hits: Number of visits to a website, many of which may be by the same visitor.
Unique visitors: Number of unique visitors to a site in a given time. This is commonly used by Nielsen/Net ratings to rank the most popular websites.
Abandoned registrations: Number of visitors who start the process of completing a registration page and then abandon the activity.
Abandoned shopping carts: Number of visitors who create a shopping cart and start shopping and then abandon the activity before paying for the merchandise.
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.
Conversion rate: Percentage of potential customers who visit a site and actually buy something.
Cost-per-thousand (CPM): Sales dollars generated per dollar of advertising. This is commonly used to make the case for spending money to appear on a search engine.
Page exposures: Average number of page exposures to an individual visitor.
Total hits: Number of visits to a website, many of which may be by the same visitor.
Unique visitors: Number of unique visitors to a site in a given time. This is commonly used by Nielsen/Net ratings to rank the most popular websites.

22. SUPPLY CHAIN MANAGEMENT METRICS
Back order: An unfilled customer order. A back order is demand (immediate or past due) against an item whose current stock level is insufficient to satisfy demand.
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.
Customer order actual cycle time: The average time it takes to actually fill a customer’s purchase order. This measure can be viewed on an order or an order line level.
Supply Chain Management Metrics
Back order: An unfilled customer order. A back order is demand (immediate or past due) against an item whose current stock level is insufficient to satisfy demand.
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.
Customer order actual cycle time: The average time it takes to actually fill a customer’s purchase order. This measure can be viewed on an order or an order line level.
Inventory replenishment cycle time: Measure of the manufacturing cycle time plus the time included to deploy the product to the appropriate distribution center.
Inventory turns (inventory turnover): The number of times that a company’s inventory cycles or turns over per year. It is one of the most commonly used supply chain metrics.

23. SUPPLY CHAIN MANAGEMENT METRICS (contd.)
Inventory replenishment cycle time: Measure of the manufacturing cycle time plus the time included to deploy the product to the appropriate distribution center.
Inventory turns (inventory turnover): The number of times that a company’s inventory cycles turns over per year. It is one of the most commonly used supply chain metrics.
Supply Chain Management Metrics
Back order: An unfilled customer order. A back order is demand (immediate or past due) against an item whose current stock level is insufficient to satisfy demand.
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.
Customer order actual cycle time: The average time it takes to actually fill a customer’s purchase order. This measure can be viewed on an order or an order line level.
Inventory replenishment cycle time: Measure of the manufacturing cycle time plus the time included to deploy the product to the appropriate distribution center.
Inventory turns (inventory turnover): The number of times that a company’s inventory cycles or turns over per year. It is one of the most commonly used supply chain metrics.

24. CUSTOMER RELATIONSHIP MANAGEMENT METRICS
Customer relationship management metrics measure user satisfaction and interaction and include
Sales Metrics
Number of prospective customers
Number of new customers
Number of retained customers
Number of open leads
Number of sales calls
Number of sales call per lead
Amount of new revenue
Amount of recurring revenue
Number of proposals given
Sales Metrics
Number of prospective customers
Number of new customers
Number of retained customers
Number of open leads
Number of sales calls
Number of sales call per lead
Amount of new revenue
Amount of recurring revenue
Number of proposals given
Service Metrics
Cases closed same day
Number of cases handled by agent
Number of service calls
Average number of service requests by type
Average time to resolution
Average number of service calls per day
Percentage compliance with service-level agreement
Percentage of service renewals
Customer satisfaction level
Marketing Metrics
Number of marketing campaigns
New customer retention rates
Number of responses by marketing campaign
Number of purchases by marketing campaign
Revenue generated by marketing campaign
Cost per interaction by marketing campaign
Number of new customers acquired by marketing campaign
Customer retention rate
Number of new leads by product
Ask your students if they can think of any additional sales, service, or marketing metrics not mentioned in the text

25. CUSTOMER RELATIONSHIP MANAGEMENT METRICS (contd.)
Customer relationship management metrics measure user satisfaction and interaction and include (contd.)
Service Metrics
Cases closed same day
Number of cases handled by agent
Number of service calls
Average number of service requests by type
Average time to resolution
Average number of service calls per day
Percentage compliance with service-level agreement
Percentage of service renewals
Customer satisfaction level
Sales Metrics
Number of prospective customers
Number of new customers
Number of retained customers
Number of open leads
Number of sales calls
Number of sales call per lead
Amount of new revenue
Amount of recurring revenue
Number of proposals given
Service Metrics
Cases closed same day
Number of cases handled by agent
Number of service calls
Average number of service requests by type
Average time to resolution
Average number of service calls per day
Percentage compliance with service-level agreement
Percentage of service renewals
Customer satisfaction level
Marketing Metrics
Number of marketing campaigns
New customer retention rates
Number of responses by marketing campaign
Number of purchases by marketing campaign
Revenue generated by marketing campaign
Cost per interaction by marketing campaign
Number of new customers acquired by marketing campaign
Customer retention rate
Number of new leads by product
Ask your students if they can think of any additional sales, service, or marketing metrics not mentioned in the text

26. CUSTOMER RELATIONSHIP MANAGEMENT METRICS (contd.)
Customer relationship management metrics measure user satisfaction and interaction and include
Marketing Metrics
Number of marketing campaigns
New customer retention rates
Number of responses by marketing campaign
Number of purchases by marketing campaign
Revenue generated by marketing campaign
Cost per interaction by marketing campaign
Number of new customers acquired by marketing campaign
Customer retention rate
Number of new leads by product
Sales Metrics
Number of prospective customers
Number of new customers
Number of retained customers
Number of open leads
Number of sales calls
Number of sales call per lead
Amount of new revenue
Amount of recurring revenue
Number of proposals given
Service Metrics
Cases closed same day
Number of cases handled by agent
Number of service calls
Average number of service requests by type
Average time to resolution
Average number of service calls per day
Percentage compliance with service-level agreement
Percentage of service renewals
Customer satisfaction level
Marketing Metrics
Number of marketing campaigns
New customer retention rates
Number of responses by marketing campaign
Number of purchases by marketing campaign
Revenue generated by marketing campaign
Cost per interaction by marketing campaign
Number of new customers acquired by marketing campaign
Customer retention rate
Number of new leads by product
Ask your students if they can think of any additional sales, service, or marketing metrics not mentioned in the text

27. BPR AND ERP METRICS
The Balanced Scorecard enables organizations to measure and manage strategic initiatives
The balanced scorecard is a management system, (in addition to a measurement system), that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise
The balanced scorecard views the organization from four perspectives, and users should develop metrics, collect data, and analyze their business relative to each of these perspectives:
The learning and growth perspective.
The internal business process perspective.
The customer perspective.
The financial perspective

28. BPR AND ERP METRICS(contd.)
The balanced scorecard is a management system, (in addition to a measurement system), that enables organizations to clarify their vision and strategy and translate them into action.
It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results.
When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise
Be sure to review the learning outcomes included in the end-of-chapter material

29. BPR AND ERP METRICS(contd.)
The balanced scorecard views the organization from four perspectives,
The learning and growth perspective.
The internal business process perspective.
The customer perspective.
The financial perspective
Management should develop metrics, collect data, and analyze their business relative to each of these perspectives
Companies cannot manage what they cannot measure
Metrics to measure priorities of strategic plan
Max # of metrics 7+ 2
Be sure to review the learning outcomes included in the end-of-chapter material