Chapter 4 : Measuring The Success of Strategic Initiatives

Measuring Information Technology's success

key performance indicators (KPIs)

• the measure 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 areas requires input from both IT and business professionals to find success.

Efficiency and Effectiveness

Benchmarking - Baseline Metrics

• 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. 

The Interrelationships of Efficiency and Effectiveness IT Metrics

• Efficiency IT metrics focus on the technology itself. 

• Effectiveness IT metrics are determined according to an organization's goals, strategies, and objectives.

The interrelationships between Effeciency and Effectiveness

Metrics for strategic initiatives

• A metric is nothing more than a standard measure to assess performance in a particular area.
• metrics are at the heart of a good, customer-focused management system and any program directed at continuous improvement.
• A focus on customers and performance standards shows up in the form of metrics that assess the ability to meet customer's needs and business objectives.

A few of the more common financial ratios include :

1. Internal rate of return (IRR) = the rate at which the net present value of an investment equals zero.
2. Return on investment (ROI) = indicates the earning power of a project and is measured by dividing the benefits of a project by the investment.
3. Payback method = number of years to recoup the cost of an initiative based on projected annual net cash flow. 
4. Break-even analysis = determines the volume of business requires to make a profit a  the current prices charged for the products or services.

Most managers are familiar with financial metrics but unfamiliar with information system metrics. The following metrics will help managers measure and manage their strategic initiatives :

• Website metrics
• Supply Chain Management (SCM) metrics
• Customer Relationship Management (CRM) metrics
• Business Process Reengineering (BPR) metrics
• Enterprise Resource Planning (ERP) metrics

Website metrics

Supply Chain Management (SCM)  metrics

Customer Relationship Management (CRM) metrics

Business Process Reengineering (BPR) and Enterprise Resource Planning (ERP) metrics

Business process reengineering and enterprise resource planning are large, organization wide initiatives. Measuring these types of strategic initiatives is extremely difficult. One of the best method is the balanced scorecard.

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 process and external outcomes in order to continuously improve strategic performance and results.

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 perspective
• The customer perspective
• The financial perspective(figure below)

END OF CHAPTER FOUR..... 

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