CHAPTER 4 MEASURING THE SUCESS OF STRATEGIC INITIATIVES

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.

Benchmarkin-Baselining Metrics

Benchmarking- a process of continuously measuring system results

-       Comparing those results to optimal system performance(benchmark values)

-       Identifying steps and procedures to improve system performance.

The Interrelationships of Efficiency and Effectiveness IT Metrics

o   Throughput

o   Transaction speed

o   System availability

o   Information accuracy

o   Web traffic

o   Response time

Efficiency IT 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- time it takes to respond to user interactions such as a mouse click

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

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)

Metrics for Strategic Initiatives

ü  Web site metrics

ü  Supply chain management (SCM) metrics

ü  Customer relationship management (CRM) metrics

ü  Business process reengineering (BPR) metrics

ü  Enterprise resource planning (ERP) metrics

Web site Metrics

Ø  Abandoned registrations

Ø  Abandoned shopping cards

Ø  Click-through

Ø  Conversion rate

Ø  Cost-per-thousand

Ø  Page exposures

Ø  Total hits

Ø  Unique visitors

Supply Chain Management Metrics

ü  Back order- an unfilled customer order. A back order is demand against an item whose current stock level is insufficient to satisfy demand.

ü  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.

ü  Customer or actual cycle time- the average time it takes to actually fill a customer’s d purchase order. This measure can be viewed on an order or an order line level.

ü  Inventory replenishment cycle time- measure of the manufacturing cycle time plus the time included to deploy the product to the appropriate distribution centre.

ü  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.

Customer Relationship management metrics

Customer relationship management metrics measure user satisfaction and interaction and include:

-       Sales metrics

-       Service metrics

-       Marketing metrics

BPR and ERP Metrics

-       The balanced scorecard enables organizations to measure and manage strategic initiatives.

CHAPTER 3- STRATEGIC INITIATIVES FOR IMPLEMENTING COMPETITIVE ADVANTAGES

Organizations can undertake high-profile strategic initiatives including:

Ø  Supply chain management (SCM)

Ø  Customer relationship management (CRM)

Ø  Business process reengineering (BPR)

Ø  Enterprise resource planning (ERP)

·         Effective and efficient SCM systems can enable an organization to:

·         Decrease the power of its buyers

·         Increase its own supplier power

·         Increase switching costs to reduce the threat of substitute products or services

·         Create entry barriers thereby reducing the threat of new entrants

·         Increase efficiencies while seeking a competitive advantage through cost leadership

·         Involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization’s profitability

·         Many organization, such as Charles Schwab and Kaiser Permanente, have obtained great success through the implementation of CRM systems.

·         Is not just technology , but a strategy, process, and business goal that an organization must embrace on an enterprise wide level.

CRM can enable an organization to:

Finding Opportunity Using BPR

-       Types of change an organization can achieve, along with the magnitudes of change and the potential business benefit.

Enterprise Resources Planning (ERP)

Integrates all departments and functions throughout an organization into a single IT system so that employees can make decisions by viewing enterprise wide information on all business operations.

CHAPTER 2 IDENTIFYING COMPETITIVE ADVANTAGES

Identifying Competitive Advantages?

To survive and thrive an organization must create a competitive advantage.

§  Competitive advantage- a product or service that an organization’s customers place a greater value on than similar offerings from a competitor

§  First-mover advantage- occurs when an organization can significantly impact its market share by being first to market with a competitive advantage.

Organizations watch their competition through environmental scanning

§  Environmental scanning- the acquisition and analysis of events and trends in the environment external to an organization.

§  Three common tools used in industry to analyze and develop competitive advantages include:

ü  Porter’s Five Forces Model

ü  Porter’s three generic strategies

ü  Value chains

The Five Forces Model

§                         Porter’s Five Forces Model determines the relative attractiveness of an industry

Buyer Power

-Buyer power- high when buyers have many choices of whom to buy from and low when their choices are few.

-One way to reduce buyer power is through loyalty programs.

  - Loyalty program- rewards customers based on the amount of business they do with a particular organization.

SUPPLIER POWER

Supplier power- high when buyers have few choices of whom to buy from and low when their choices are many.

Supply chain- consists of all parties involved in the procurement of a product or raw material.

§  Organizations that are buying goods and services in the supply can create a competitive advantage by locating alternative supply sources (decreasing supplier power) through B2B marketplaces

§  Business-to-Business (B2B) marketplace – an internet-based service that brings together many buyers and sellers.

§  Two types of business-to-business (B2B) marketplaces

§  Private exchange- a single buyer posts its need and then opens the bidding to any supplier who would care to bid.

§  Reverse auction- an auction format in which increasingly lower bids are solicited from organizations willing to supply the desired product or service at an increasingly lower price.

Threat of Substitute Products or Services

§  High when there are many alternatives to a product or services and low when there are few alternatives from which to choose.

§  Switching cost- costs that can make customers reluctant to switch to another product or service.

Threat of New Entrants

§  High when it is easy for new competitors to enter a market and low when there are significant entry barriers to entering a market

§  Entry barrier- a product or service feature that customers have come to expect from organizations in a particular industry and must be offered by an entering organization to compete and survive.

Rivalry among Existing Competitors

§  High when competition is fierce in a market and low when competition is more complacent.

§  Although competition is always more intense in some industries than in others, the overall trend is toward increased competition in just about every industry

The Three Generic Strategies-Creating a Business Focus

§  Organizations typically follow one of Porter’s three generic strategies when entering a new market.

                                                   Low Cost        High Cost

Value Creation

Once an organization chooses its strategy, it can use tools such as the value chain to determine the success or failure of its chosen strategy.

§  Business process- a standardized set of activities that accomplish a specific task, such as processing a customer’s order.

§  Value chain- views an organization a series processes, each of which adds value to the product or service for each customer.