Chapter 4: Measuring Information Technology Success

Measuring Information Technology 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




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

Benchmarking - Base Lining 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

Efficiency IT metrics focus on technology and include:

Throughput

Transaction speed

System availability

Information accuracy

Web traffic

Response time

  

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

Effectiveness IT Metrics : 

1) Effectiveness IT metrics focus on an organization’s goals, strategies, and objectives and include:

Usability

Customer satisfaction

Conversion rates

Financial

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).

Metrics for Strategic Initiatives : 

1) Metrics for measuring and managing strategic initiatives include:

Web site metrics

Supply chain management (SCM) metrics

Customer relationship management (CRM) metrics

Business process reengineering (BPR) metrics

Enterprise resource planning (ERP) metrics   

Web sites Metrics include : 

Abandoned registrations

Abandoned shopping cards

Click-through

Conversion rate

Cost-per-thousand

Page exposures

Total hits

Unique visitors

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 : Sales dollars generated per dollar of advertising. This is commonly used to make the case for spending money to appear on a search engine.

Customer Relationship Management :

1)  Customer relationship management metrics measure user satisfaction and interaction and include

Sales metrics

Service metrics

Marketing metrics

CHAPTER 3 Strategic Initiatives for Implementing Competitives Advantages

 Strategic Initiatives

Organizations can undertake high-profile strategic initiatives including:

Supply chain management (SCM)

Customer relationship management (CRM)

Business process reengineering (BPR)

Enterprise resource planning (ERP)

Supply Chain Management (SCM)

involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

Four basic components of supply chain management :

Supply chain strategy – strategy for managing all resources to meet customer demand

Supply chain partner – partners throughout the supply chain that deliver finished products, raw materials, and services.

Supply chain operation – schedule for production activities

Supply chain logistics – product delivery process

Effective and Efficient Systems can enable an organization to :

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

Customer Relationship Management :

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

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

CRM is not just technology, but a strategy, process, and business goal that an organization must embrace on an enterprisewide level

CRM can enable an organization to:

1)Identify types of customers

                                    2)Design individual customer marketing campaigns 

              3)Treat each customer as an individual

                4) Understand customer buying behaviors

Business Process Reengineering:

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

Business process reengineering (BPR) – the analysis and redesign of workflow within and between enterprises

The purpose of BPR is to make all business processes best-in-class

Finding Opportunity using BPR :

A company can improve the way it travels the road by moving from foot to horse and then horse to car

BPR looks at taking a different path, such as an airplane which ignore the road completely

Enterprise Resource Planning :

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

Keyword in ERP is “enterprise”

ERP systems collect data from across an organization and correlates the data generating an enterprisewide view

Evaluate how Apple can gain business intelligence through the implementation of a customer relationship management system

Create an argument against the following statement:  “Apple should not invest any resources to build a supply chain management system

Why would a company like Apple invest in BPR?

Chapter 3 Case : Consolidating Touchpoints for SAAB

Saab required a consolidated customer view among its three primary channels:

Dealer network

Customer assistance center

Lead management center

Chapter 3 Case Questions : 

1) Explain how implementing a CRM system enabled Saab to gain a competitive advantage

2) Estimate the potential impact to Saab’s business if it had not implemented a CRM system

   3) What additional benefits could Saab receive from implementing a supply chain management system

BUSINESS DRIVEN TECHNOLOGY CHAPTER 1

               Information technology is everywhere in business

Business Functions Receiving The Greatest Benefits From Information Technology

• Customer Service                           70%
• Finance                                           51%
• Sales and Marketing                       42%
• IT Operations                                 39%
• Operations Management                31%
• HR                                                  17%
• Security                                          17%

Information Technology's Impact On Business Operations

• Accounting Finance
• Human Resources
• Finance
• Marketing 
• Sales
• Production Management
• Operations Management
• Management Information System

   Information technology (IT) – a field concerned with the use of technology in managing and processing information

Information technology is an important enabler of business success and innovation

When beginning to learn about information technology it is important to understand

• Data, information, and business intelligence IT resources
• IT cultures 

Data - raw facts that describe the characteristic of an event

Information - data converted into a meaningful and useful context

Business intelligence – applications and technologies that are used to support decision-making efforts





IT RESOURCES

Organizational information cultures include:

Information-Functional Culture - Employees use information as a means of exercising influence or power over others. For example, a manager in sales refuses to share information with marketing. This causes marketing to need the sales manager’s input each time a new sales strategy is developed.

Information-Sharing Culture  - Employees across departments trust each other to use information (especially about problems and failures) to improve performance.

Information-Inquiring Culture - Employees across departments search for information to better understand the future and align themselves with current trends and new directions.

Information-Discovery Culture - Employees across departments are open to new insights about crisis and radical changes and seek ways to create competitive advantages.

THE END FOR THE CHAPTER ONE !

HERE WE GO FOR THE SECOND ONE !

IDENTIFYING COMPETITIVE ADVANTAGE

¡What is competitive advantage?

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

§Unfortunately, CA is temporary because competitors keep duplicate the strategy.

§Then, the company should start the new competitive advantage.

Five Forces Model 

• Buyer power
• Supplier power
• Threat of substitute products or services.
• Threats of new entrants.
• Rivalry among existing companies.

Introduction

Michael Porter’s Five Forces Model is useful tool to aid organization in challenging decision whether to join a new industry or industry segment.

Anddd.. THIS IS THE MAIN POINTS FOR THIS CHAPTER ..

1. Buyer Power               

High – when buyers have many choices of whom to buy.

Low – when their choices are few.

To reduce buyer power (and create competitive advantage), an organization must make it more attractive to buy from the company not from the competitors.

Best practices of IT-based

Loyalty program in travel industry (e.g. rewards on free airline tickets or hotel stays ) 

The Competitive Environment

Bargaining Power of Customers./Buyer power 

Customers can grow large and powerful as a result of their market share.  

Many choices of whom to buy from 

Low when comes to limited items

E.g.: used loyalty programs (jusco card, tesco card, - being a members to get the discount) 

2. Supplier Power

                                                    

High – when buyers have few choices of whom to buy from. 

Low – when their choices are many.

Best practices of IT to create competitive advantage.

E.g. B2B marketplace – private exchange allow a single buyer to posts it needs and then open the bidding to any supplier who  would care to bid. Reverse auction is an auction format in which increasingly lower bids. 

3. Threat of Substitute products & Services

High – when there are many alternatives to a product or service. 

Low – when there are few alternatives from which to choose.

Ideally, an organization would like to be on a market in which there are few substitutes of their product or services.

Best practices of IT 

E.g. Electronic product -same function different brand

The Competitive Environment

Threat of Substitutes.

  

To the extent that customers can use different products to fulfill the same need, the threat of substitutes exists.

E.g: electronic product -same function different brands

Switching cost- costs can make customer reluctant to switch to another product or service

4. Threat of new entrants 

High – when it is easy for new competitors to enter a market.

Low – when there are significant entry barriers to entering a market. 

Entry barriers is a product or service feature that customers have come to expect from 

organizations and must be offered by entering organization to compete and survive.

Best practices of IT

E.g. new bank must offers online paying bills, acc monitoring to compete.

The Competitive Environment

Threat of New Entrants.  

Many threats come from companies that do not yet exist or have a presence in a given industry or market. 

The threat of new entrants forces top management to monitor the trends, especially in technology, that might give rise to new competitors.  

E.g. new bank (online paying bills, acc monitoring)

EHH? HABIS DAH? HEHE BELUM LAGI...

             The Three Generics Strategies

1) COST LEADERSHIP

1.       Be a low cost producer in the industry allows the company to lower prices to customers 
2. 
   
3.         Competitors with higher costs cannot afford to compete with the low-cost leader on prices.

2) DIFFERENTIATION

1.       Create competitive advantage by distinguishing their products on one or more features important to their customers.

3) FOCUS STRATEGY

1.        Target to niche market 
2.        Concentrate on either cost leadership or differentiation

               The Value Chains- Targeting Business Processes   

Supply Chain - a chain or series of processes that adds value to product & service for                                       customer.

Add value to its products and services that support a profit margin for the firm

THE END :)

Alhamdulillah

P/S : Another 2 weeks we gonna celebrates for Hari Raya Aidilfitri !!

           WUHUUUU ~

          Sooooo mintak ampun maaf zahir batin ye , especially to our beloving lecturer Madam INTAN LIANA BT SUHAIME  ;)

     

         DONT FORGET for our DUIT RAYA hehe :D

Dan hati-hati bila memandu . Pandu perlahan , jiwa selamat :)