Measuring the Success of Strategic Initiatives ( Chapter 4 )

THE INTERRELATIONSHIP OF EFFICIENCY AND EFFECTIVENESS IT METRICS

Efficiency and effectiveness metrics are two primary types of metrics. Efficiency IT metrics measure the performance of the IT system itself including throughput, speed, and availability. Effectiveness IT metrics measure the impact IT has on business processes and activities including customer satisfaction, conversion rate, and sell-through increase.

Effectiveness IT Metrics

Efficiency IT Metrics

METRICS FOR STRATEGIC INITIATIVE

Different financial ratios are used to evaluate a company's performance. companies can get additional insight into their performance by comparing financial ratios against other companies in their industry. A few of the more common financial ratios include:

• Internal rate of return ( IRR ) - the rate at which the net present value of an investment equals zero.
• Return on investment ( ROI ) - indicate the earning power of the project and is measured by dividing the benefit of a project by the investment.
• Payback method - numbers of years to recoup the cost of an initiative based on project annual net cash flow.
• Break-even analysis - determines the volume of business required to make a profit at the current price charged for the products or services.

Most managers are familiar with financial but unfamiliar with information system metrics. The following metrics will hape 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

• Abandoned registrations : Number of visitor who start the process of completing a registeration page and then abandon the activity.
• Abandoned shopping carts : Number of visitor 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 and ad, and are taken to the side of the advertiser.
• Conversion rate : Percentage of potential customer 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 exposure : Average number of a page exposure to an individual visitor.
• Total hits : Number of visits to a website, many of which may be by the same visitor.
• Unique visitor : Number of unique visitor to a site in a given time. This is a commonly used by Nielsen/Net ratings to rankthe most popular website.

Balance 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 provide feedback around both the internal business process and external outcomes in order to continuously improve strategic performance and result.

The balance scorecard views the organization from 4 perspective, and users should develop metrics, collect data, and analyze their business relative to each of this perspective:

• The learning and growth perspective
• The internal business process perspective
• The customer perspective
• The financial perspective 

Strategic Initiatives for Implementing Competitive Advantage ( Chapter 3 )

STRATEGIC INITIATIVES

• Gain competitive advantages and Business efficiencies.
• Supply chain management.
• Customer relationship management.
• Business process reengineering.
• Enterprise resources planning. 

SUPPLY CHAIN MANAGEMENT ( SCM )

Involve 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 SCM 

Effective and Efficient SCM system 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 product of service.
• Create entry barriers thereby reducing the threat of new entrants.
• Increase efficiencies while seeking a competitive advantages through cost leadership.

Effective and Efficient Supply Chain Management ( SCM ) Effect on Porter's Five Force

CUSTOMER RELATIONSHIP MANAGEMENT ( CRM )

Involve managing all aspects of a customer's relationship with organization to increase customer loyalty and retention and an organization's profitability. CRM allows an organization to gain insight into customer's shopping and buying behaviours in order to develop an implement enterprise-wide strategies.

CRM Overview

BUSINESS PROCESS REENGINEERING ( BPR )

The analysis and redesign of workflow within and between enterprise.The concept of BPR traces its origins to management theories developed as early as the 19th century. The purpose of BPR is to make all business process the best-in-class.

Seven Principles of Business Process Reengeneering.

• Organize around outcomes, not tasks.
• Identify all the organization's process and prioritize them in order of redesign urgency.
• Integrate information processing work into the real work that produce the information.
• Treat geographically dispersed resources as though they were centralized.
• Link parallel activities in the workflow instead of just integrating their result.
• Put the decision point where the work is performed, and built into the process.
• Capture information once and the source.  

ENTERPRISE RESOURCE PLANNING ( ERP )

Integrate all department and function throughout an organization into a single IT system ( or integrate set of IT system ) so that employees can make decision by using enterprise-wide information on all business operations.

Enterprise Resource Planning System

Identify Competitive Advantage ( Chapter 2 )

IDENTIFYING COMPETITIVE ADVANTAGES

• Develope new product
• Entering new market
• Increasing costomer loyalty
• Attracting new customer
• Increasing sales
• Decreasing costs

THE 5 FORCE MODEL - EVALUATING INDUSTRY ATTRACTIVENESS

MICHAEL PORTER

• Knowledgeable customer can force down price by pitting rivals against each other
• Influential suppliers
• Competition can steal customer
• New market enterence can steal potential investment capital
• Subsitute products can steal customers 

Porter's Five Forces Model

• Barriers to Entry : The power of competitors to enter a market.
• Supply Power : The power of supplies to drive up prices of materials.
• Buyer Power : The power of customers to drive down prices.
• Threat of Substituted : The power of customers to purchase alternatives.

THE 3 GENERIC STRATEGIES - CHOOSING A BUSINESS FOCUS

• Broad cost leadership
• Broad differentiation
• Focus strategy

Porter's Three Generic Strategies

VALUE CHAIN ANALYSIS - EXECUTING BUSINESS STRATEGIES

Michael Porter created value chain analysis, which views firm as a series of business process that each add value to the product of service.Value chain analysis is a useful tool for determining how to create the greatest possible value for customer. The goal is to identify processes in which firm can add value for the customer and create the competitive advantage for itself, with a cost advantage or product differentiation. 

The Value Chain group a firm's activities into two categories, primary value activities and support value activities.

The Value Chain

Information Technology's Role in Business ( Chapter 1 )

Why we need to study Information technology?
Information technology is eveywhere in business.Understanding information technology provide great insight to anyone learning about business.It is easy to demonstrate info role in business by reviewing a copy of popular business magazines such as Fast Company.

INFORMATION TECHNOLOGY'S IMPACT ON BUSINESS OPERATIONS.

The business function receving the greatest benefit from information technology

COMMON DEPARTMENT IN ORGANIZATION



Functiona organization - each functional area has its own system and communicates with every other functional area.