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Chapter 4
Measuring the Success of
Strategic Initiatives
Learning Outcomes
 Compare efficiency IT metrics and
effectiveness IT metrics
 List and describe five common types of
efficiency IT metrics
 List and describe four types of effectiveness
IT metrics
 Explain customer metrics and their
importance to an organization
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Overview
Efficiency and effectiveness IT metrics are two
ways to measure the success of IT strategic
initiatives
 Efficiency IT metrics – measure the
performance of the IT system itself including
throughput, speed, availability, etc.
 Effectiveness IT metrics – measure the
impact IT has on business processes and
activities including customer satisfaction,
conversion rates, sell-through increases, etc.
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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 they were not any benchmarks?
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E-government 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
E-government effectiveness metrics include
CRM practices, customer-service vision,
approaches to offering e-government services through
multiple-service delivery channels, and
initiatives for identifying services for individual citizen segments
Efficiency IT metrics focus on
technology and include:
 Throughput – amount of information that can travel
through a system at any point in time
 Speed – amount of time to perform a transaction
 Availability – number of hours a system is available
 Accuracy – extent to which a system generates
correct results
 Web traffic – includes number of pageviews, number
of unique visitors, and time spent on a Web page
 Response time – time to respond to user
interactions
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Effectiveness IT metrics focus on an
organization’s goals, strategies, & objectives
 Usability – the ease with which people perform
transactions and/or find information
 Customer satisfaction – such as the percentage of
existing customers retained
 Conversion rates – number of customers an
organization “touches” for the first time and convinces
to purchase products or services
 Financial – such as return on investment, cost-
benefit analysis, etc.
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The interrelationships between
efficiency and effectiveness
The interrelationships between
efficiency and effectiveness
 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
time. 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)
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Determining IT Efficiency and
Effectiveness
Customer metrics – assess the
management of customer relationships by the
organization and include:
 Market share
 Customer acquisition
 Customer satisfaction
 Customer profitability
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What types of things can an organization monitor
to determine the efficiency and effectiveness of
its Web sites?
• Revenue generation
• New customer acquisition
• The amount of traffic
Web Traffic Analysis
 Cookie – a small file deposited on a hard drive by a
Web site containing information about customers and
their Web activities
 Click-through – a count of the number of people
who visit one site and click on an advertisement that
takes them to the site of the advertiser
 Banner ad – a small ad on one Web site that
advertises the products and services of another
business, usually another dot-com business
 Interactivity – visitor interactions with the target ad
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Behavioral Metrics
 Click-stream data tracks the exact pattern of a
consumer’s navigation through a Web site
 Click-stream data can reveal:

Number of pageviews

Pattern of Web sites visited

Length of stay on a Web site

Date and time visited

Number of customers with shopping carts

Number of abandoned shopping carts
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Visitor Web site metrics
Exposure, visit, and hit Web site metrics
How Levi’s Got Its Jeans into Wal-Mart
 Formulate a strategy for how Levi’s can use
efficiency metrics to improve its business
 Formulate a strategy for how Levi’s can use
effectiveness metrics to improve its business
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How Do You Value Friendster?
 Friendster specializes in social networking
 Friendster received over $13 million in VC
capital
 Google recently offered to buy Friendster for
$30 million
 A venture capital company recently valued
Friendster at $53 million
 Friendster has yet to generate any revenue
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Case Questions
1. How could you use efficiency metrics to help
place a value on Friendster?
2. How could you use effectiveness metrics to help
place a value on Friendster?
3. Explain how a venture capital company can
value Friendster at $53 million when the
company has yet to generate any revenue
4. Explain why Google would be interested in
buying Friendster for $30 million when the
company has yet to generate any revenue
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