CHAPTER 4 - Measuring the success of strategic initiatives

 

   Define metrics and describe the relationship between efficiency IT metrics and effectiveness IT metrics.

Metrics are the detailed measures that feed those key performance indicators (KPI). Efficiency and effectiveness metrics are two primary types of IT 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 rates, and sell-through increases. Peter Drucker offers a helpful distinction between efficiency and effectiveness. Drucker states that managers “Do things right” and / or “Do the right things”. Doing things right addresses efficiency (getting the most from each resources) while doing the right things addresses effectiveness (setting the right goals and objectives and ensuring they are accomplished). Effectiveness focuses on how well an organization is achieving its goals and objectives while efficiency focuses on the extent to which an organization is using its resources in an optimal ways.


  Explain why a business would use metrics to measure and success of strategic initiatives.

A business uses metrics to measure and success of strategic initiatives because business leaders want to monitor key metrics in real time to actively track the health of their business. Different financial ratios are used to evaluate a company’s performance. Companies can gain additional insight into their performance by comparing financial ratios against other companies in their industry. A few of the common financial ratios include internal rate of return, return on investment, payback method and break-even analysis. 

 

 key performance indicator> measure that are tied to business drivers
> metrics are detailed measures that feed KPIsEfficiency and Effectiveness
Efficiency IT metric measures the performance of the IT system itself including throughput, speed, and availabilityEffectiveness IT metric measures the impact IT has on business processes and activities including customer satisfaction, conversion rates, and sell though increasesBenchmarking baselining metrics

benchmark baseline values the system seek to attain
benchmarking a process of continuously measuring system results, comparing those results to optimal system performance and identifying steps and procedures to improve system performanceThe interelationships of efficiency and effectiveness IT metrics
efficiency IT metrics focus on technology and include :

> throughput
amount of information that can travel through a system at any point
> transaction speed
amount of time a system takes to perform a transaction > system availability
number of hours a system is available for users

> information accuracy
extent to which a system generates the correct result when executing the same transaction numerous times
> web traffic
a host of benchmarks such as the number of pages views, the number of unique visitors, and the average
time spent viewing a web page > response time
times to respond to user interaction such as a mouse click