Measuring the Success of Strategic Initiatives

Hello guys! Some notes from Chapter 4, enjoy! :D

Designing metrics requires an expertise that neither IT nor business professional usually possess.Metrics are about neither technology nor business strategy.

Key Perfomance Indicator (KPIs)
The measures that are tied to business drivers. Metrics are the detailed measures that feed those KPIs.

Efficiency and Effectiveness

• Efficiency IT metrics : Measure the perfomance 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 self-through increases.

Benchmarking - Baseline Metrics.

• Benchmarks : Baseline values the system seeks to attain
• Benchmarking : A process of continuously measuring system results, comparing those results to optimal system perfomance (benchmark values), and identifying steps and procedures to improve system perfomance.

The Interrelationship of  Efficiency and Effectiveness  IT Metrics

Efficiency IT Metrics focus on technology and include :

1. Throughput – amount of information that can travel through a system at any point in time
2. Speed – amount of time to perform a transaction
3. Availability – number of hours a system is available
4. Accuracy – extent to which a system generates correct results
5. Web traffic – includes number of pageviews, number of unique visitors, and time spent on a web page
6. Response time – time to respond to user interactions

Effectiveness  IT Metrics focus on an organization's goals, strategies and objectives.

1. Usability – the ease with which people perform transactions and/or find information
2. Customer satisfaction –  such as the percentage of existing customers retained
3. Conversion rates – number of customers an organization “touches” for the first time and convinces to purchase products or services
4. Financial – such as return on investment, cost-benefit analysis, etc

 Metrics for Strategic Initiatives
A metric is nothing more than a standard measure to assess perfomance in a particular area. Most managers are familiar with financial metrics but unfamiliar with information system metrics. The following metrics will help managers measure and manage their strategic initiatives : 

• Website Metrics

Most companies measure the traffic on a website as the primary deterinant of the website's success. A company can use web traffic analysis or web analytics to determine the revenue generated, the number of new customers acquired, and so on.

• Supply Chain Management (SCM) Metrics

Can help an organization understand how it's operating over a given time period. SCM can cover many areas including procurement, production, distribution, inventory, transportation

• Customer Relationship Management (CRM) Metrics

Wondering what CRM metrics to track and monitor using reporting and real-time perfomance dashboards?

• Business Process Reengineering (BPR) and Enterprise Resource Planning (ERP) Metrics.

Addressing some of the weaknesses and vagueness of previous measurement techniques, the balanced scorecard approach provides a clear prescription as to what companies should measure in order to balance the financial perspective. 

The balanced scorecard is a management system, that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic perfomance and results

Strategic Initiatives for Implementing Competitive Advantages

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. The four basic components of supply chain management are : 

• Supply Chain Strategy - The strategy for managing all the resources required to meet customer     demand for all products and services
• Supply Chain Partners - The partners chosen to deliver finished products,  raw materials, and services including pricing, delivery, and payment processes along with partner relationship monitoring metrics.
• Supply Chain Operation - The schedule for production activities including testing packaging, and preparation for delivery. Measurements for this component include productivity and quality.
• Supply Chain Logistics - The product delivery processes and elements including orders, warehouses, carriers and invoicing. 

Supply Chain for a Product Purchased from Walmart

Effective and Efficient Supply Chain Management's Effect on Porter's Five Forces

Customer Relationship Management (CRM)

Involves managing all aspects of a customer's relationship with an 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 behaviors in order to develop and implement enterprise-wide strategies.    

CRM overview

Business Process Reengineering (BPR)

The analysis and redesign of workflow within and between enterprises. The purpose of BPR is to make all business process the best-in-class. 

FINDING OPPORTUNITY USING BPR

• As you can see in the picture, there are different ways to travel the same road.
• A company could improve the way that it travels the road by moving from foot to horse and then from horse to car.
• True BPR would look at taking a different path.
• Company can use an airplane to get to its final destination despite using the road.
• Companies often follow the same indirect path for doing business, not realizing there might be a different, faster and more direct way of doing business.

Seven Principles of Business Process Reengineering

Enterprise Resource 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. 

Identifying Competitive Advantage

What is competitive advantage?

• A feature of a product or service on which customers place a greater value than they do on similar offerings from competitors.
• Competitive advantages provide the same product or service either at a lower price or with additional value that can fetch premium prices.
• Unfortunately, competitive advantages are typically temporary, because competitors often quickly seek ways to duplicate them.
• Then, the company should start the new competitive advantage.

Managers use three common tools to analyze competitive intelligence and develop competitive advantages including : 

1. The Five Forces Model - Evaluating Industry Attractiveness

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

Porter's Five Forces Model

Micheal Porter's

BUYER POWER

• The ability of buyers to affect the price they must pay for an item.
• High - When buyers have many choices of whom to buy.
• Low - When their choices are few. 
• To reduce buyer power is by manipulating switching costs, costs that make customers reluctant to switch to another product or services.
• Using loyalty programs, which reward customers based on their spending. For example, in travel industry by rewarding them with free airline tickets or hotel stays.

SUPPLIER POWER

• The ability to influence the prices they charge for supplies (including materials, labor, and services)
• Supplier power is high when buyers have few choices of whom to buy from.
• For example, patient who need to purchase cancer-fighting drugs have no power over price and must pay because there are few available alternatives.
• Supplier power is low when their choices are many.

THREAT OF SUBSTITUTE PRODUCTS OR SERVICES 

• High - When there are many alternatives to a product or service
• Low -  There are few alternatives from which to choose.
• For example, travelers have numerous substitutes for airline transportation including automobiles, trains, and boats.  

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.
• An entry barrier is a feature of a product or service that customers have come to expect and entering competitors must offer the same for survival.
• For example, a new bank must offer its customers an array of MIS- enabled services, including ATMs, and online bill paying ( Maybank and CIMB) 

      

       2. The Three Generic Strategies - Choosing A Business Focus

Porter's Three Generic Strategies

COST LEADERSHIP

• Becoming a low-cost producer in the industry allows the company to lower prices to customers.
• Competitors with higher costs cannot afford to compete with the low-cost leader on price. 

DIFFERENTIATION

• Create competitive advantage by distinguishing their products on one or more features important to their customers.
• Unique features or benefits may justify price differences.

FOCUSED STRATEGY

• Target to a niche market.
• Concentrates on either cost leadership or differentiation.

      3. Value Chain Analysis - Executing Business Strategies

The Value Chain 

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.

Business Driven Technology

Information Technology (IT)
A field concerned with the use of technology in managing and processing information. It is important to enabler of business success and innovation.

Information Technology's Role in Business :

 i) Understanding information technology provides great insight to anyone learning about business.

 ii) Business functions receiving the greatest benefit from information technology

              Technology in BusinessWeek and Fortune

Information  Technology Basics :

i) Management information systems (MIS)

• Covering the application of people, technologies, and procedures to solve business problems.
• MIS is a business function, similar to Accounting, Finance, Operations and Human Resources.

ii) It is important to understand :

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

Information : 

i) Data - Raw facts that describe the characteristic of an event.

ii) Information - Data converted into a meaningful and useful context.

iii) Business intelligence - Decision made after knowing the info.

IT Cultures :

i) Information Functional Culture

• Employees use information as a mean of exercising influence or power over others.

             eg : 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.

ii) Information Sharing Culture

• Employees across department trust each other to use information to improve perfomances.

iii) Information Inquiring Culture

• Employees across department search for information to better understand the future and align themselves with current trends and new direction.

iv) Information Discovery Culture

• Employees across department are open to new insights about crisis and radical changes and seek ways to create competitive advantages.

Functional Organization - Each functional area has its own systems and communicates
with every other functional area. 

Diagram shows Marketing communicating with all other functional areas in the organization.

Ice Breaking

Well, basically this is my first time ever created a blog!
I'm so not a type of person who love to write because i do not tell stories through writing I share through pictures... 

"picture worth a thousand words" :)

So, the reason of the blog is created because of my academic purposes and who knows maybe I might fall in love slowly with blogging? Hihi.. Till then till my first entry for Information Technology Business subject. Stay tuned peeps, peace out! :D