CHAPTER 4 : MEASURING INFORMATION TECHNOLOGY'S SUCCESS.

Chapter 4 :


MEASURING INFORMATION TECHNOLOGY'S 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 professional.

EFFICIENCY AND EFFECTIVENESS IT METRIC
>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.
  METRIC

BENCHMARKING-BASELINING 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 result to optimal system performance (benchmark values), and identifying steps and procedures to improve system performance.

THE INTERRELATIONSHIPS OF EFFICIENCY AND  EFFECTIVENESS IT METRIC

• Efficiency IT  metric focus on technology and include:

      -Throughput
      -Transaction speed
      -System availability
      -Information accuracy
      -Web traffic
      -Response time

• Effectiveness IT metrics focus on an organization's goals, strategies and objectives and include:

        -Usability
        -Customer satisfaction
        -Conversion rates
        -Financial 

• 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.

         -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)

• Interrelationships between efficiency and effectiveness.

METRICS FOR STRATEGIC INITIATIVES

>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 SITE METRICS

Web site metrics include:
>Abandoned registrations 
>Abandoned shopping cards
>Click-through
>Conversion rate
>Cost-pre-thousand 
>Page exposures
>Total hits
>Unique visitors

SUPPLY CHAIN MANAGEMENT METRICS
>Back order 
>Customer order promised cycle time
>Customer order actual cycle time 
>Inventory replenishment cycle time
>Inventory turns (inventory turnover)

CUSTOMER RELATIONSHIP MANAGEMENT METRICS

• Customer relationship management metrics measure user satisfaction and interaction and include:

  >Sales metrics
  >Services metrics
  >Marketing metrics 

past year question ( oct 2009, part d ) Case Study

Past year question : October 2009 (part D)

QUESTION 1

The five competitive advantages used by AirAsia are it operates scheduled domestic and international flights and it using low fare, no frills airline. AirAsia pioneered low cost travelling in Asia. It is also the first airline in the region to implement fully ticketless travel and unassigned seats. Next is AirAsia operates with the world's lowest unit cost and a passenger break-even load factor.

It has hedged 100% of its fuel requirements for the next three years, achieves an aircraft turnaround time of 25 minutes, has a crew productivity level that is triple that of Malaysia Airlines and achieves an average

aircraft utilisation rate of 13 hours a day.

QUESTION 2

The Porter's generic strategies were applied by AirAsia are cost leadership, differentiation and focused strategy.

For cost leadership, AirAsia is having when it use the lowest price in the target market segment. As example, AirAsia operates scheduled domestic and international flights and is Asia's largest low fare, no frills airline. AirAsia pioneered low cost travelling in Asia.

Next is differentiation. A differentiation strategy is appropriate where the target customer segment is not price-sensitive, the market is competitive or saturated, customers have very specific needs which are possibly under-served, and the firm has unique resources and capabilities which enable it to satisfy these needs in ways that are difficult to copy. As example, AirAsia operates with the world's lowest unit cost of US$0.023/ASK(available seat per

kilometer) and a passenger break-even load factor of 52%. It has hedged 100% of its fuel

requirements for the next three years, achieves an aircraft turnaround time of 25 minutes,

has a crew productivity level that is triple that of Malaysia Airlines and achieves an average

aircraft utilisation rate of 13 hours a day.

And the last one is focused strategy. This dimension is not a separate strategy per se, but describes the scope over which the company should compete based on cost leadership or differentiation. The firm can choose to compete in the mass market (like Wal-Mart) with a broad scope, or in a defined, focused market segment with a narrow scope. In either case, the basis of competition will still be either cost leadership or differentiation. As example, AirAsia will strengthen and enhance its route network by connecting all the existing cities in the region and expanding further into Indochina, Indonesia, Southern China (Kun Ming, Xiamen, Shenzen) and India. The airline will focus on developing its hubs in Bangkok

and Jakarta through its sister companies, Thai AirAsia and Indonesia AirAsia.

QUESTION 3

Based on Porter's Five Force Model, AirAsia's buyer power is AirAsia has many competitors like Tiger Airways, Jetstar Asia, Nok Air, Lion Air and Cebu Pacific which make the buyer power will be high when buyers have many choices of whom to buy. That's why AirAsia try to be the first airline in the region to implement fully ticketless travel and unassigned seats to reduce the buyer power.

Next is supplier power, will be high when buyer have fewer choices to buy from and it will be low when their choices are many. Best practices of IT to create competitive advantage. AirAsia try to compete with the others by having unique resources and capabilities which enable it to satisfy these needs in ways that are difficult to copy.

AirAsia operates with the world's lowest unit cost, has a crew productivity level that is triple that of Malaysia Airlines and achieves an average aircraft utilisation rate of 13 hours a day.

CHAPTER 3 : Strategic Initiatives For Implementing Competitive Advantages

Chapter 3

Strategic Initiatives For Implementing Competitive 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)

1 ) 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 include.

*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 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.

2 ) Customer Relationship Management(CRM).

# Involves managing all aspects of a customer's relationship with an organization to increase customer loyalty and retention and retention and an organization's profitability.

# Many organization, 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 :

        -Identity types of customers

       -Design individual customer marketing campaigns

       -Treat each customer as an individual

       -Understand customer buying behaviours

3 ) Business Process Re-engineering

$ Business Process- a standardize set of activities that accomplish a specific task, such as processing a customer's orders.

$ Business Process Re-engineering (BPR) - the analysis and redesign of workflow within and between enterprises

      

$ SEVEN PRINCIPLES OF BUSINESS PROCESS REENGINEERING :

     

      1) Organize around outcome, not tasks.

      2) Identify all the organization's processes and prioritize them in order of redesign urgency.

      3) Integrate information processing work into the real work that produces the information.

      4) Treat geographically dispersed resources as though they were centralized.

      5) Link parallel activities in the workflow instead of just integrating their result.

      6) Put the decision point where the work is performed, and build control into the process.

      7) Capture information once and at the source.

       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 a airplane which ignore the road completely

~ Types of change an  organization can achieve, along with the magnitudes of change and the potential business benefit.

 4 ) Enterprise Resource Planning

 @  Enterprise resource planning (ERP) - by viewing enterprise wide information on all business operations.integrates all departments and functions throughout an organization into a single IT system so that employees can make decisions

@ Keyword in ERP is "enterprise"

 @ ERP systems collect data from across an organization and correlates the data generating an enterprise wide view.

@ 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.

 @ ERP systems collect data from across an organization and correlates the data generating an enterprise wide view.

      BPR and ERP METRIC

      The balanced scorecard enables organizations to measure and manage strategic initiatives.

      Vision and Strategy:

      1)Financial :      

       " To succeed financially, how should we appear to our shareholders?"

      2)Internal Business Processes:

 

        " To satisfy our shareholders and customer, what business processes must we excel at?"

  

       3)Learning and Growth:

     

         " To achieve our vision how will we sustain our ability to change and improve ?"

       4)Customer

         " To achieve our vision, how should we appear to our customers?"