METRICS
Metric Questions answers:
• Why should senior managers be concerned about metrics?
• How can the health of online firms be assessed?
• What are the steps to implement the Performance Dashboard?
• What external sources of metrics information can firms use to chart their progress?
Why Senior Managers Should be Concerned About Metrics
Five ways in which metrics can have a positive effect on the growth and vitality of the organization:
1. Help define the Business Model.
2. Help communicate strategy.
3. Help track Performance.
4. Help increase accountability.
5. Help Align Objectives.
Current Challenges to Specifying Metrics for Online Businesses
Reasons why some firms have not made an explicit commitment to metrics:
– Companies’ strategies change rapidly.
– Measurement is Resource Intensive.
– Soft Metrics are not valued by the investment community.
– Meaningful metrics change on Internet time.
Assessing the Health of Online Firms
The Balanced Scorecard
– Introduced by Kaplan and Norton in response to their perception that managers overwhelmingly focus on short term financial performance.
– They argued that firms must balance their financial perspective by analyzing other domains of the business,including internal business processes and customer responses.
*They introduced 4 categories of metrics:
1. Financial
2. Customer Internal Business Systems
3. Learning and Growth.
*Financial Metrics
– They are designed to assess the financial performance of the company.
*Customer Metrics
– Customer metrics are intended to assess the management of customer relationships by the firm.
*Internal Business Process Metrics
-These focus on operations inside the company.
*Kaplan and Norton divided them into three groups:
1. Innovation
2. Operations
3. Postsale service
*Learning and Growth Metrics
– These broadly cover employee, information systems, and motivation metrics.
The Balanced Scorecard – Strategy Into Operational Terms
Limitations of the Balanced Scorecard
*No clear definition of strategy or business models.
*Unclear location of organizational capabilities or resources in the framework.
*Unclear where partnerships reside in the framework.
The Performance Dashboard
*The Performance Dashboard
– Is intended to reflect the health of a business.
*The Strategy Framework
– Drives the necessary metrics.
*Resources are featured in the resource system of the business model.
*Partnerships are featured in the resource system of the business model.
Components of the Performance Dashboard
The Performance Dashboard is composed of five categories of metrics:
1. Market Opportunity Metrics
-Marketopportunity metrics assess the degree to which the firm can accurately gauge the market opportunity.
2. Business Model Metrics
-Capture the subcomponents of the business model.
*Value proposition or Cluster Benefits
The value proposition is composed of three parts:
– Target segment
– Benefits offered
– Capabilities that drive the benefits
3. Online Offering Metrics
– Metrics should reflect the entire decision process from pre purchase to post purchase.
4. Resource System Metrics
– The resource system is based on the benefits offered to consumers.
5. Financial Metrics
-Captures the revenues, costs, profits, and balance-sheet metrics of the firm
6. Marketing and Branding Metrics
– These focus on marketing communications and branding effectiveness.
7. Implementation Metrics
– These focus on the effectiveness of a company’s human resources program as well as its processes, organizational structure, systems (including information, incentive & rewards), coordination mechanisms, culture and management style, and technology systems.
8. Customer Metrics
a. Customer Interface Metrics– Measures the customer’s experience with the technology interface; that is, the customer’s response to the 7C’s of the interface.
b. Customer Outcome Metrics– This captures output metrics such as overall costs of satisfaction, average order size, and customer profitability.
Implementing the Performance Dashboard
Step One: Articulate Business Strategy
Step Two: Translate the Strategy into Desired Outcomes
Step Three: Choose Metrics
Step Four: Link Metrics to Leading and Lagging Indicators
Step Five: Calculate Current and target Performance
Blueprint for the Performance Dashboard
Metrics for Seamless Online/Offline Customer Purchase Process
Metrics for Seamless Internal Business Processes & Operations
*Information Sharing
–Ability to open accounts online and offline
–Ability to access accounts online and offline
–Integrated customer databases
*Fulfillment Systems
–Seamless order processing
–Seamless order tracking
–Integrated inventory systems
External Sources of Metrics Information
*Firms are likely to track their value proposition versus competition, customer satisfaction with the site, site usability and financial outcomes.
Online Information:
– Market Research
– Analyst Reports
– Financial Information
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