Matakuliah
Tahun
: A0814/Investment Analysis
: 2009
TECHNOLOGY PAYOFF METRICS –
BALANCED MULTIPLE OBJECTIVES
Pertemuan 11-12
What is a Metrics
• Metrics is a term relates to measurement.
• The objective of establishing metrics are for tracking and
evaluating performance, benchmarking, feedback, and
organizational improvement.
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Metrics
• Financial metrics are driven by costs and have
traditionally been the focus of the accounting and
financial functions in any organization.
• Operational metrics, capture performance related to the
core functions of the organization
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Immediate Versus Lagged Metrics
Why unable to detect payoff from IT ?
It is because looking at metrics at the woring
point in time.
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Productivity, Profitability, and Customer
Value
• Hitt and Brynjolffon presented evidence that the payoff
from IT need to always reveal itself in metrics that are
related to productivity or profitability of the firm
implementing the IT.
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Productivity, Profitability, and Customer
Value
• It’s very important to assess the value of the IT
investment to customers.
• While productivity, profitability, and customer value
would be the firs places to look for IT payoff, there are
instances when payoff metrics go beyond these three
dimensions.
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A Balanced and Inclusive Approach
• Balanced Scorecard Approach
Financial
Perspective
Customer
Perspective
Internal Business
Perspective
Innovation and
Learning
Perspective
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• The balanced scorecard allow senior managers to view
their business from four important perspectives:
– How do we look to the customers? (customer perspective)
– At what must we excel? (internal perspective)
– How do we continue to improve and create value ? (innovation
and learning perspective)
– How do we look to the shareholders? (financial perspective)
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Customer Perspective
• Customers’ interest are generally assessed along foru
dimensions:
– Time
• The time between which the customer places an order to when the company
actually ships the product has to be closely tracket by the company.
– Quality
• Quality measures the product’s defect level as perceived by the customer
– Performance and service
• Performance and services measures related to how the company’s products
or services help in creating value to the customers
– Cost
• Costs are indicative of the internal efficiency of tranlating inputs into outputs
or services
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Customer Perspective
• Customer satisfaction
– What is the perceived ease of use of the technology?
– What is the perceived usefulness of the technology?
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Internal Business Perspective
• The measures that reflect these internal operations are
derived from the processes that have the greatest impact
on customer satisfaction, such as factors that effect
delivery time, quality, and productivity.
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Innovation and Learning Perspective
• It is important for companies to make continuous
imprvements to their existing products and processes
while at the same time introducting new products and
services with expanded capabilities
• Innovation measures on the balanced scorecard address
the company’s ability to develop and introduce new
products rapidly.
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Financial Perspective
• Key factor in determining a company’s worth in the eyes
of shareholders and other outsiders, senior managers
have to be even-nidful of the bottom line.
• Measures to capture any redundancies or wastage that
would thereby lead to better financial performance.
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Final Thoughts on The Balance Scorecard
• Enables a company to regulate its management
processes and focuses the organization on implementing
a long-term strategy.
• While the balance scorecard was originally designed for
the organization as a whole, many of its benefits can be
reaped by examining the IT payoff question as well.
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Recommendations
• Extent possible, data for IT payoff analysis incorportae
contextual metrics. Include the business strategy
preceding the investment; implementation factors such
as firm culture, skill mix, incentive structure, and conflict
resolution; or degree of product and process integration
with IT and the extent of business process reengineering
(BPR).
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Recommendations
• To gather longitudinal data that extends well beyond the
initial implementation. IT projects can have extended
development cycles followed by training and
implementation, which may obscure the overall impact of
the investment in IT if longitudinal data are not gathered.
The advantages of crossectional data are that it is easier
and cheaper to collect, and the analysis is relatively
simple.
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Recommendations
• Impact of IT needs to be independently measured by
examining productivity, profitability, customer value, and
the entire balanced scorecard.
• Identify appropriate IT assets and impacts prior to
examining organizational payoff.
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