FDI Strategy

8/12/2019 FDI Strategy

1/35

Performance Metrics

CPS 181s

April 10, 2003


2/35

Should Performance Be

Measured?


3/35

MetricsAssessing the progress and health of on-line businesses

Financial progress: sales, margins, profit, market share

Strategic metrics require entire examination of the company:perception of value proposition, marketplace offering,effectiveness of implementation

Branding and implementation metrics focus on> supply-chain performance

> organizational dynamics

> marketing communication effectivenessincluding branding

Senior and stock market analysts tend to have a biastoward financial metrics

provide history of the company in the marketplace

do not reflect the strategy of the company

Managers need early warning systemmetrics


4/35

Should Senior Managers be

Concerned About Metrics?Organization metrics represent performance targets of

the companyPercent increase in revenue

Percent increase in unique visitors

Length of time visitors remain on site

Cost of customer acquisition

Metrics valuable as employee reward or taking strategic

actionChange processesChange strategy

Change product strategies


5/35

Metrics Drive Behavior in a

Number of WaysHelp define the business model

Concrete goals with precise measurements

Focusing on measurement can increase the precision of the value

proposition

Help communicate strategyDocument performance targets

Communicates strategy to workforce

Creates buy-in to the metric-setting processes

Help track performance Instantaneous feedback concerning site performance real-time

Usage, visitors, length of time on site, average sales, page views


6/35

Metrics Drive Behavior in a

Number of Ways...Help increase accountability

Metrics must be linked to the performance appraisal system

Individual performance can be appraisals tied to companywide,

team-specific, and individual metrics

Site usability can be tied to the interactive design function

Customer service metrics can be tied to the customer servicedepartment

Help Align ObjectivesAlign precise objectives, departmental functional goals,

companywide strategic activities as a whole


7/35

Current Challenges to Specifying

Metrics for Online Businesses

Companies Strategies Change RapidlyInternet timerequires rapid change

Measurement is resource intensiveSetup and maintenance of capital intensive/human resource

intensive systems and procedures

Data capture, data mining, and information use require time andcommitment of senior executives

Online measurement systems are vulnerableeasy tomanipulate final results


8/35

Current Challenges to Specifying

Metrics for Online Businesses...

Soft metrics are not valued by the investment community

Investment community looks at revenues, margins, number ofvisitors, length of time on site, customer acquisition costs

But, ease of customer use, best value perception, and other marketresearch measures are frequently early warning indicators of siteperformance

Meaningful metrics change on Internet timeoften as quickly as

the time it takes to learn best how to interpret the retained originaldata


9/35

What Should We Measure?


10/35

How Can We Assess the Health

of eCommerce Firms?...The Balanced Scorecard

Introduced by Kaplan and Norton

Finance balanced by other domains of the business Includes internal business processes and customer responses

Four categories

> Financial

> Customer

> Internal business systems> Learning and growth


11/35

Kaplan-Norton Balanced Scorecard

FINANCIAL

To succeed financially, howshould we appear to our

shareholders?

INTERNAL BUSINESSPROCESS

To satisfy our shareholders andcustomers, at which businesses

must we excel?

CUSTOMER

To achieve our vision, howshould we appear to our

customers?

LEARNING AND GROWTH

To achieve our vision, how willwe sustain our ability to change

and improve?

Vision

and

Strategy

Source: Kaplan, Robert S. and David P. Norton. 1996. Using the Balanced Scorecard as a Strategic Management System. Harvard Business Review74 (January-February): 76.


12/35

K-N Financial and Customer

MetricsFinancial Metrics

Revenue, revenue growth, gross margins, operating income,net margin, earnings per share, cash flow

Reflect recent planning period , to some degree all previousplanning periods

Customer MetricsManagement relationship of customers by the firm

Market share

Customer acquisition

Customer satisfaction

Customer profitability

Customized by the target segment


13/35

K-N Internal Business Process

Metrics

Innovation includes customers perception of

innovativeness of the companyOperationsquality of entire supply

Postsale servicequality being offered tocustomer


14/35

K-N Learning and Growth

MetricsEmployee

Selection

Training

RetentionSatisfaction

Information SystemsQuality of infrastructure

Timeliness, accuracy, and utility of dataMotivation

Empowerment

Alignment of company and personal goals


15/35

Limitations to the K-N

Balanced ScorecardNo clear definition of strategy or businessmodels

Unclear location of organizationalcapabilities or resources in framework

Unclear where partnerships reside inframework


16/35

The Rayport-Jaworski Performance

Dashboard and Strategy FrameworkThe Performance Dashboard - intended to reflect the

health of the business

The Strategy Framework Drives the Necessary MetricsSix critical steps

> opportunity assessment

> business-model metrics

> customer-interface design

> market communications and branding> implementations

> financial


17/35

Introducing the R-J Performance Dashboard

Financial

Metrics

Steps of Strategy:

Customer InterfaceImplementation

and Branding

Performance

Dashboard:

Areas

Addressed:

Size of marketopportunity

Attractiveness oftarget segments

Competitivelandscape

Customer acquisition Changes in customer

behavior

Site experience andusability

Branding Technology

infrastructure

Internal organization

Relationship withsuppliers andpartners

Fulfillment capability

Revenue Profit

Cost

Balance sheet

Market Opportunity

AssessmentBusiness Model

Implementation

& Branding

Metrics

Customer

Interface &

Outcome Metrics

Business Model

Metrics

Opportunity

Metrics

Uniqueness of valueproposition

Attractiveness ofoffering

Firm capabilitiesrelative tocompetition

Sustainability ofcompetitive position

Evaluation


18/35

Components of the R-J

Performance DashboardOpportunity Metrics

Ability to discern unfulfilled needs in the market place is critical

Market-opportunity metrics asses the degree to which the firm

can accurately gauge the market opportunityBusiness-model Metrics

Capture subcomponents of the business model: egg diagram,resource systems, financial metrics

Value Proposition or Cluster Benefits Metrics

> target segments, benefits offered, capabiliti4s that drive benefits> focus on customers perceptions

> performance relative to the competitors benefits


19/35

R-J Branding and

Implementation MetricsFocus on the supply-chain performance,organizational dynamics, marketing

communication effectiveness (includingbranding)

Fulfillment of the brand process metrics:customer awareness of the brand

Innovation metrics: ability to rapidly innovate,even if in a potentially discontinuous fashion


20/35

R-J Customer-Interface

Metrics

Customer-interface and customer-outcome metrics

Customers perception of the firms performance oneach level of the 7 Cs of the customer interface

Example: customers rating of customization compared tocompetitors

Other critical interface metrics Including value proposition


21/35

R-J Customer-Outcome

MetricsCapture process measures that the firm will produce

favorable customer responses such as satisfactionand loyalty

Focus on subjective customer-outcome metricssatisfaction

length of stay at site (stickiness)

overall evaluation of the experience

Focus on objective customer-outcome metricscustomer acquisition costs

average order size

customer profitability

number of visits per month


22/35

Financial Metrics

Revenues

Costs

Profits

Balancesheet metrics

Lise Buyer


23/35

Life Cycle of a Company

STARTUP/

BETA

CUSTOMER

ACQUISITIONMONETIZATION MATURITY

Develop aplatform for rapidgrowth bybuilding a strongteam andcreating a flexiblesite.

Build marketshare as quicklyas possible byaggressivelyspending onpartnerships andpromotion.

Increaserevenues andcustomer lock-inby developingnew revenuestreams.

Control costs andoptimizemarketingexpenditures toachieve profitablegrowth.

6 Months- 1 Year 1 Year - 2 Years 2 Years - 5 years > 5 Years

Strategy

Business.comTNBT.com

mValue.comPaypal.comEvite.com

Yahoo.comAmazon.com

SchwabAOL

Examples*

* At time of writing (3/2000)


24/35

What are the Steps to Implement

the R-J Performance Dashboard?Step One: articulate business strategy

market opportunity assessment

business modelcustomer-interface design

branding

implementation

evaluation


25/35

Steps Two and Three

Step Two: translate strategy into desired outcomes

not settling target levels but specifying outcomes

Step Three: devise metrics identifies specific metrics that reflect the desired

outcomes

look-to-book ratios


26/35

Bill Gurley on the Power of

Conversion RatesConversion Rate 2% 4% 8%

Advertising Spend 10,000$ 10,000$ 10,000$

Visitors 5000 5000 5000

Transactions 100 200 400

Cost/Transaction 100$ 50$ 25$

Revenue 10,000$ 20,000$ 40,000$

Marketing/Revenue (%) 100% 50% 25%

Average transaction size = $100 Source: J William Gurley

Source: Gurley, J. William. 2000. The Most Powerful Metric of All. CNET News.com, 21 February.URL: http://www.news.com/Perspectives/Column/0,176,403,00/html?tag=st.ne.


27/35

Steps Four and Five

Step Four: link metrics to leading and laggingindicators

map entire set of indicators including leading & lagging indicators

Step Five: calculate current and target performancecurrent conversion rates

advertising expenditures

degree of positive word of mouth


28/35

Blueprint to the R-J Performance Dashboard

Step One:

Articulate

Business

Strategy

Step Two:

Translate

Strategy Into

DesiredOutcomes

Step Three:

Devise

Metrics

Step Four:

Link Metrics

To Leading

And LaggingIndicators

Step Five:

Calculate

Current And

TargetPerformance

Definego

alsandvalueproposition

Market OpportunityOpportunity size?Competitive environment?

Customer

How to acquire customers?How will customers change?The customer experience?

Implementation and

Branding

How to develop brand?How to go to market?

Financial

Financial consequences interms of revenue, profit, costand balance sheet?

Market OpportunityMarket size and growthAverage age and incomeCompetitor concentration

Customer

Market sharePurchases / yearSuccess rateService requests / customer

Implementation

Customer brand awarenessSystem uptime percentageNumber of IT staff% inaccurate orders

Financial

RevenueProfitEarnings per share

Debt to Equity ratio

For each metric,determine the metricsthat it affects and thataffect it

Map the linked set ofmetrics, indicatingleading and laggingindicators

Ensure that there is abalance betweenleading and laggingindicators

Developresourcesystemr

equiredtodeliverthestrategy

For each metric,calculate current levelof performance

Determine targetlevel required to meetoutcomes describedin Step 2

Ensure that targetsare consistent witheach other

Business Model

Unique value proposition?Capabilities vs. competition?

Business Model

Customer perceived benefitsExclusive partnerships$ invested in technology vscompetition


29/35

What are the Three Sources ofMetrics Information That Firms Can

Use to Chart Their Progress?

Industry standard metrics

Benchmark values

On-line Information


30/35

Online Information

Market researchprimary customer data

Analysts reportsblending market data

Financial informationincome statement, balance sheet,statement of cash flow

Use of Bizrateuse of dimensions of service

Use of Forrester Reportse-commerce reportscompetitors, consumers, technology evolution in a segment

of the industryUse of Hoovers Online financial and market information for

both online and offline companies


31/35

U.S. Top 25 Web & Digital Media Properties (March 2000)

Source: Media Metrix (www.mediametrix.com/usa/press/releases/20000424.jsp) March 31, 2000

Rank Digi tal Media/Web Unique Visitors (000)

1 AOL Network 59,858

2 Yahoo Sites 48,336

3 Microsoft Sites 46,581

4 Lycos 32,899

5 Excite @ Home 28,571

6 Go Network 23,006

7 NBC Internet 17,169

8 Amazon 15,217

9 Time Warner Online 13,63610 Real.com Network 13,482

11 Go2Net Network 13,041

12 AltaVista Network 12,557

13 About.com Sites 12,329

14 Ask Jeeves 12,269

15 eBay 11,155

16 LookSmart 10,557

17 ZDNet Sites 10,226

18 CNET Networks 10,023

19 eUniverse Network 9,198

20 JUNO/JUNO.COM 9,177

21 EarthLink 8,526

22 Infospace Impressions 8,305

23 Viacom Online 8,139

24 FortuneCity Network 7,809

25 CitySearch-TicketMasterOnline

7,689


32/35

Market Research Source - Bizrate.com


33/35

Analyst Source - Forrester


34/35

Financial Information Source - Hoovers Online


35/35

Mapping Internet Research Onto The Performance Dashboard

MediaMetrix

ACNielsen BizRate Forrester Gomez Jupiter

CreativeGood Hoovers

Market Info

Traffic

Fulfillment

Implemen-tation

Privacy

Usability

Content

CustomerSatisfaction

CustomerService

FinancialPerformance

Market

Implementation

Customer

Financial

Market Research Analyst

Financial

Information

FDI Strategy

Documents

Transcript of FDI Strategy