CIOs can learn from the field of advertising, which has certain things in common with IT. Both require substantial investments and for both one cannot explain a direct impact on performance.
In the case of advertisements one cannot say with confidence that
it will lead to increase in sales, there are far too many other factors
responsible, e.g. channel and sales schemes, distribution efficacy, pricing etc
that influence this relationship. That’s also a big area of concern for the marketing manager.
So how does one measure the impact of advertisements? Russel H. Colley gave the answer by proposing the DAGMAR (Defining
Advertising Goals for Measured Advertising Results) model in 1961. The DAGMAR model identifies four intermediary stages before sales
happen- awareness, interest,
desire and action (AIDA). It proposes that the impact of advertisements
should be measured in terms of parameters related to these four intermediary stages – brand awareness and saliency, the level of interest generated in
the brand, the desire it creates in the consumers’ minds and the action (or
purchase) they take, and not just in terms of the final purchase. The transition
from one stage to the other is moderated by other factors, like other elements
of the marketing and promotion mix, competitive actions etc.
Don’t we need a similar concept in case of IT too, how does IT impact the organizational performance in economic
terms? The intermediary stages should also be measured to gauge the impact.
After all, like advertising, even in case of IT, there are many internal as
well as external factors influencing the impact.
In order to develop a similar model, we will need to understand
the process of IT’s impact on performance.
In the
simplest form, IT impacts organizational processes by making them more efficient (E). The impact could
be on one process or on a set of multiple processes and this impact can be
measured in terms of increased speed, decrease in cost, better utilization of
other resources or all three.
When this process impact spreads to other adjoining areas and is
sustained over time through continual improvements, a local functional capability (F)
is generated. For example, IT can enhance the speed of the customer care
process for a mobile telephony operator but when this impact is accompanied by
impact on other adjoining processes like billing and service provisioning, a
local capability of responding faster and effectively to the customers is
generated. The metric to define the functional capability needs to be developed
to measure it.
When many such local functional capabilities are created in the
organization, they together can create an organizational
capability (OR). For example, when the local functional capability of
responding to the customers is accompanied by similar capabilities in other
areas, e.g. creating appropriate services options (marketing) or network
planning (operations), or training the customer care executives (HR) etc. then
an organization wide capability of customer
orientation can be created.
It is not merely a rhetoric, but it is a real capability for which suitable
measures needs to be developed.
When the functional or the organizational capability is leveraged
by the business to create products and services, which the customers need and the competitors
do not provide, the resulting competitive
edge (CE) generates performance impacts as it enables the organization
charge a premium for their services or create a new line of revenue or win in
competitive situations. One needs to develop suitable measures for identifying
how is this competitive edge resulting into increase in business.
On the lines of the AIDA model, the building blocks of the EFORCE model for justifying IT investments
(efficiency, functional capability, organizational capability, competitive
edge) are developed.
These, however, are initial thoughts. One needs to identify and
explain the measures, which can be used at each of the intermediary stage.
So, what do you think about it?
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