Let us understand the business value metric with the help of one business case example. The Below shown example is for illustration purpose only.

Business Case: Online retailer ‘allretail.com’:

Let us take a scenario of an online retail market. An online retail market is growing, and thus creating a challenge for the online retailers. Typically these online retailers rely on low-margin/high-volume business in order to meet the challenge of growing competition, for meeting their revenue and margin targets.

For example an online retailer, ‘allretail.com’ measures customer satisfaction using online survey method, collecting feedback about service quality. Online retailer has found that the more the number of feedbacks received from buyers there is an increase in their revenue. Online retailer’s research analyzed that the perceived quality of shopping experience was primarily determined by the buyer’s perception of transaction speed, and timely delivery of the purchased product. However there might be other qualitative factors which may also have significant impact on the rating of customer satisfaction.

The IT & Operations team uses an online application performance monitoring tool to measure transaction speed from a real buyer perspective. Working further on this, the business development team along with IT & Operations team come up the following questions for which they want seek answers.

  • Does higher transaction speed translate to greater loyalty?
  • How much revenue can be increased by improving the transaction speeds?

Using the basic business value construct, we can now illustrate the creation of this metric

Figure: Example of a basic business value metric

The decisions that can be made utilizing this metric include answers to questions such as:

  • In addition to transaction performance, is it required to analyze other parameters that affect perceived quality? e.g. overall health depends on transaction speed, availability, accuracy etc
  • Whether any further investments in improving transaction performance makes business sense?

To know more about the topic, watch out for the next posting on the topic.

Vineet S. Kunchur
IT Management Consulting