radio station's vision is that there is a demand for radio entertainment in the shape of good music, entertaining talk, and news. Its mission is to become a leading player in the national market. The station's specified business goal is a market share of 25 percent and an ROE of 15 percent. The executive management cockpit or dashboard of the radio station with KPIs for monitoring business performance in relation to strategic objectives is illustrated in Exhibit 1.2.
Exhibit 1.2 Executive Management Cockpit of Radio Station with KPIs Prior to BA Initiative
The current status, which can be read from the instruments in the executive management cockpit, is an actual ROE of 9 percent and an actual market share of 17 percent. So the station has a way to go in order to achieve its targets of an ROE of 15 percent and a market share of 25 percent. The business strategy and objectives are thus presented by means of the following metrics (measures) or KPIs. Note that success and good performance are derived from the actual values of these measures in relation to the objectives.
The two KPIs are used to control and manage the radio station. Return on equity (KPI 1) is the most important KPI, and it is affected by the market share (KPI 2). The thinking is that a bigger market share (KPI 2) will mean more concurrent listeners and increased advertising revenue, which means a bigger ROE for a given level of cost. A new BA initiative is planned and implemented in the business. The process is outlined in the following section using the BA model.
Functional Strategy and Business Case
BA activities must always be based on the business‐driven environment, with the management specifying or creating one single information strategy that must be subject to the company's overall business strategy (vision, mission, and objectives).
The program manager of the radio station has come up with a strategic initiative to increase the business's market share from the current 17 percent to 25 percent. The radio station must hold on to its listeners longer. The program manager specifies this strategy as: “From our current record of holding on to our listeners for 15 minutes, before he or she changes channel, we must in the future hold on to our average listener for 30 minutes.” The program manager introduces the performance target: average listening time as a new measure or KPI for the production department. The target is that the average listener must be kept on the broadcasting frequency for 30 minutes. The average listening time thus takes its place as a new KPI on the management dashboard.
Note that this strategic target penetrates right into the core business of the radio station. If the target – to hold on to the average listener for 30 minutes – is achieved, it will mean a bigger market share, increased advertising revenue, and, ultimately, an improved ROE. So, it is expected that an increase in KPI 3 will affect both KPI 2 and KPI 1 positively.
Before launching the BA initiative, the program manager prepares a business case for the project. He expects a larger market share (KPI 2) of up to 25 percent as a result of the increase in average listening time (KPI 3) of 30 minutes. This is expected to improve the pricing of advertising slots, so that the advertising revenues of the radio station increase by $4 million per year. Based on these expectations, he calculates that return on equity (KPI 1) will increase from 9 percent to 13 percent. In addition, he expects that the BA initiative will incur a resource consumption of three employees in four months as well as necessitate purchasing software and consultancy services for $250,000.
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