Business Intelligence and Analytics Grow Up

 
 
By Samuel Greengard  |  Posted 2011-07-28
 
 
 

Finding the right information at the right time—and then putting it to work—has always been at the center of a winning business strategy. But in an era when organizations are awash in data, it’s challenging to manage data in a way that provides insights that lead to business success.

“The ability to build models, view ‘what-if’ scenarios and predict events goes a long way toward achieving a competitive advantage,” says David Patton, managing director at PwC Consulting.

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Business intelligence and business analytics are at the center of this universe. In recent years, BI and BA systems have become far more sophisticated and powerful. Used effectively, they can spot patterns and yield insights that would otherwise go undetected.

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However, constructing the right architecture is no small feat—particularly as social networking and mobility enter the picture. “Data is available in ways that were unimaginable a few years ago,” says John Lucker, principal at Deloitte Consulting. “The challenge is putting it to use.”

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Culling and crunching data across a far-flung enterprise requires sophisticated tools—particularly with the growth of unstructured data and the emergence of unconventional data sources. What’s more, there’s a growing need to involve line-of-business leaders and partners.

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“Ideally,” says Kamlesh Mhashilkar, head of BIPM Services at Tata Consultancy Services, “an organization can use BI and BA at tactical, strategic and operational levels. When these systems are used effectively, they have the ability to transform an organization.”

Banking on Better Data

Although BI and BA have been around in one form or another for almost a quarter of a century—the concept actually dates back to IBM researcher Hans Peter Luhn in the late 1950s—the adoption rate for these tools remains relatively low. Industry studies report that only 10 to 20 percent of organizations tap into BI and BA in any significant way. Worse, many users face major hurdles in extracting meaningful information from these systems.

Yet, organizations that use BI and BA effectively frequently achieve clear-cut benefits that have an impact on the bottom line. Financial services firms analyze accounts for signs of customers who seem likely to change banks or credit card providers. Hospitals plug in epidemiological data and overlay it with internal data points in order to identify patients who are at greater risk of complications or death.

Manufacturers and retailers use mashups, social media data and clickstream analysis to better understand customer segments and determine how different groups influence others. This can guide everything from customer service to marketing.

Growing interest in BI and BA is no accident. Lower-cost hardware and software—combined with better ways to capture, manage and manipulate data—have created a “perfect storm,” Deloitte’s Lucker observes. “Companies have an opportunity to close the gap on inefficiencies and suboptimal processes. They’re able to substantially boost their return on technology and business investments.”

It’s an opportunity that Deutsche Postbank AG, a London-based branch of the German banking giant, wasn’t going to pass up. The U.K. office, which focuses on private, business and corporate clients, requires accurate and timely management reports to guide investments.

In the past, the bank had to assemble reports from a disparate array of systems and sources. “We had silos of data and no effective way to connect them,” says Clarel Sookun, a director and head of IT. “Various attempts to streamline reporting and data analysis weren’t effective.”

To fix the problem, the bank turned to IBM Smart Analytics in September 2010. The appeal of the BA solution, Sookun explains, is that it offered a way to fully integrate a diverse array of data elements in real time.

Now, instead of it taking hours or days to prepare a report, bankers have the information they require at their fingertips. They can drill down through investment portfolios and view results by divergent criteria and variables. The system has also boosted reporting accuracy, providing a way to reconcile data on the fly.

Having achieved success in the initial phase of business analytics, the bank is looking to expand the capabilities to aid finance operations by analyzing loan and interest data and performing what-if scenarios using a graphical interface. It also aims to ratchet up management reporting tools so executives can gain a more comprehensive view of various metrics.

“There are enormous long-term benefits,” Sookun notes. “We can view how a change in basis points—or a series of changes—affects the business, or how buying or selling assets impacts the bottom line.”

Tata’s Mhashilkar says that organizations are increasingly connecting data from different systems and repositories in order to spot relationships that previously eluded the radar. “The key to building BI and BA systems that offer a competitive advantage is moving beyond data marts and islands of information,” he says.

“It’s all about connecting data that resides in different departments—including human resources, finance, manufacturing, marketing, customer support and others. With everything visible in one place, it’s possible to gain a single snapshot and know what is happening across the organization in real time.”

A Healthy Approach to BI

To maximize results from BI and BA, technology and business managers must understand how to assemble the right combination of tools. Today’s BI systems incorporate a wide variety of capabilities, including querying and reporting, data mining and online analytical processing (OLAP).

BA systems, on the other hand, increasingly tackle complex simulations, risk analysis, predictive modeling and more. They use sophisticated algorithms and complex event-processing features to provide insights in near or real time.

These tools also cull data from a growing number of sources, including ERP and CRM applications, human resources programs, GIS systems, warranty databases, financial ledgers and R&D documents. In addition, some organizations plug in audio, video and other unstructured data, while others add outside data from social networks. The common denominator, Tata’s Mhashilkar says, is that human decision making remains the key to transforming information into actionable strategies.

Moving beyond spreadsheets and connecting a variety of data types creates both challenges and opportunities. At Schumacher Group, a provider of outsourced emergency room physician-management services, getting a handle on budgeting and resource planning is at the heart of the business.

The organization works with more than 2,500 clinical providers at about 200 U.S. hospitals. “We realized that we had to get off paper-based solutions and aggregate data in an electronic form,” says CIO Douglas Menefee.

The company adopted a software-as-a-service (SaaS) model that taps into Microsoft ProClarity ad hoc reporting. The BI system, which provides Web-based dashboards, uses SharePoint to connect users from 20 states. It aggregates data from nine different source systems, including a scheduling application, a demographic database and a CRM system.

All the data gets pulled into an enterprise data warehouse and, from there, it’s available on a real-time basis. Among other things, previously siloed finance departments can collaborate on budgeting, while physicians can view performance scorecards.

Such consolidated reporting and BI functionality has knocked the time required to complete monthly budgeting tasks from an average of 12 hours to about 45 minutes. It has also improved accuracy.

“With a 360-degree view, we’re able to spot gaps immediately, and we can understand budgeting and revenue in a way that wasn’t previously possible,” Menefee says. “We are far more aligned with our objectives.”

Ringing in a New Era of Analytics

Retailers, too, are finding ways to leverage BI and BA for bottom-line gains. Helzberg Diamond Shops, which operates about 235 jewelry stores in malls throughout the United States, is working to ramp up the information available to store managers.

Using a BI dashboard built by Information Builders, managers can examine product-category sales, margins and inventory levels. They can also identify trends in promotions and other store-specific information, including individual associate performance, credit sales and extended-care plan usage.

The company moved to the Web FOCUS platform about 18 months ago. It is the latest iteration in an enterprise data-warehousing strategy dating back to 1998. Managers and regional managers can log into their dashboards, view performance metrics and export the data to Excel spreadsheets or Active HTML.

“It’s easy to drill through data and spot patterns and trends that otherwise wouldn’t be detected,” says Greg Backhus, director of data warehousing for Helzberg.

What companies discover once they dive into BI and BA, PwC’s Patton says, is that every customer interaction offers potential value. “It’s possible to look at past purchasing history, predispositions, psychographics, demographic analysis and population densities,” he explains.

“Organizations are able to use statistical, analytic and predictive models to better understand business conditions and react in a more agile and flexible way. They can refine products and services to better meet the needs of their clients.”

That’s certainly the situation at TrueCar, a leading Web-based provider of new car pricing. “It’s our goal to offer the most accurate car-pricing data available,” states Mike Swinson, vice president of analytics. “It’s essential for potential buyers to know what others in their geographic area paid for the same automobile.”

In order to provide the most accurate data possible, TrueCar gleans data from a variety of sources, including automobile registration data, DMV and public records, dealers and other sources. But TrueCar doesn’t stop there. It also serves up projections for likely price changes over the coming weeks.

TrueCar uses SAS analytics and forecasting software to improve marketing campaigns and industry sales forecasts, as well as to obtain reports on pricing and trends. The software, which provides a dashboard, slices through a rolling set of 3 million transactions for as many as 10 data sources each week.

Among other things, the system strips out personal identifying information. It also uses a scoring algorithm to rate dealers based on the best haggle-free pricing.

In addition, the software incorporates Web analytics, which includes purchasing patterns and click preferences. That makes it easier for TrueCar to understand shifts in preferences.

“All the information winds up being housed in our analytics and business intelligence platform,” Swinson says. “All told, the BI and BA initiative has helped TrueCar reduce its cost per click by 50 percent, while also boosting revenue threefold.”

A Mobile City

As organizations look for ways to make workers more mobile, BI and BA fit neatly into the mix. At the City of Richardson—a community of about 103,000 citizens located in northeastern Texas—mobile BI has significantly changed the way police, fire and public safety personnel go about their jobs.

Using a mobile application from Information Builders, the city is able to tap into several applications and databases, including Lotus Notes, a SQL server and dispatch systems. Officials can view scheduling information and real-time reports—drilling down into the latter to check such details as the state of active 911 calls, a list of who’s currently being held in the city jail, and recent fire and police activities. “The system allows city officials to tap into important information, anytime and anywhere, from a BlackBerry or iPhone,” says Eric Matthews, the city’s deputy CIO. “It reduces the time demands on our dispatchers, gives them more accurate information, and helps them make faster and better decisions.”

The city of Richardson began using Information Builder’s WebFOCUS software about five years ago and added the mobile capabilities about three years ago. Matthews reports that it’s now integrating iPads and looking for additional ways to extend data to officials in the field. “Mobile business intelligence has greatly enhanced the way we operate,” he says.

Getting Smarter & Better

Admittedly, assembling all the pieces for a robust BI or BA architecture is no simple task. Nevertheless, Deloitte’s Lucker says that companies must stop hiding behind excuses for why they can’t make these systems work. This includes the notion that accurate results aren’t possible because of “dirty data.”

“Many data analytics systems don’t require data to be all that clean to work well,” he explains. “The built-in algorithms can find or produce the right data.”

Other factors also affect the success of an initiative. Lucker says it’s crucial to find people who understand how to interconnect systems and data in an optimal way, and extend access to smartphones, tablets and other mobile devices.

It’s also important for ownership and decision making to reside with business leaders rather than with IT executives. “IT must be the enabler, not the dictator,” says Tata’s Mhashilkar. “Unfortunately, this is often not the case.”

Finally, organizations must understand that BI and BA initiatives are often long-term projects that accumulate value over time. Along the way, it’s also vital to consider intangible gains, including promotions and campaigns that help build a stronger brand or achieve other, perhaps intangible, goals.

“Some of these systems require months or years to refine” Mhashilkar says. “An immediate payoff might exist, but a bigger one waits down the line as the value of the data increases.”

Make no mistake: BI and BA systems are evolving rapidly, and organizations that use these tools effectively boost performance and results.

“Business intelligence and business analytics offer tremendous opportunities across a wide range of industries,” PwC’s Patton concludes. “The ability to use data in powerful ways makes it possible to create a smarter and more resourceful organization.”