TOP: BUSINESS ANALYTICSTOP: BUSINESS ANALYTICSMGT 2206 001MGT 2206 001

Welcome!Welcome!

Matthew J. LiberatoreMatthew J. Liberatore

Fall 2009Fall 2009

IntroductionIntroduction Many firms are awash in dataMany firms are awash in data

Enterprise Resource Planning (ERP) Enterprise Resource Planning (ERP) Systems provide voluminous business dataSystems provide voluminous business data

The internet offers customer and market The internet offers customer and market data and the opportunity to experiment data and the opportunity to experiment with different product, promotion, and with different product, promotion, and pricing plans pricing plans

RFID devices will be placed on virtually RFID devices will be placed on virtually every pallet or carton generating vast every pallet or carton generating vast amounts of new dataamounts of new data

IntroductionIntroduction These trends are leading firms to use These trends are leading firms to use

and analyze data to improve business and analyze data to improve business performance and make better performance and make better decisionsdecisions

Competing on Analytics Competing on Analytics by Davenport by Davenport and Harris: sand Harris: someome firms use analytics as firms use analytics as a competitive weapona competitive weapon

Consider some examples, many from Consider some examples, many from our researchour research

Analytics Competitor: Analytics Competitor: NetflixNetflix

Movie recommendation engineMovie recommendation engine ““throttling”: infrequent-use throttling”: infrequent-use

customers (most profitable) given customers (most profitable) given priority in shippingpriority in shipping

Paying for distribution rights of DVDs Paying for distribution rights of DVDs (look at success of related movies)(look at success of related movies)

Analytics Competitors in Analytics Competitors in SportsSports

Moneyball Moneyball by Michael Lewis by Michael Lewis A’s consistently make the playoffs despite a low A’s consistently make the playoffs despite a low

overall payrolloverall payroll New metrics for player selection: “on-base New metrics for player selection: “on-base

percentage” and “on-base plus slugging percentage” and “on-base plus slugging percentage”percentage”

Boston Red SoxBoston Red Sox Example: Martinez easier for opposing batters Example: Martinez easier for opposing batters

after 7 innings or 105 pitches (ALCS 2003)after 7 innings or 105 pitches (ALCS 2003) New England Patriots: analytics both on and New England Patriots: analytics both on and

off the fieldoff the field

Analytics Competitor: Analytics Competitor: Harrah’s EntertainmentHarrah’s Entertainment

Customer loyalty card data used in Customer loyalty card data used in near-real time to optimize yield, set near-real time to optimize yield, set prices for slots and rooms, and prices for slots and rooms, and design traffic through the casinosdesign traffic through the casinos Predict the “pain point” and pull you Predict the “pain point” and pull you

away from the slot machineaway from the slot machine Which marketing initiatives to move Which marketing initiatives to move

through which channelsthrough which channels HR analytics used in recruiting HR analytics used in recruiting

processprocess

VanguardVanguard

Dashboards have non-financial Dashboards have non-financial metrics and line of sight that roll up metrics and line of sight that roll up to a corporate dashboard to drive to a corporate dashboard to drive outcomesoutcomes

Customer analytics is a major focus Customer analytics is a major focus where data mining is used to score where data mining is used to score clients and track problemsclients and track problems

Six sigma and analytics combined to Six sigma and analytics combined to improve business processesimprove business processes

WyethWyeth

““metrics feed strategy and strategy metrics feed strategy and strategy feeds metrics”feeds metrics”

Ten high level enterprise metrics are Ten high level enterprise metrics are integrated and reviewed by the CEO and integrated and reviewed by the CEO and top managementtop management

Analytics and six sigma help to manage Analytics and six sigma help to manage and improve all of their global and improve all of their global processes: innovation, sales and processes: innovation, sales and marketing, supply chain, management, marketing, supply chain, management, supportsupport

KPMGKPMG

Metrics are key and help to understand Metrics are key and help to understand how strategy is being executedhow strategy is being executed

Focusing on “electronic data discovery” Focusing on “electronic data discovery” – how to build associations across data– how to build associations across data

Examples: bad debt chasing, payroll Examples: bad debt chasing, payroll process, SOX audit controls in vendor process, SOX audit controls in vendor sourcing and pricing, fraud discoverysourcing and pricing, fraud discovery

Rohm and HaasRohm and Haas

Implementing an executive Implementing an executive dashboard dashboard

Providing business managers with Providing business managers with operational metricsoperational metrics

Focusing analytics in supply chain, Focusing analytics in supply chain, customer relationships, working customer relationships, working capital reductioncapital reduction

FTI ConsultingFTI Consulting

Analytics used in corporate finance, Analytics used in corporate finance, economic consulting, forensic and economic consulting, forensic and litigation consulting, as well as brand litigation consulting, as well as brand management and strategic management and strategic communications in generalcommunications in general

Focus on leading and predictive Focus on leading and predictive metrics metrics

NordstromNordstrom

Analytics used at store level for Analytics used at store level for merchandising (ID trends/styles), and by merchandising (ID trends/styles), and by upper management to track customer upper management to track customer interactionsinteractions

Heavy use in determining who should Heavy use in determining who should receive emails and catalogs in their multi-receive emails and catalogs in their multi-channel operationchannel operation

Lots of “test versus control” uses in the Lots of “test versus control” uses in the Direct Marketing aspects of their businessDirect Marketing aspects of their business

Scorecards used to measure performance of Scorecards used to measure performance of new predictive models against current onesnew predictive models against current ones

Air ProductsAir Products

Extracts value from a single instance SAP Extracts value from a single instance SAP system enabling their supply chains via system enabling their supply chains via dashboards, data accessibility via business dashboards, data accessibility via business warehouse cubeswarehouse cubes

Analytics integrates with their lean/six sigma Analytics integrates with their lean/six sigma and other initiatives to drive customer and and other initiatives to drive customer and shareholder valueshareholder value

Make visible data that is strategic such as Make visible data that is strategic such as customer metrics like Perfect Order customer metrics like Perfect Order Fulfillment Fulfillment

ColgateColgate

Use data (financial, sales now R&D, shared Use data (financial, sales now R&D, shared services coming) generated from global services coming) generated from global ERP system to run the companyERP system to run the company

Most managers can “drill down” into data Most managers can “drill down” into data to answer questions like “what did we buy to answer questions like “what did we buy today”today”

Measure the back end of sophisticated Measure the back end of sophisticated marketing promotions to see what part marketing promotions to see what part worked worked

MarriottMarriott

Marriott Rewards used analytics to Marriott Rewards used analytics to predict customer acquisition and predict customer acquisition and retentionretention

Realized, expected, and potential Realized, expected, and potential customer value is measuredcustomer value is measured

Predict each customer’s likelihood of Predict each customer’s likelihood of visiting a location on a weekday or visiting a location on a weekday or weekend in the next yearweekend in the next year

APQC StudyAPQC Studyon Process Measures and on Process Measures and

AnalyticsAnalytics Five participating companies: Wyeth, ING, Five participating companies: Wyeth, ING,

Marriott International, General Electric, Marriott International, General Electric, CaterpillarCaterpillar

Key findings:Key findings: Analytics are applied within processes as early Analytics are applied within processes as early

warning indicatorswarning indicators Value of analytics greatly enhanced when Value of analytics greatly enhanced when

integrated into day to day processesintegrated into day to day processes Integrating process analytics with continuous Integrating process analytics with continuous

improvement techniques such as Six Sigma improvement techniques such as Six Sigma and Lean drives action and bottom line resultsand Lean drives action and bottom line results

What Companies Are Telling What Companies Are Telling Us About AnalyticsUs About Analytics

““We are helping clients harness their vast We are helping clients harness their vast amounts of customer and operational data”amounts of customer and operational data”

““We cannot find enough new grads with the right We cannot find enough new grads with the right quantitative skills”quantitative skills”

““We compete on the basis of better knowledge of We compete on the basis of better knowledge of their customers, using analytics”their customers, using analytics”

““The riskier our business problems the more we The riskier our business problems the more we rely on analytics”rely on analytics”

““After implementing our ERP system we are After implementing our ERP system we are mining that data, and using data better in mining that data, and using data better in different ways”different ways”

What Business Leaders Are What Business Leaders Are Saying…Saying…

““In God we trust, all others bring data”In God we trust, all others bring data” ““Do you think that, or do you know Do you think that, or do you know

that?”that?” ““Those who succeed with six sigma, and Those who succeed with six sigma, and

then advance in our company, have the then advance in our company, have the better quantitative skills”better quantitative skills”

““We are basing our strategy on analytics, We are basing our strategy on analytics, especially customer analytics”especially customer analytics”

What is Business Analytics?What is Business Analytics?

AnalyticsAnalytics has been defined as “the has been defined as “the extensive use of data, statistical and extensive use of data, statistical and quantitative analysis, explanatory quantitative analysis, explanatory and predictive models, and fact-and predictive models, and fact-based management to drive based management to drive decisions and actions” (Davenport decisions and actions” (Davenport and Harris, and Harris, Competing on AnalyticsCompeting on Analytics, , 2007)2007)

What is Business Analytics?What is Business Analytics?

Some authors view analytics as a Some authors view analytics as a subset of subset of business intelligencebusiness intelligence (BI): “a (BI): “a set of technologies and processes that set of technologies and processes that use data to understand and analyze use data to understand and analyze business performance ” and “includes business performance ” and “includes both data access and reporting, and both data access and reporting, and analytics” (Davenport and Harris, analytics” (Davenport and Harris, Competing on AnalyticsCompeting on Analytics, 2007), 2007)

What is Business Analytics?What is Business Analytics?

For the purposes of this course, we will For the purposes of this course, we will not make any distinctions between not make any distinctions between business analytics and BIbusiness analytics and BI

We consider We consider business analyticsbusiness analytics to to include include

the access, reporting, and analysis of the access, reporting, and analysis of data supported by software to drive data supported by software to drive business performance and decision business performance and decision makingmaking

Introduction to Business Introduction to Business Analytics:Analytics:

Course TopicsCourse Topics Overview of Business AnalyticsOverview of Business Analytics Data WarehousingData Warehousing Business Analytics and Data Business Analytics and Data

VisualizationVisualization Performance ManagementPerformance Management Introduction to Data, Text, and Web Introduction to Data, Text, and Web

MiningMining Data Mining Methods and ApplicationsData Mining Methods and Applications