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2012: The Year Analytics Means Business

Posted by Timo Elliott on Friday, February 10, 2012 · 6 Comments 

(2 votes, average: 4.00 out of 5)

The real trend this year is not the technology. It’s about helping business people makebetter decisions, andactually change the way companies do business. Analytics has always been about transforming business, butthe recent huge changes in analytic technology have created interesting new opportunities for businessinnovation.

Most organizations are now starting to understand the technical opportunities, but many struggle to apply thonew opportunities to their business processes. This blog post attempts to explain what’s going on in theanalytics market and give concrete examples of how other companies have implemented the new technologiein “game-changing” ways (sorry kittens).

Wrenching Change and A Foggy Outlook

The chart below illustrates the wrenching effects of recent financial problems on the world gross domestic

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product: companies today have to be ready to react to unprecedentedly fast changes to their economicenvironment.

And the economic environment is fraught with extreme uncertainty. This year, thepeople who run the worldwill change, and so will many of the policies of the countries they manage. Financial markets have still not

completely stabilized, notably with the future of the Euro still not assured.

Companies have reacted to this uncertainty by slashing costs and accumulating cash, and now need to startinvesting that cash into future development. Since interest rates are low and the business outlook is stilluncertain, many of them are using the money for new technology that can help them prepare for the future.

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In particular, companies want better visibility about what’s going on in their market, and increasedorganizational agility in order to be able to deal with change fast. It’s like driving in the fog without a map – order to survive, you should invest in better visibility, brakes, and steering to be able to spot and avoid fast-moving objects looming out of the fog.

Analytics provides these capabilities: business intelligence to peer into the road ahead, risk-management toprovide fast alerts to new obstacles, and flexible financial planning systems to help swerve around them.

Analytics: Hotter Than Ever

Companies are investing heavily in analytics:

Analytics is the #1 top technology priority for both CIOs and CFOs, according to GartnerNucleus Research recently released a report showing that organizations get $10.66 of value for every $invested in analyticsIDC has increased growth forecasts faced with stronger-than-expected figures for recent yearsIDC analyst Dan Vesset: “After three decades, the business analytics market is finally reaching themainstream” and “There are few growth inhibitors in the foreseeable future”At the recent BI Gartner Summit in London, Gartner’s Dan Sommer announced an early estimate of 10%+ growth in analytics during 2011, outpacing general IT growth.

Fast-Moving Technology

Analytics technology has been changing fast. On the back end, new technologies have come together to provwhat Gartner calls “extreme data performance”. These include in-memory, column data stores, in-databasecalculations, massively parallel architectures, complex event processing, Big Data / NoSQL / Hadoop, andcloud architectures.

The combination of these technologies provides a opportunity to access massive amounts of a greater variety

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data, faster, and more flexibly. The key opportunity is that these new platforms “collapse the stack” so thatorganizations can implement and update analytic projects much faster than ever before.

And on the front end, various technologies are coming together to provide unprecedented levels of context-based “actionable insights”, including self-service data discovery, advanced visualization including maps,mobile analytics, predictive analytics, collaborative decision-support. They help provide more action-orienteinterfaces optimized for the context of the users, both inside and outside the organization.

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These technology advances are clearly important, and we’re going to continue to see great improvements thiyear. The new opportunities have reached a tipping point similar to the rise of digital cameras vs. analogphotography – and you don’t want to leave it too late to make the change, likeKodak, which recently filed fobankruptcy protection!

However, the real opportunity is using these new possibilities not only to improve analytics but fundamentalrethink key business processes.

High Resolution Management

University researchers have pointed out that today’s managementtechniques are based on the limitations of information scarcity:

“How many times has someone in your company uttered, “Wedon’t have that level of accuracy in the information, so we haveto make aggregated estimates”? Under the current paradigm, it issometimes impossible to drill down and understand what ishappening at a highly detailed level.”

They coined the term “High Resolution Management” to describe whatbecomes possible with the new technology opportunities:

“We contend that these technologies will change drastically howmanagement makes decisions. Why? Because with access to thefinest granularities of information, management will be able tomove freely from macro to micro levels and will be able tomeasure, plan and act accordingly. With increased resolution come more options to drill down,eliminate inefficiencies and cut costs.”

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Lets take a look at three different types of High Resolution Management opportunity, letting companies:

Remove bottlenecksRethink businessFlip business models

Remove Bottlenecks

Better technology always means business opportunity, but the new analytic platforms are rapidly eliminatingsome of the key bottlenecks that have prevented organizations from getting value from their data:

Faster, more flexible data access. Companies like Red Bull have been able to speed up and simplify their dawarehousing environments. Using the HANA in-memory database, the company can now load detailed datatwenty-five times faster into their data warehouse, and they were able to eliminate several levels of datastaging, increasing the flexibility of the solution.

Data volumes and complexity. Companies like Colgate-Palmolive, Provimi, and Danone have long had accto vast amounts of detailed data about their production facilities and sales channels – but the quantity of data

meant that they were unable to run full analytics in a reasonable time frame. That has now changed. Forexample, according to Colgate-Palmolive CIO Tom Greene:

“We will be able to run analytics at a local level on specific brands and locations, and at the lowestlevel of detail in real time”

And Danone can now measure the carbon emissions of 35,000 different products, with new systems that:

“collect, measure, and analyze data across the entire product life-cycle, from sourcing throughproduction, transport, retail, distribution, consumption, and end of cycle”

New forms of data: ‘unstructured’ data such as text has long been difficult to effectively analyze andincorporate into mainstream corporate analytics. The new systems make it much easier for companies likeMedtronic to access and analyze the large amount of complaints and feedback data they receiveabout theirproducts, combine it with other data sources, and provide it to business users with dynamic interfaces:

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New interfaces and users. Companies like Altron have been able to get the data to their users where theyneeded it. As Debra-Lynn Marais, Group Information Manager explains:

“The days of our users and execs being in the office have gone. They work from home or on theroad. We had to develop a solution that gets information out to where our people are. Everythingwe do is mobile first. In addition, it’s less cumbersome and cheaper to buy and use a tablet thanany other form.”

Rethink Business

Many companies are going beyond “just” improving their existing analytic capabilities, using analytics in neways to change the way they do business. Instead of analytics being something that is used to monitor andeventually improve a business process, analytics is becoming a more fundamental part of the business procesitself.

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Proactive Analytics. Instead of using analytics only to assess previous performance, companies are using thenew capabilities to get data fast enough to make a real difference. For example, online grocerFresh Direct,instead of just understanding what problems happened yesterday, can now understand what problems willhappen in the next few hours, so they can actually fix them before a customer is impacted:

“FreshDirect has an operations center that manages its fleet of delivery trucks. In a large

metropolitan area like New York, traffic doesn’t always flow predictably. A traditional approach toBI would be to print a report showing the level of on-time deliveries (OTDs) the day before andthen ask the transportation department what went wrong for the orders that were delivered late.FreshDirect uses analytics in a more impactful way.”

“The company monitors the delivery rate of every truck and enters that data into the BI system onan ongoing basis. Every hour, it uses the previous hour’s data to predict how many deliveries willbe on-time in the next hour. If the predicted OTD rate is below FreshDirect’s target, the companysends out an auxiliary truck or trucks to help make deliveries. The company holds 10 trucks inreserve for just this purpose.”

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Integrated Risk Assessments. Among other products, publisher Houghton Mifflin Harcourt produceseducational books. Schools pass orders in June or July after the end of the school year, and then expect delivfor the start of the next school year in September. Getting books printed during the summer is expensive, asmany publishers compete for the limited supply of printers available.

To avoid these extra costs, Houghton Mifflin Harcourt uses usingsophisticated, risk-based forecasting. The

company prints books in January or February, when printing is much cheaper. In order to minimize of excessinventory, it has carefully analyzed all the causes of previous forecasts, and now takes account of all thedifferent things that influence book obsolescence.

Before, the buying team just ordered based on the volume forecast from sales. Now they have much greatercontext for their decisions. For example, if there’s a vote coming up on schools funding that may result in thecanceling of a math adoption program for the year, they can decide to hold back on those purchases until theoutlook is clearer. The fast, more accurate forecasting mechanism has saved them tens of millions of dollars,and they have more of the products their customers want.

New Customer Services. International grocery chain Casino is rolling outa new mobile shopping applicatio

for its customers. It provides data from its enterprise systems directly to its customers, resulting in increasedshopping convenience and increased customer loyalty.

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German healthcare provider AOK (“the good health organization”) is committed to helping its members avoiillnesses in the first place. It is planning to introduce a new, market-differentiating service:personalizedhealthcare advice for each customer, with tools that:

“Conduct real-time analyses of the tremendous amounts of medical data we receive, recognizepotential health risks, assemble various preventive care programs and respond to those risksappropriately and ahead of time.”

As an added bonus, they also believe that this tailored prevention program will result in significant costreductions by preventing expensive unneeded treatments.

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BC Hydro is saving $70 million dollars a year through the installation of new smart electricity meters, usingSAP systems, and offering new services to commercial customers based on the new data possibilities.Companies like Centrica are planning to use SAP’s Smart Data Analytics, giving them deep understanding inconsumer consumption.

Flip Business Models

The really interesting opportunity for businesses is where companies have managed to use analytics tofundamentally flip the way their businesses work: instead of analytics being part of a process, it “becomes thbusiness model”.

Tim Ferriss, author of the 4-hour workweek, is an interesting example of this. He didn’t do what most authordo: write a book, and then figure out how to publicize it. He used an analytics-first approach: he bought GooAds, with mockups of book covers, with a variety of titles of books that he might be interested in writing – athen wrote the book that got the most clickthroughs! This is one step beyond using analytics such as focus-groups, which are typically there to validate existing products. The next generation of products and services being created “on the fly” based on an analysis-first approach.

The clothing brand Zara shook up fashion retailing with “analytics first” – instead of having a designer creaticlothes and then trying to sell them six months later, they realized new manufacturing techniques meant theycould create clothes “in the moment”. They could observe what people were wearing in the street, quicklymake small batches of variations on that theme, and get them into the stores. If they sold well they made morif they didn’t sell they discounted quickly. Instead of a season-oriented, “batch” business, they switched to aflow-oriented business, using new technology capabilities.

The new analytic platforms mean that this analytics-first approach is available to many more businesses than

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How to Easily Analyze Your Excel Data in the Cloud

Big Leap Forward: AnalyticsKeynote at UK &Ireland SAP User GroupConference 2011

 Analytics Projects Are LikeSkiing Through Moguls?

SAP Innovation Tour in theBaltics

the past. For example, T-Mobile is in the process of transforming the way they attract customers. Instead of laboriously creating a range of rate plans, promoting them, and analyzing the results, they now use analytics automatically create hundreds of more complex, personalized rate plans. They then throw them out into themarket, monitor in real time, and quickly cull any that aren’t successful. It’s a way of doing business that wohave been inconceivable in the past, and a lot more common in the future.

Conclusion

2012 is the year to rethink your analytic technology to take account of new opportunities:

On the back end, for extreme data performanceOn the front end, for actionable insights

And it’s time to rethink your business:

Remove today’s bottlenecks to successful analytics caused by data volumes, data variety, or data accesRethink business processes by embedding real-time decisionsCreate new products and services that could only exist because of today’s analytic power

Organizations are using this technology to change the way they do business. If you run an analytics project, yare in the forefront of these changes – it’s your job to help explain to the rest of the business how thesetechnologies should be changing their existing processes. Good luck!

___________________________________________________

If you’re interested in slides that go along with this article, please see this post about therecent Gartner BISummit in London that includes a download of my presentation at the conference.

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Comments

6 Responses to “2012: The Year Analytics Means Business”

1.  Lawrence Green says:March 27, 2012 at 14:20

Great article on business analytics. With markets becoming more complex and turbulent, predictiveanalytics will help organisations gain competitive advantage. Analytics must be embedded within anorganisation’s strategy

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2. What I Found Interesting About Gartner BI Summit 2012 London | Business Analytics says:February 16, 2012 at 15:54

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[...] MPP, in-db analytics, real-time, etc.). And this year, I’ve presented dozens of examples of the reallife business changes that have been made possible because of these [...]

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