Across the Tasman, David Fodor, head of risk and decision services at National Australia Bank, says the bank used SAS marketing optimisation software to determine the best form of contact for the customers who are delinquent in credit card payments. Some customers, he explains, respond to SMS messages, a phone call from the contact centre, or a “more stern communication”, a letter.
The software, he says, “smooths” the demand and shifts workload to different times of the day, diverting it to different channels.
The number of people contacted through the call centre is down. The software also has a list of customers who do not need to be contacted as they will “self cure” or pay the bill.
These are two examples of how businesses today are using analytics to optimise their decision making.
Analytics, as defined in the 2007 book Competing on Analytics by Thomas Davenport and Jeanne Harris, is “the extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive decisions and actions.”
Davenport, a professor at Babson College, has worked with a lot of companies using analytics. In his conversations with the heads of their analytical groups, he has found that they do a lot of analyses, but the managers do not necessarily use the information to make better decisions.
“Decision making is so bad in companies,” he says, that companies are prompted to take systematic steps to improve making decisions, and these include identifying what information is critical to them.
This is where analytics comes in. At the SAS Premier Business Leadership Series recently held in Singapore, Davenport provided greater detail on the topic.
He says companies who decide to go this way may not always do it optimally. They realise information is important for decision making and take “huge chunks of information and we put them in big warehouses … and find that data warehouses are too big to know what is in them.”
When he was working at a global consultancy, they ran a global survey on companies that have put in ERP systems. Eighty-three percent said they did this to improve decision making. When they were asked what else they were doing to ensure better decision making, they said, “nothing”.
Thus, he says, there is a need for “a close relationship between information and decision making”.
Davenport says there are examples of analytics tools that range from simple scorecards and dashboards, to the more sophisticated ones. But the real relationship between information and decision making is when you start to automate [it]. The information is embedded in the application itself and he says this is seen in companies that do yield pricing management, underwriting loans and insurance policies.
A data-laden world
At the conference, Davenport led a panel discussion with executives from across the region that highlighted the role analytics plays in a subdued economy. Today’s business leaders, represented by the panelists, do not have “the luxury of ambiguity”, notes Davenport. “They have to take action in the economic crisis. It is not just about prediction and understanding. It is what to do to get through it”.
Jim Goodnight, founder and chief executive of SAS, who was on the panel, cites the use of analytics in the finance sector. “If you are a bank that issues credit cards how do you make decisions? Who should you send the invitation for a credit card to?” he points out. “A lot of these things require decisions that are based on the data that is available and you can not just have somebody making these decisions. The amount of data [is] so large now. You have got to use computers to make decisions. Think of them [analytics] as a tool.”
Goodnight says analytics is being applied to a range of models and sectors, and even in politics. “Candidates are using SAS to forecast how well they are doing and target areas and where to spend more money and more time,” says Goodnight.
Pravir Vohra, group CTO, ICICI Bank in India, says the bank’s investment in analytics was extremely useful as it had allowed them to work on campaigns such as where to deploy ATMs, predict attrition and consumer behaviour. “When you are using past behaviour to predict future events, that is pretty good when you are in an environment of business as usual,” says Vohra. “But when you hit air pockets like this [the economic slowdown] you have to have a different model.”
The CIO’s role
In the book Competing on Analytics, Davenport and Harris say the CIO’s role in an analytical company is working with their executive colleagues to decide what analytical behaviours are necessary and how to elicit them.
The most traditional approach to analytics for CIOs is through technology, they wrote. But those who want to play an even more valuable role will focus on the ‘I’ in their titles.
Analytical competition is all about information, they wrote. “Do we have the right information, is it truly reflective of our performance, and how do we get people to make decisions based on information? These issues are more complex and multifaceted than buying and managing the right technology.”
“CIOs can — if they are not just chief technology officers, if they are focused on information — identify the whole area of decision making, prioritising key decisions and how to improve them,” says Davenport.
They can identify the technology or act as an adviser for some of the new approaches to decision making.
He says a critical skill for today’s knowledge workers is “telling a good story with data”. Davenport calls them “analytical communicators”.
This is not necessarily something you learn in school, he says. “You may learn about data analysis or how to use computers well, but this idea of communicating to decision makers with data and analysis is a very critical thing.”
At the same time, he says, it is important for companies who are going into analytics to acknowledge failure and to learn from it. “Change your behaviours and take action,” he advises. “Companies that have strong testing orientation tend to think that failure is a very useful answer to their tests. They move to something else.”
The big picture
At the conference, David Fodor of the National Australia Bank says prior to the bank’s use of analytics to match the best contact channel to its credit card customers, the task was done manually. “It was not efficient, nor scientific.”
With the increased volume of names, the complexity increased, he says. “We rolled the dice and we came to SAS marketing optimisation software.”
But Fodor says the system is not “set and forget” as it needs to be worked on regularly. “With the economy we have to be fairly prudent about how we treat the customers, how we assess them for risks. We run a fortnightly forum where we reassess what we are doing. We have a fairly dynamic operational structure around it.”
His department works closely with the ICT team. “What my business is doing is so highly technology dependent. We can not afford not to work closely with them.”
For Mark McCabe of the NZ AA, a key pointer is that, “it is all in the planning”.
“Why do you want to enter into it, what do you foresee as the benefits? In that way you start the programme on the right foot from the start. Realise the benefits and the purpose, and go from there.”
Pravir Vohra of ICICI Bank, on the other hand, points out people can get “addicted” to analytical reporting. “Analytics can only take you so far,” he says as the environment is always changing. “Nobody in the world predicted the meltdown 18 months ago.”
“You need to keep your eyes and ears to what is happening in the industry, the government, the regulators and consumer sensibilities. “There is something out there you have to be cognisant of which could never be thrown out by fast data,” says Vohra.
Davenport agrees. “You have to kind of have the big picture,” he says. “The human brain is the only thing that could do that.”
He recalls the following words of an airline pilot who went sailing with him: “With all the computers and avionics and green screens in airplanes, I still find it useful to look out the window.”Sidebar: For better, not worse
Few chief executives of technology companies can claim they did not let go of staff due to the credit crunch. Dr Jim Goodnight of SAS is one of them, and he has a good reason.
“We have got two years of R and D and we are working hard to deliver that out of the door so we can move on to other things,” he says. “It did not make sense to lay off people in the long run. There is a huge amount of talent we are losing, so we just took the approach — let everybody keep their job.”
Goodnight says SAS was able to do this as a private company. “Even if we take a 5 or 10 per cent reduction in profits that’s okay with me,” he says. “I don’t give a damn what Wall Street thinks.”
Ho Kwon Ping, executive chairman of Banyan Tree Holdings says his company deals with crises by continuing to build “corporate resilience” and that includes managing staff. In the service industry, he explains, “People are your assets.”
He says after the Boxing Day tsunami in Asia, the company asked staff to take unpaid leave in some jurisdictions, but asked every employee to sign up for it, and understand the need for it. . “It has almost come inbuilt as part of our structure now.”
They are now looking at restructuring the system in “a more formal way, where we reward people after that in order to account for extreme volatility in the industry, and yet be able being able to retain morale and build continually on human capital that we have,” says Ho.
He says how a company handles its people well during a crisis is important. “If you handle the crisis properly, people will come out of it stronger,” he says. “People who go through a crisis together, bond together.”
Pravir Vohra, group CTO of ICICI Bank in India says during a time of change, some employees may feel like a “fish out of water”.
“You need to redeploy them, to reskill them, you have to keep morale up, to keep the fire in the belly going,” says Vohra.
Thomas Davenport, a professor of business at Babson College in Wellesley, Massachusetts sums up the importance of managing people well during a downturn: “You are going to need them going forward.”
Divina Paredes attended the Premier Business Leadership Series in Singapore as a guest of SAS.
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