Companies can wield business intelligence as a weapon to outmaneuver competitors and boost revenue -- but not without making analytics an enterprisewide effort backed by senior management.
Panelists at an executive summit in New York Tuesday said they have used enterprise-level analysis of data with BI tools when deciding on strategic initiatives such as deciding where to build new manufacturing plants, how to bolster customer loyalty or how to dramatically increase market share. But doing so successfully has meant moving analytics from scattered pockets throughout a company to embedding it in front-line business processes, executives said at the Competing on Analytics symposium. The event was sponsored by Harvard Business School Publishing, Intel and SAS Institute.
Keith Coulter, managing director of consumer cards and loans at London-based Barclays, said the use of analytics was core to a five-year plan launched in 2000 to reverse a decline in revenue by winning new customers against emerging competitors MBNA and Capital One Financial in the U.K. Barclays infused analytics into its supply chain systems as well as the systems used by call center representatives to interact with customers. The result: Barclays acquired 1.5 million accounts through direct marketing from 2003 to 2004, three times the number of new accounts added between 2001 and 2003, he said.
This year, the company plans to combine its unsecured loans business with its second mortgage business and to integrate analytics into those combined systems, Coulter said.
The initiative would not have been successful without a philosophy that relies on analytics, he said, adding that most employees in marketing now are programmers and analysts. "The people who run the business ... this is the way they are expected to work," Coulter said. "This is now embedded in our business, embedded in how we work and how we compete."
Thomas Davenport, a professor of IT and management at Babson College, has been surveying companies that use analytics to compete over the past year. He said analytics can help companies optimize key business processes such as setting prices for products and identifying most valuable customers. But companies can't optimize these core processes without taking an large-scale approach, he said.
"Most of the time, analytic decisions are more accurate than those that are made with the gut," Davenport said. "If this is your competitive strategy, it makes no sense to do it in a series of pockets throughout the organization -- particularly if the pockets are spreadsheets."
In addition, senior executives need to be squarely behind the effort, said Gary Loveman, CEO and chairman of Las Vegas-based Harrah's Entertainment. When Loveman came on board in 1998, Harrah's was struggling to compete and was seen as a takeover candidate, he said. In response, Loveman devised a plan to use analystics to build customer loyalty. For example, the company at the time had "one of the worst Web sites" of any business, he said. Even so, Loveman turned down requests to overhaul it, instead requiring employees to focus on customer loyalty.
Since then, Harrah's has developed a program that assesses customer worth, tailors marketing programs to them and sets optimal prices for hotel rooms. Since 1998, the company has raised its share of the gaming market by 750 basis points, and its stock price has grown from US$14 to US$73 per share. Loveman described analystics as "the juice that makes the company go."
He stressed that solving complex problems with analytics is difficult and said companies must require employees to use the technology. "If I had been hired as the senior vice president of marketing, we wouldn't be having this conversation," he said. "The only way I did it is I ordered [employees] to do it. If I were to disappear tomorrow and someone came in with different ideas, there is no question in my mind that this would be gone."
While Procter & Gamble has used analytics since the 1930s, it pushed analytics to an enterprisewide level only last year. In 2005, it formed an analytics group of about 100 employees by combining operations research with marketing and consumer research analysis groups, said Glenn Wegryn, associate director of global analytics at the Cincinnati-based company. Analytics, which Wegryn said used to be viewed as a "bump on the side of the IT organization," is now key to planning large strategic initiatives.
The analytics group, which functions as an internal consultancy and is paid by retainers from different business units, is insulated from any budget or head count cuts that may affect other divisions, he said. "We're not a fixed overhead tax to the business unit," Wegryn said. "In a large company, you vacillate between head-count reduction and cost reduction. I don't expect my staff to go down ... due to a corporate edict to reduce our staffing level, because we are paid by different business units."
Moving analytics to an enterprise level can give those doing the analysis a deeper knowledge of business operations and instill confidence in their work, according to the panelists. At transportation logistics firm Schneider National Inc., the analytics group was able to dissuade company officials from changing the rules associated with scheduling drivers, said Ted Gifford, vice president of engineering and research at the Green Bay, Wis.-based company. While an initial pilot indicated that the change would be good, the analytics group built a simulation model that showed it would be a mistake.
"We were able to go back and challenge some of the structure and assumptions of the pilot," Gifford said. "By learning from our 'black box' and going back to the business and helping them redesign the pilot, we potentially avoided a $20 million mistake."