Data analysis tools can deliver competitive advantage

Companies can wield business intelligence as a weapon to outmaneuver competitors and boost revenue, but only if data analysis techniques are used enterprisewide and the effort is backed by senior management.

That was the view of users and experts sitting on a panel at the Competing on Analytics Symposium last week.

If done right, enterprise-level analysis of data using BI tools can help organizations make key decisions about issues such as where to build manufacturing plants, how to bolster customer loyalty or how to increase market share, the panelists said.

Keith Coulter, managing director of consumer cards and loans at London-based Barclays, said data analysis has been a core piece of a five-year effort launched by his company in 2000 to halt a sales decline and gain new customers against emerging competitors Capital One Financial and MBNA, which is now owned by Bank of America.

Coulter said analytics played a key role in Barclays' acquisition of 1.5 million new accounts during 2003. The total is three times more than the number of accounts added during 2001 and 2002 combined, he noted.

Coulter said analytics have since become central to the business. "This is now embedded in our business, embedded in how we work and how we compete," he said.

More-accurate decisions

In surveys of companies using analytics, Thomas Davenport, a professor of IT and management at Babson College in Mass., said he found that data analysis is helping them optimize key business processes such as setting prices and identifying valuable customers.

"Most of the time, analytic decisions are more accurate than those that are made with the gut," Davenport said, adding that success requires widespread use in an organization.

And senior executives need to be squarely behind such an effort, said Gary Loveman, chairman and CEO of Las Vegas-based Harrah's Entertainment.

When Loveman came on board in 1998, Harrah's was struggling and had become a takeover candidate, he said. Loveman responded to those threats with a plan to use analytics to build customer loyalty -- a plan so important that Loveman postponed work on projects that were not focused on customer loyalty.

Harrah's has since developed a program that assesses customer worth, tailors marketing programs to those customers and sets optimal prices for hotel rooms. Now, Loveman says, analytics is "the juice that makes the company go."

He acknowledged that using data analysis to solve complex problems is difficult but added that its benefits are well worth the effort.

"The only way I did it is I ordered [employees] to do it," Loveman said. "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."

Deeper knowledge

The Procter & Gamble has used analytics since the 1930s, but the capability was spread throughout the organization only last year. In 2005, the Cincinnati-based consumer goods company formed an analytics group of about 100 employees to work on strategic initiatives, said Glenn Wegryn, associate director of global analytics.

The P&G analytics group functions as an internal consultancy and is paid by retainers from different business units. "We're not a fixed overhead tax to the business unit," Wegryn said.

Spreading data analytics systems throughout the enterprise can provide users with a deeper knowledge of business operations, the panelists said.

For instance, the analytics group at transportation logistics firm Schneider National Inc. was able to dissuade company officials from changing the rules associated with driver scheduling even after a pilot project suggested that changes were needed, said Ted Gifford, vice president of engineering and research at the Wis.-based company.

"We were able to go back and challenge some of the structure and assumptions of the pilot," Gifford said.