1. TOP: BUSINESS ANALYTICS MGT 2206 001 Welcome! Matthew J. Liberatore Fall 2009

2. Introduction Many firms are awash in data Many firms are awash in data Enterprise Resource Planning (ERP) Systems provide voluminous business data Enterprise Resource Planning (ERP) Systems provide voluminous business data The internet offers customer and market data and the opportunity to experiment with different product, promotion, and pricing plans The internet offers customer and market data and the opportunity to experiment with different product, promotion, and pricing plans RFID devices will be placed on virtually every pallet or carton generating vast amounts of new data RFID devices will be placed on virtually every pallet or carton generating vast amounts of new data

3. Introduction These trends are leading firms to use and analyze data to improve business performance and make better decisions These trends are leading firms to use and analyze data to improve business performance and make better decisions Competing on Analytics by Davenport and Harris: some firms use analytics as a competitive weapon Competing on Analytics by Davenport and Harris: some firms use analytics as a competitive weapon Consider some examples, many from our research Consider some examples, many from our research

4. Analytics Competitor: Netflix Movie recommendation engine Movie recommendation engine “throttling”: infrequent-use customers (most profitable) given priority in shipping “throttling”: infrequent-use customers (most profitable) given priority in shipping Paying for distribution rights of DVDs (look at success of related movies) Paying for distribution rights of DVDs (look at success of related movies)

5. Analytics Competitors in Sports Moneyball by Michael Lewis Moneyball by Michael Lewis A’s consistently make the playoffs despite a low overall payroll A’s consistently make the playoffs despite a low overall payroll New metrics for player selection: “on-base percentage” and “on-base plus slugging percentage” New metrics for player selection: “on-base percentage” and “on-base plus slugging percentage” Boston Red Sox Boston Red Sox Example: Martinez easier for opposing batters after 7 innings or 105 pitches (ALCS 2003) Example: Martinez easier for opposing batters after 7 innings or 105 pitches (ALCS 2003) New England Patriots: analytics both on and off the field New England Patriots: analytics both on and off the field

6. Analytics Competitor: Harrah’s Entertainment Customer loyalty card data used in near- real time to optimize yield, set prices for slots and rooms, and design traffic through the casinos Customer loyalty card data used in near- real time to optimize yield, set prices for slots and rooms, and design traffic through the casinos Predict the “pain point” and pull you away from the slot machine Predict the “pain point” and pull you away from the slot machine Which marketing initiatives to move through which channels Which marketing initiatives to move through which channels HR analytics used in recruiting process HR analytics used in recruiting process

7. Vanguard Dashboards have non-financial metrics and line of sight that roll up to a corporate dashboard to drive outcomes Dashboards have non-financial metrics and line of sight that roll up to a corporate dashboard to drive outcomes Customer analytics is a major focus where data mining is used to score clients and track problems Customer analytics is a major focus where data mining is used to score clients and track problems Six sigma and analytics combined to improve business processes Six sigma and analytics combined to improve business processes

8. Wyeth “metrics feed strategy and strategy feeds metrics” “metrics feed strategy and strategy feeds metrics” Ten high level enterprise metrics are integrated and reviewed by the CEO and top management Ten high level enterprise metrics are integrated and reviewed by the CEO and top management Analytics and six sigma help to manage and improve all of their global processes: innovation, sales and marketing, supply chain, management, support Analytics and six sigma help to manage and improve all of their global processes: innovation, sales and marketing, supply chain, management, support

9. KPMG Metrics are key and help to understand how strategy is being executed Metrics are key and help to understand how strategy is being executed Focusing on “electronic data discovery” – how to build associations across data Focusing on “electronic data discovery” – how to build associations across data Examples: bad debt chasing, payroll process, SOX audit controls in vendor sourcing and pricing, fraud discovery Examples: bad debt chasing, payroll process, SOX audit controls in vendor sourcing and pricing, fraud discovery

10. Rohm and Haas Implementing an executive dashboard Implementing an executive dashboard Providing business managers with operational metrics Providing business managers with operational metrics Focusing analytics in supply chain, customer relationships, working capital reduction Focusing analytics in supply chain, customer relationships, working capital reduction

11. FTI Consulting Analytics used in corporate finance, economic consulting, forensic and litigation consulting, as well as brand management and strategic communications in general Analytics used in corporate finance, economic consulting, forensic and litigation consulting, as well as brand management and strategic communications in general Focus on leading and predictive metrics Focus on leading and predictive metrics

12. Nordstrom Analytics used at store level for merchandising (ID trends/styles), and by upper management to track customer interactions Analytics used at store level for merchandising (ID trends/styles), and by upper management to track customer interactions Heavy use in determining who should receive emails and catalogs in their multi-channel operation Heavy use in determining who should receive emails and catalogs in their multi-channel operation Lots of “test versus control” uses in the Direct Marketing aspects of their business Lots of “test versus control” uses in the Direct Marketing aspects of their business Scorecards used to measure performance of new predictive models against current ones Scorecards used to measure performance of new predictive models against current ones

13. Air Products Extracts value from a single instance SAP system enabling their supply chains via dashboards, data accessibility via business warehouse cubes Extracts value from a single instance SAP system enabling their supply chains via dashboards, data accessibility via business warehouse cubes Analytics integrates with their lean/six sigma and other initiatives to drive customer and shareholder value Analytics integrates with their lean/six sigma and other initiatives to drive customer and shareholder value Make visible data that is strategic such as customer metrics like Perfect Order Fulfillment Make visible data that is strategic such as customer metrics like Perfect Order Fulfillment

14. Colgate Use data (financial, sales now R&D, shared services coming) generated from global ERP system to run the company Use data (financial, sales now R&D, shared services coming) generated from global ERP system to run the company Most managers can “drill down” into data to answer questions like “what did we buy today” Most managers can “drill down” into data to answer questions like “what did we buy today” Measure the back end of sophisticated marketing promotions to see what part worked Measure the back end of sophisticated marketing promotions to see what part worked

15. Marriott Marriott Rewards used analytics to predict customer acquisition and retention Marriott Rewards used analytics to predict customer acquisition and retention Realized, expected, and potential customer value is measured Realized, expected, and potential customer value is measured Predict each customer’s likelihood of visiting a location on a weekday or weekend in the next year Predict each customer’s likelihood of visiting a location on a weekday or weekend in the next year

16. APQC Study on Process Measures and Analytics Five participating companies: Wyeth, ING, Marriott International, General Electric, Caterpillar Five participating companies: Wyeth, ING, Marriott International, General Electric, Caterpillar Key findings: Key findings: Analytics are applied within processes as early warning indicators Analytics are applied within processes as early warning indicators Value of analytics greatly enhanced when integrated into day to day processes Value of analytics greatly enhanced when integrated into day to day processes Integrating process analytics with continuous improvement techniques such as Six Sigma and Lean drives action and bottom line results Integrating process analytics with continuous improvement techniques such as Six Sigma and Lean drives action and bottom line results

17. What Companies Are Telling Us About Analytics “We are helping clients harness their vast amounts of customer and operational data” “We are helping clients harness their vast amounts of customer and operational data” “We cannot find enough new grads with the right quantitative skills” “We cannot find enough new grads with the right quantitative skills” “We compete on the basis of better knowledge of their customers, using analytics” “We compete on the basis of better knowledge of their customers, using analytics” “The riskier our business problems the more we rely on analytics” “The riskier our business problems the more we rely on analytics” “After implementing our ERP system we are mining that data, and using data better in different ways” “After implementing our ERP system we are mining that data, and using data better in different ways”

18. What Business Leaders Are 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 that?” “Do you think that, or do you know that?” “Those who succeed with six sigma, and then advance in our company, have the better quantitative skills” “Those who succeed with six sigma, and then advance in our company, have the better quantitative skills” “We are basing our strategy on analytics, especially customer analytics” “We are basing our strategy on analytics, especially customer analytics”

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

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

22. What is Business Analytics? For the purposes of this course, we will not make any distinctions between business analytics and BI For the purposes of this course, we will not make any distinctions between business analytics and BI We consider business analytics to include We consider business analytics to include the access, reporting, and analysis of data supported by software to drive business performance and decision making

23. Introduction to Business Analytics: Course Topics Overview of Business Analytics Overview of Business Analytics Data Warehousing Data Warehousing Business Analytics and Data Visualization Business Analytics and Data Visualization Performance Management Performance Management Introduction to Data, Text, and Web Mining Introduction to Data, Text, and Web Mining Data Mining Methods and Applications Data Mining Methods and Applications