advanced analytics to insure against industry disruption
BIG DATA & ADVANCED ANALYTICS
ADVANCED ANALYTICS TO INSURE AGAINST INDUSTRY DISRUPTION Getting information off the Internet is like taking a drink from a fire hydrant1. Mitch Kapor’s quote is a great analogy for the age of big data. The importance of information as a corporate asset is growing exponentially with the need to leverage accurate insights to counter threats from new competitors. With terabytes of data flowing in and out of organisations every day, in some cases, every minute, an executed data and advanced analytics strategy allows businesses to extract substantial value from these assets. Customers are becoming more demanding as they change the way they interact with organisations; looking for faster, easier ways to engage, when and where it’s convenient for them. If businesses aren’t meeting their demands, and managing the experience in a way that engages them, customers are moving to competitors that can. The age of information is upon us, it’s how organisations respond to customer needs and wants that will shape and create industry leaders and disruptors. Intelligent information organisations are emerging across industries and markets, and it’s those harnessing new information capabilities that are leading the way. Great companies use insight to optimise what they do and with a focussed data strategy and the rise of machine learning, companies can diagnose root causes, predict behaviours and reshape entire industries. Companies that adopt, adapt and harness these powers rapidly are securing commercial advantage. There are many stories of competitive advantage through advanced analytics. Global leader, Amazon, generates 20% more revenue through its IBCF (item-based, collaborative filtering) analytics 2 solution . Advanced analytics is a natural extension to BI, embedding predictive and prescriptive capabilities into the businesses’ operation. Analytically driven decisions are based on explicit ‘cause and effect’ relationships that get to the “why” of historical trends; and with big data platforms reducing the cost of data collection, you can turn insights into operationalised action quickly. The simple truth? Without sophisticated, innovative advanced analytics, you’ll be left behind. With a little help and guidance to ward off those ‘selling the dream’, any organisation, regardless of size, industry, business problem or cultural profile, can undertake an advanced analytics project.
How can advanced analytics help you insure against disruption? The answer will vary depending on your maturity, your industry, the type of disruption and what you’re willing to do culturally. However, we have listed below a number of areas that are common across most industries. 1.
Go natural…Organisations can use advanced analytics to investigate aspects of their customers' behaviours that they had not considered previously, and use these insights to develop proprietary offerings. The application of ‘unsupervised learning’ techniques (one branch of machine learning), is a way of understanding groups of customers based on similarity. The result is ‘natural’ groups and these enable organisations to design, develop and market specific products and solutions to meet their needs.
2.
Predict individual risk…Advanced analytics has been used extensively to enable organisations to more accurately predict risk at individual and segment levels. For insurance companies, this means better understanding claims and defaults by customer, by region, even down to individuals within blocks of 200 households. For retailers, it means understanding which customers are ‘discount seekers’ and which are ‘premium buyers’, and for banks, it’s being able to predict who is more likely to apply for credit card ‘A’, pass the credit check, use the card in a crowded wallet and pay enough interest to payback the acquisition cost within a year of joining. The ATO has improved debt collection by using risk information to guide collection
1 2
http://www.brainyquote.com/quotes/quotes/m/mitchellka163583.html http://datascienceseries.com/blog/the-definitive-big-data-analytics-checklist-for-smart-marketers
1 of 2
actions and priorities, to prioritise treatment of outstanding lodgements, and to detect identity and refund 3 fraud . 3.
Target ‘good’ customers…Using advanced analytics can also enable companies to target customers based on their potential lifetime value. Understanding where the customer is in the purchase cycle allows for offer tailoring; the offer will change for customers that haven’t purchased in last six months (incentivise to visit and buy) versus customers that purchased last week. For instance the message may be, “this article that you didn’t buy goes really well with the item you bought last week”. Retailers used advanced analytics to fuel their communications and offers to optimise marketing spend based on individual level projections of ROI.
How can you quickly start on your advanced analytics journey? It’s not as daunting as it seems. Treat advanced analytics as you would any business project; define your objectives and determine how you’ll achieve those. Our standard formula includes:
The start small, deliver incrementally approach. Bite off just a little and show how quickly you can realise a business outcome that will resonate. If you are not currently using segmentation, insights from a ‘natural’ segmentation analysis will provide customer insight. A second stage is then to use advanced analytics to diagnose what the key drivers are of specific behaviours. Think about undertaking a proof of concept.
If you have a strategy in place, at least assess and understand where you are on the analytics maturity curve. This is important for identifying the types of projects you are ready to tackle. If you don’t have a strategy in place, get someone to help you formulate that view by engaging with both the business and IT. It’s likely that pockets of your business are using analytics in some form.
In most cases, shifting to an advanced analytics driven environment requires significant business change. Ensure you have someone who can engage with your stakeholders and manage the business change for you. Advanced analytics is rarely an IT project, it’s a business problem being addressed using a technical approach.
You need to understand your data: what you have; what you don’t have; where you can access additional, useful data; how you can technically combine that into useable information; and ultimately, what will help set you apart from your competition. You need to know what data should be collected and evaluated to get you the best business outcomes and how you’ll acquire and manage that once you do collect it. You’ll need to consider data protection and consumer privacy to ensure you’re compliant at all times.
Start with a Strategy…As with all key business exercises, we can’t stress enough how essential a strategy is to confirming the current and future states that you’re looking for. As well as your data strategy, an analytics strategy must define the business problems you’re trying to solve. You’ll need a clear set of analytics objectives and an understanding of the appropriate data analysis techniques that are required to meet those objectives.
As Albert Einstein once said, information is not knowledge. What we now have however, is an accessible way to turn terabytes of information and data into knowledge and use that to change the way we operate. This is a game changer; it’s a way to challenge the status quo and innovate while achieving business benefit along the way. 3
https://www.ato.gov.au/Media-centre/Speeches/Commissioner/The-effective-use-of-analytics-in-public-administration--The-ATO-Experience/
C3 is an award winning Australian information management, advanced analytics and business intelligence company that delivers measurable business improvements for its clients. While remaining vendor independent, C3 only employs experienced consultants who focus on true business outcomes for clients, rather than on the technical solutions to get those outcomes.
ADVANCED ANALYTICS TO INSURE AGAINST INDUSTRY DISRUPTION Getting information off the Internet is like taking a drink from a fire hydrant1. Mitch Kapor’s quote is a great analogy for the age of big data. The importance of information as a corporate asset is growing exponentially with the need to leverage accurate insights to counter threats from new competitors. With terabytes of data flowing in and out of organisations every day, in some cases, every minute, an executed data and advanced analytics strategy allows businesses to extract substantial value from these assets. Customers are becoming more demanding as they change the way they interact with organisations; looking for faster, easier ways to engage, when and where it’s convenient for them. If businesses aren’t meeting their demands, and managing the experience in a way that engages them, customers are moving to competitors that can. The age of information is upon us, it’s how organisations respond to customer needs and wants that will shape and create industry leaders and disruptors. Intelligent information organisations are emerging across industries and markets, and it’s those harnessing new information capabilities that are leading the way. Great companies use insight to optimise what they do and with a focussed data strategy and the rise of machine learning, companies can diagnose root causes, predict behaviours and reshape entire industries. Companies that adopt, adapt and harness these powers rapidly are securing commercial advantage. There are many stories of competitive advantage through advanced analytics. Global leader, Amazon, generates 20% more revenue through its IBCF (item-based, collaborative filtering) analytics 2 solution . Advanced analytics is a natural extension to BI, embedding predictive and prescriptive capabilities into the businesses’ operation. Analytically driven decisions are based on explicit ‘cause and effect’ relationships that get to the “why” of historical trends; and with big data platforms reducing the cost of data collection, you can turn insights into operationalised action quickly. The simple truth? Without sophisticated, innovative advanced analytics, you’ll be left behind. With a little help and guidance to ward off those ‘selling the dream’, any organisation, regardless of size, industry, business problem or cultural profile, can undertake an advanced analytics project.
How can advanced analytics help you insure against disruption? The answer will vary depending on your maturity, your industry, the type of disruption and what you’re willing to do culturally. However, we have listed below a number of areas that are common across most industries. 1.
Go natural…Organisations can use advanced analytics to investigate aspects of their customers' behaviours that they had not considered previously, and use these insights to develop proprietary offerings. The application of ‘unsupervised learning’ techniques (one branch of machine learning), is a way of understanding groups of customers based on similarity. The result is ‘natural’ groups and these enable organisations to design, develop and market specific products and solutions to meet their needs.
2.
Predict individual risk…Advanced analytics has been used extensively to enable organisations to more accurately predict risk at individual and segment levels. For insurance companies, this means better understanding claims and defaults by customer, by region, even down to individuals within blocks of 200 households. For retailers, it means understanding which customers are ‘discount seekers’ and which are ‘premium buyers’, and for banks, it’s being able to predict who is more likely to apply for credit card ‘A’, pass the credit check, use the card in a crowded wallet and pay enough interest to payback the acquisition cost within a year of joining. The ATO has improved debt collection by using risk information to guide collection
1 2
http://www.brainyquote.com/quotes/quotes/m/mitchellka163583.html http://datascienceseries.com/blog/the-definitive-big-data-analytics-checklist-for-smart-marketers
1 of 2
actions and priorities, to prioritise treatment of outstanding lodgements, and to detect identity and refund 3 fraud . 3.
Target ‘good’ customers…Using advanced analytics can also enable companies to target customers based on their potential lifetime value. Understanding where the customer is in the purchase cycle allows for offer tailoring; the offer will change for customers that haven’t purchased in last six months (incentivise to visit and buy) versus customers that purchased last week. For instance the message may be, “this article that you didn’t buy goes really well with the item you bought last week”. Retailers used advanced analytics to fuel their communications and offers to optimise marketing spend based on individual level projections of ROI.
How can you quickly start on your advanced analytics journey? It’s not as daunting as it seems. Treat advanced analytics as you would any business project; define your objectives and determine how you’ll achieve those. Our standard formula includes:
The start small, deliver incrementally approach. Bite off just a little and show how quickly you can realise a business outcome that will resonate. If you are not currently using segmentation, insights from a ‘natural’ segmentation analysis will provide customer insight. A second stage is then to use advanced analytics to diagnose what the key drivers are of specific behaviours. Think about undertaking a proof of concept.
If you have a strategy in place, at least assess and understand where you are on the analytics maturity curve. This is important for identifying the types of projects you are ready to tackle. If you don’t have a strategy in place, get someone to help you formulate that view by engaging with both the business and IT. It’s likely that pockets of your business are using analytics in some form.
In most cases, shifting to an advanced analytics driven environment requires significant business change. Ensure you have someone who can engage with your stakeholders and manage the business change for you. Advanced analytics is rarely an IT project, it’s a business problem being addressed using a technical approach.
You need to understand your data: what you have; what you don’t have; where you can access additional, useful data; how you can technically combine that into useable information; and ultimately, what will help set you apart from your competition. You need to know what data should be collected and evaluated to get you the best business outcomes and how you’ll acquire and manage that once you do collect it. You’ll need to consider data protection and consumer privacy to ensure you’re compliant at all times.
Start with a Strategy…As with all key business exercises, we can’t stress enough how essential a strategy is to confirming the current and future states that you’re looking for. As well as your data strategy, an analytics strategy must define the business problems you’re trying to solve. You’ll need a clear set of analytics objectives and an understanding of the appropriate data analysis techniques that are required to meet those objectives.
As Albert Einstein once said, information is not knowledge. What we now have however, is an accessible way to turn terabytes of information and data into knowledge and use that to change the way we operate. This is a game changer; it’s a way to challenge the status quo and innovate while achieving business benefit along the way. 3
https://www.ato.gov.au/Media-centre/Speeches/Commissioner/The-effective-use-of-analytics-in-public-administration--The-ATO-Experience/
C3 is an award winning Australian information management, advanced analytics and business intelligence company that delivers measurable business improvements for its clients. While remaining vendor independent, C3 only employs experienced consultants who focus on true business outcomes for clients, rather than on the technical solutions to get those outcomes.
