Analytics: The Widening Divide

Neil Beckley, FSS Leader, IBM Growth Markets Analytics: The Widening Divide How companies are achieving competitive advantage through analytics

What you will take away from this session 1 Understand Why Analytics matters 2 Insight into the Business benefits that can be realised 3 Understand IBM s leadership in the BAO sector and how to engage Page 2 10/21/2011

Table of contents Introduction The analytics advantage in today s marketplace How analytics creates competitive advantage Two paths to transformation Roadmap for creating competitive advantage Page 3 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Why analytics matter to our clients The explosion of information is creating enormous challenges and opportunities By predicting future outcomes with greater confidence business and government leaders can: Generate more revenue Reduce risk Lower costs Improved decision making at the point of impact leads to better client service, risk avoidance and problem resolution Industry leaders that have invested in BAO are expanding their performance lead over their competitors the use of analytics as a competitive differentiator in selected industries will explode. International Institute for Analytics - 12/3/10

Introduction MIT Sloan Management Review and IBM IBV partnered again to continue to explore how organizations are operationalizing analytics Insert cover art here Builds on the 2010 partnership study: Analytics: The New Path to Value IBM Institute for Business Value + Second year of knowledge partnership Surveyed 4,500 executives, managers and analysts plus extensive interviews Respondents represent more than 30 industries in 122 countries Interviews with executives from leading analytic organizations Interviews with IBM and MIT thought leaders Analysis by IBM and MIT SMR team Page 5 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Key findings Organisations are challenged with how to innovate for differentiation, grow revenues and reduce costs Primary Business Challenges Innovating to achieve competitive differentiation 60% Growing revenue Reducing costs and increasing efficiencies Profitably acquiring and retaining customers 46% 44% 50% Increasing operating speed and adaptability 35% Managing regulatory compliance 14% Managing risk or reducing fraud 10% Top-line focused Internally focused Source: Analytics: The New Path to Value, a joint MIT Sloan Management Review and IBM Institute for Business Value study (c) Massachusetts Institute of Technology

Key findings Organizational obstacles, not data or financial concerns, are holding back adoption Lack of understanding how to use analytics to improve the business 38% Lack of management bandwidth due to competing priorities Lack of skills internally in the line of business Ability to get the data Culture does not encourage sharing information Primary obstacles to widespread analytics adoption Ownership of the data is unclear or governance is ineffective Lack of executive sponsorship Concerns with the data Perceived costs outweigh the projected benefits No case for change 15% 24% 23% 23% 22% 21% 21% 28% 34% Organizational Data Financial Source: Analytics: The New Path to Value, a joint MIT Sloan Management Review and IBM Institute of Business Value study. Copyright Massachusetts Institute of Technology 2010.

Key findings Organizations want to see insights more clearly and act on them Analytic techniques that provide the most value Today Historic trend analysis and forecasting Standardized reporting Data visualization Analytics applied within business processes Simulations and scenario development Clustering and segmentation Regression analysis, discrete choice modeling, and mathematical optimization Data visualization In 24 months Simulations and scenario development Analytics applied within business processes Regression analysis, discrete choice modeling, and mathematical optimization Historic trend analysis and forecasting Clustering and segmentation Standardized reporting Increased or sustained value Decreased in value Source: Analytics: The New Path to Value, a joint MIT Sloan Management Review and IBM Institute of Business Value study Copyright Massachusetts Institute of Technology 2010.

Introduction MIT Sloan Management Review and IBM IBV partnered again to continue to explore how organizations are operationalizing analytics IBM Institute for Business Value + Insert cover art here Builds on the 2010 partnership study: Analytics: The New Path to Value Second year of knowledge partnership Surveyed 4,500 executives, managers and analysts plus extensive interviews Respondents represent more than 30 industries in 122 countries Interviews with executives from leading analytic organizations Interviews with IBM and MIT thought leaders Analysis by IBM and MIT SMR team Page 9 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Introduction Our key findings underscore the urgency to act on analytics and showcase the paths organizations are taking to transformation Research findings The ability to create a competitive advantage with analytics is widening Competitive analytics requires mastery of three competencies There are two paths to analytic sophistication These findings chart the paths to analytic transformation Page 10 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Introduction This study provides a compelling call to action for all clients Entry point 1 2 What is the business value of analytics to you? Are you prepared to use analytics for competitive advantage? 3 How can analytics impact your business imperatives? Page 11 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Table of contents The analytics advantage in today s marketplace How analytics create a competitive advantage Two paths to transformation Roadmap for creating competitive advantage Page 12 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Findings The ability to create competitive advantage using analytics surged dramatically in 12 months; the bottom-line impact is clear 2011 Respondents who say analytics creates a competitive advantage 58% Organizations achieving a competitive advantage with analytics are 2.2x 2010 37% 57% increase more likely to substantially outperform their industry peers Ratio of respondents who indicated analytics creates a competitive advantage to those who indicated it did not and the likelihood they also indicated their organizations was substantially outperforming their competitive peers. The ratio was 2.0 to1 in 2010. Page 13 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Findings Segmenting the data enabled us to examine how organizations use analytics to create a performance and competitive advantage Analytic sophistication segments Aspirational Experienced Transformed Limited users of analytics Generally depend upon spreadsheet reporting Actively increasing analytic capabilities Expanding business intelligence foundations to broader, deeper analysis Advanced analytics capabilities Insights influence behaviors and impact performance 2011 32% 2011 45% 2011 24% 2010 34% 2010 46% 2010 20% Percentage of total respondents who self-assessed into each of the grouping by year. The percentage of respondents in each group was stable, despite a 50% increase in the number of total respondents. Page 14 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Findings Early adopters have outpaced others in gaining competitive advantage by expanding the use of analytics Respondents who cited a competitive advantage using analytics year-over-year 2010 80% 2011 Transformed 23% 65% increase 2011 Experienced 2010 38% 63% 66% increase 2011 Aspirational 2010 39% 5% decrease Page 15 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Findings Transformed organizations outpaced all others in integrating analytics into core strategies and operations in the past 12 months Respondents increasing their integration of analytics into strategy and operations Transformed Experienced Aspirational 34% 55% 70% Transformed organizations creating a competitive advantage are 3.4x more likely to substantially outperform their industry peers Ratio of Transformed organizations creating a competitive advantage compared to Aspirational organizations not creating an advantage that selfassessed as substantially outperforming their competitive peers. Page 16 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Findings Transformed organizations are creating advantage by intensely focusing on applying analytics in three areas of the business Speed of decisions Transformed 72% Experienced 49% Aspirational 22% Enterprise risks Transformed 6% 0% 86% Experienced Aspirational Customers Transformed 34% 49% 62% Experienced Aspirational Percentage indicates those who exhibited an intense level of focus on a particular subject area. Each respondent s answers to a set of survey questions related to these topic areas were weighted and analyzed to determine a level of focus; they were then grouped by segment. Page 17 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Findings Overall, the majority of organizations now rely on analytics and data to manage key financial and operational tasks Majority of respondents 10% 20% 30% 40% 50% 60% 70% Operational Financial Streamlining operational processes Managing supply chain or logistics Allocating annual budget Establish financial forecasts Aspirational Experienced Transformed Percentage of respondents who indicated their organization relies on data and analytics to execute these activities. The question choices ranged from 1= Intuition /Experience, 3= Equal parts experience / data to 5= Data / Analytics. Respondents above selected 4 or 5. Page 18 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Findings Yet, the majority of organizations rely on analytics for few activities; most including Transformed have ample opportunity to do more Majority of respondents 10% 20% 30% 40% 50% 60% 70% Customer HR Strategic Operational Financial Enhancing customers overall experience Optimizing the match of sales reps to customers Defining marketing campaigns Identify target customers Allocating employees time and efforts Evaluating employee performance Establishing organizational strategic objectives Developing / refining new products or services Streamlining operational processes Managing supply chain or logistics Allocating annual budget Establish financial forecasts Aspirational Experienced Transformed Percentage of respondents who indicated their organization relies on data and analytics to execute these activities. The question choices ranged from 1= Intuition /Experience, 3= Equal parts experience / data to 5= Data / Analytics. Respondents above selected 4 or 5. Page 19 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Table of contents The analytics advantage in today s marketplace How analytics create competitive advantage Two paths to transformation Roadmap for creating competitive advantage Page 20 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Analytic competencies Transformed organizations master three competencies to drive sustainable competitive advantage Analytic Competencies Manage the data Understand the data Act on the data Information management Solid information foundation Standardized data management practices Insights accessible and available Analytic skills and tools Skills developed as a core discipline Enabled by a robust set of tools and solutions Delivers actionable insights embedded in processes Data-oriented culture Fact-driven leadership Analytics used as a strategic asset Strategy and operations guided by insights Page 21 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Characteristics of a Transformed organization Transformed organizations serve as benchmarks for all the analytic competencies with six characteristics distinguishing them most Percentage of Transformed who rated themselves as highly effective at key characteristics Ability to analyze data 78% Ability to capture, and aggregate data 77% Culture open to new ideas 77% Analytics as a core part of business strategy and operations 72% Embed predictive analytics into processes 66% Insights available to those who need them 65% Characteristics identified based on discrete factor analysis Page 22 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Table of contents The analytics advantage in today s marketplace How analytics create competitive advantage Two paths to transformation Roadmap for creating competitive advantage Page 23 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Paths to transformation We also examined what happens between Aspirational and Transformed -- the space between the two end-point benchmarks Path through the middle Transformed Experienced Aspirational Page 24 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Paths to transformation Experienced organizations take either a data-centric enterprise path or an analytics-centric functional path to move towards Transformed Paths to transformation High Information management proficiency Collaborative path Data-oriented culture Transformed Enterprise driven Governance approach Low Aspirational Specialized path Line-of-business driven Low Analytic skills and tools proficiency High Page 25 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Paths to transformation The two paths have contrasting strengths and weakness Collaborative path Specialized path Information management [ ] Collaborative efforts are underway to integrate enterprise data Moving towards enterprise-level information governance Analytic skills and tools [ ] Primarily uses scorecards and dashboards to make insights readily accessible and available Lacking predictive skills Data-oriented culture [ ] Uses analytics to guide future strategies and day-to-day operations Leaders open to new ideas Information management [ ] Lines of business make independent decisions about analytics strategy, investments and standards Data integration is less of a priority Analytic skills and tools [ ] Predictive analytics supported by strong skills and tools within business units Scenarios and prototypes used to analyze impacts of decisions Data-oriented culture [ ] Uses analytics to improve operational and financial metrics Struggles to find executive support Weak Page 26 10/21/2011 Level of competency: Strong Moderate Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Table of contents The analytics advantage in today s marketplace How analytics creates competitive advantage Two paths to transformation Guidance for moving forward Page 27 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Recommendations Three steps to client transformation 1 Assess your analytic sophistication 2 Focus on improving your analytic competencies Establish a strong information foundation Develop a robust set of analysis skills and tools Create a culture that takes action on analytics 3 Tie approach together with an information agenda Page 28 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Why IBM? IBM has invested over $14B in BAO acquisitions across integrated data, trusted information and optimized business performance since 2005 Over 10,000 Technical Professionals Over 7,500 dedicated Industry aligned Analytics Consultants Largest Research & Math Department in Private Industry Strong network of specialist Business Partners Purpose built Analytics Solution Centres

Recommendations Why IBM? Page 30 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Recommendations Key messages you should remember Three key findings 1 Organizations that use analytics to create a competitive advantage significantly outperform their industry peers 2 3 There are three key competencies required for analytics: information management, analytic skills and tools, and a data-oriented culture Leaders must balance investments in information management and analytic capabilities while cultivating the needed culture to achieve a competitive advantage with analytics Page 31 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Recommendations 1 2 3 Entry point What is the business value of analytics to you? Are you prepared to use analytics for competitive advantage? How can analytics impact your business imperatives? Discussion overview Discussion with C-Suite leadership and senior management about the competitive and performance value analytics can create within their organization Discussion with senior and line-ofbusiness management about the level of analytic competency within the organization, and understand which path is being taken toward transformation Discussion with C-Suite and senior leadership to identify the organization s business imperatives, and discuss how analytics-driven priority industry solutions can be leveraged to address them Page 32 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

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Appendix Appendix BAO BVA overview BAO Functional Assessment overview IBV BAO study assessment Page 34 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Business Analytics & Optimization (BAO) BVA Portfolio Enhancements for Q4/Q1 Link to all BAO BVA Enablement Updates & Focus Areas We continue to develop on our GTM with BVAs in BAO We will also be announcing the enhanced BAO Jumpstart portfolio at our IOD conference in October Announcing two NEW BAO Jumpstart BVAs: Organizing our BAO BVAs into four categories: 1 2 3 4 BAO Jumpstart for Strategic Alignment - Includes BAO Jumpstart 2.0, Predictive Analytics Jumpstart and Deep Insight (Watson) Assessment BAO Jumpstart for Customer Insight - Includes NEW Customer Analytics Diagnostic BAO Jumpstart for Risk, Fraud and Finance - Includes Fraud and Abuse Diagnostic, Performance Management Diagnostic and Cognos Optimization BAO Jumpstart for Information Management Foundation - Includes NEW Enterprise Content Management Strategy Customer Analytics Diagnostic (under BAO Jumpstart for Customer Insight BVA category) Enterprise Content Management Strategy (under the BAO Jumpstart for Information Management Foundation BVA category)

BAO Functional Assessment Meets the Following Objectives Objectives: Map out the business and technical requirements of a specific solution area Inform the client about the likely range of performance improvement that could be attained by increasing the use and quality of information and analytics Deliver a plan to achieve specific business results such as Improve Supply Chain, Reduce Operational Risk, Improve Customer Cross Sell, etc. Provide a detailed business case for implementing the proposed solution Describe how the proposed solution would fit within the client s existing architecture Define what might the project plan look like for implementing the proposed solution BAO Functional Assessment 2 Week workshop to help clients build an Information Agenda using proven industry models and customized approach. The workshop is designed to help map out business and technical requirements for achieving specific improvements in business results through the use of quality information and analytics. The output would provide a detailed business case for leveraging a client's existing architecture as well defining any gaps that might exist. 36

BAO Functional Assessment Performs the Following Key Tasks Key Tasks: 1. Assess Business Maturity Levels 2. Identify Business Use Cases & KPIs 3. Understand Current Analytics Capability 4. Build the Base Business Value Case Showing the Likely Range of Improvements to KPIs from Implementing the Solution 5. Define the Conceptual Architecture 6. Design the Use Case Architecture 7. Begin to define Logical Data Flows 8. Build a Phased Plan for Implementation 9. Define the To-Be Architecture 10. Develop Conceptual Architecture with Product Mapping 11. Complete Logical Data Flow Design 12. Provide Additional Information as Needed Such as: Technical Data Governance Software Configuration and Sizing Infrastructure Design & Capacity Plan 37

Recommendations Three steps to transformation 1 Assess your analytic sophistication 2 Focus on improving your analytic competencies Establish a strong information foundation Develop a robust set of analysis skills and tools Create a culture that takes action on analytics 3 Tie approach together with an information agenda Page 38 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Recommendations Step 1: Assess your analytic sophistication (C-Suite) Information management Analytic skills and tools Data-oriented culture Transformed Integrated, simplified information platform Robust set of tools and talents Analytics-driven organization Experienced Collaborative Enterprise integration underway Scorecards, dashboards Driven by enterprisewide focus Specialized LOB-centric data management Predictive analytic tools and skills Driven by line-ofbusiness metrics Aspirationals Ad hoc data management Spreadsheets and standardized reports Analytics are not integral to strategy Page 39 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Recommendations Step 1: Assess your analytic sophistication (Sr. VPs and LOBs) Page 40 10/21/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Paths to transformation Step 1a: Competency assessment for Experienced organizations Collaborative Observed competency levels Information management Solid information foundation Standardized data management practices Insights available and accessible Specialized Analytic Tools and Skills Skills developed as a core discipline Enabled by a robust set of tools Delivers actionable insights embedded in processes Data-oriented culture Fact-driven leadership Analytics used as a strategic asset Strategy and operations guided by insights 41 10/21/2011 Source: Analytics 2011, a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership.

Recommendations Step 2a: Focus on improving your analytic competency levels Information management competency Establish a strong information foundation Challenging questions 1 Effective information governance What do you need to do to have everyone in your organization agree on the definition of key data such as customer or on-time delivery? 2 Standardized data quality How can you make sure everyone trusts the data used to drive insights and decisions? 3 Integrated, simplified information What can you do to improve the consistency and accuracy of your information across the organization? 4 Accessible and available What steps are you taking to ensure employees have to timely access to the information they need?

Recommendations Step 2b: Focus on improving your analytic competency levels Analytic skills and tools competency Develop a robust set of analysis skills and tools Challenging questions 1 Skills nurtured as a core discipline How effective is your organization at attracting and developing the analytic skills it needs? 2 Champions seed expertise What incentives are in place for analytic talent to mentor others? 3 Robust tools to analyze, visualize How prepared is your organization to integrate emerging analytical tools? 4 Centralized expertise partnered with local analysts How can you improve the partnership between employees who excels at analytics, and those who understand the business implications?

Recommendations Step 2c: Focus on improving your analytic competency levels Data-oriented culture competency Create a culture that takes action on analytics Challenging questions 1 Guiding strategy and operations How can the leadership team better promote the use of analytics in decision making? 2 Open to new ideas How willing is your organization to adopt new ideas, founded on advanced analytics, which challenge a current strategic approach or tactic? 3 Fact-driven decisions Are your key executives visibly using facts to underpin their decisions? 4 Insights shared broadly Are the same insights about customers including interaction history and organizational value -- shared with everyone who interacts with them?

Recommendations Step 3: Tie it together with an information agenda The Information Agenda Analytics-driven strategy and objectives to enable business priorities Effective information governance structure, tools and processes Business-value based approach to define information-intensive projects aligned with the strategy A flexible and scalable information management foundation that leverages existing information assets Page 45 10/21/2011 Source: IBM methodology

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