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Analytics: The Next
Competitive Advantage
Hari S. Hariharan
Copyright © 2007, SAS Institute Inc. All rights reserved.
Overview
Context
Challenges for Organizations
The Art of the Possible with Analytics
Analytics and Business Performance
Approach to become Analytically Driven
Conclusion
Copyright © 2007, SAS Institute Inc. All rights reserved. 1

Overview
Context
Conclusion
Context: Can you relate to this situation?

Belong to a large organization with several
departments
Organization has centralized tools/systems
like CRM, BI tool etc
Get weekly/monthly reports and dashboards
Still decision making is a struggle

Context: Can you relate to this even more?
Over whelmed by the # of weekly reports &
dashboards
Conflicting data and lack of actionable
information
Frustration and poor decisions
Why so common?
Possible reasons
• Over investments in tools and technology
instead of capabilities
• Islands of excellence
• Limited integrated enterprise wide
approaches

Can this continue?
Not really
Especially given the challenges faced by
organizations
Overview
Context
Conclusion

Challenge of sustaining High Performance
Achieving and sustaining high performance
has never been more challenging
Average Life Span of S&P 500 Company
Past 50 years
Now 15 years
2020 10 years
Emphasis on growth
Growth is top on the agenda of many executives
42 percent of global executives are focusing

primarily on growth, and an additional 32 percent
are balancing growth and cost control.
32 percent of executives around the world say
acquiring new customers is one of their top
business issues.

Key drivers of CEO growth agenda?
Creating and keeping profitable customer
relationships is a key issue for CEOs
Business Issues Rank
Acquiring new customers 1 (38%)

Managing risk 1 (38%)
Improving workforce performance 2 (36%)
Achieving growth while increasing profitability 2 (36%)
Increasing revenue from current customers 3 (35%)
Developing employees into capable leaders 4 (33%)
Applying innovation to stay ahead of the competition 5 (29%)
Changing organizational culture and employee
6 (26%)
attitudes
Developing a more customer-centric business model 6 (26%)
Using IT to reduce costs and create value 6 (26%)
Several challenges affecting the growth agenda
Market related challenges

Operational challenges
Specific challenges around customer
acquisition and retention

Market Challenges
Commoditization, product substitution, brand
fragmentation
Demographic changes are altering customer
needs/behaviors
Declining world population is shrinking base of
available new customers
Increased ‘noise’ in the market / more messages
and mediums – hard to get consumer attention
Operational Challenges
Outmoded business practices are accelerating
marketing spend without accelerating returns
Organizational silos fragment the customer
experience across channels.
Unfocused, cost-driven cutbacks in service and
support programs alienate key customers and
erode customer loyalty.

Specific challenges for customer acquisition
Product/service specialization are impede
consumer decision making – too many choices
Difficult to create relevant messages and offers
Difficult to reach customers
Cost of acquisition is increasing resulting in price
pressures (equipment subsidies, price discounts,
giveaways, rebates)
Specific challenges for customer retention

Lack holistic view of the customer
Over reliance on buying rather than earning
customer’s business
Extreme technology focus (on reducing costs)
impacts brand experience
Cost of switching is nominal

Implications for organizations
Need for renewed customer centric focus

Need to leverage existing investments in
systems tools and technologies
Need to emphasize smarter decision making
−What does this mean?
Overview
Context
Conclusion

What does Analytics mean?

Sources that can drive Analytical Insights?
Success stories around analytics
Are there other opportunities for deploying
Analytics
Key Lessons
What does Analytics mean?
Analytics a simple definition

• Scientific process of using data to derive
insights to drive actions
Insight : the true nature of a situation
Is hypothesis driven and should be an
ongoing “test and learn” process
Value of analytically driven insights depends
upon successful execution

Sources of Actionable Analytics/Insights
Customer and Descriptive and

Market Research Predictive Modelling
Hypotheses Data
and Analysis
Thought
Leadership
Experimental
Design
Front-Line and
Back-Office
Feedback Campaign Market Testing
Lessons &
Trade-off Insights
analyses
Success Stories around Analytics
Familiar examples
• Financial Services
• Telecommunication
• Retail
Less familiar example
• Sports

Analytics in Financial Services
Use of FICO scores in acquisition campaigns

Use of predictive models to develop lists for
cross sell campaigns
Use of triggers to drive event based marketing
Conjoint analyses to design products
Analytics in Telecommunication
Use of predictive models to understand drivers

of churn
Use of decision trees to drive customer contact
strategies

Analytics in Retail
Pricing decisions
Promotion and use of coupons
Space allotment and optimization
Analytics in Sports
Oakland As consistently made to playoffs with
a lower payroll liability
One key driver: use of analytics
Use of new metrics of player performance
instead of traditional metrics like RBI
New Metrics
• On Base %
• On Base Plus Slugging %
Copyright © 2007, SAS Institute Inc. All rights reserved. Source: “Competing on Analytics” HBS

Opportunities for using Analytics
Several internal and external opportunities for using
analytics
INTERNAL EXTERNAL
Financial Customer
Manufacturing Supplier
R&D Service
HR
Copyright © 2007, SAS Institute Inc. All rights reserved. Source: “Competing on Analytics” HBS
Examples of analytical techniques for internal

processes
Activity Based Costing
Optimization
Simulation
Bayesian Inference

Key Lessons
There are several opportunities for applying

analytics within organizations
Need for a comprehensive integrated
approach for the use of analytics within the
organization
Will this help?
Overview
Context
Conclusion

Analytics and High Performance
Does using analytics help drive better

business performance?
Research specifically to understand the
relationship between analytics usage and
high performance
Examples of Analytically driven Competitors
Organizations are becoming more analytical.

57% of top performers vs. 8% of low performers indicated
either above average analytical capabilities or that
analytics are a key element of their strategy.
47% 2002
33% 37%
2006
27% 19%
10%
12% 8% 9%
0%
No analytical Minimal analytical Some analytical Above Average Analytics key element
capability capability capability Analytical capability of Strategy

High performance associated with extensive &
sophisticated use of analytics
Low Performers High Performers

23% Have significant decision-support 65%
analytical capabilities
8% Value analytical insights to a very large 36%
extent
33% Have above average analytical 77%
capability within industry
23% Use analytics across their entire 40%
organization
How do companies compete – and win – with

analytics?
These high performers have discovered the power of
analytics to out-think and out-execute the competition.
• Enhance customer relevance
• Out-execute competitors
• Differentiate a commodity
• Drive enterprise agility


Harrah’s Competitive Advantage
“Opportunities abound to employ simple analytic methods
to substantially increase profitability, especially in large
businesses such as mine where a single insight can ring
the cash register literally millions of times.
A ten-basis-point movement of slot pricing toward the
estimated demand curve for a given game could enhance
our profitability by an eight-figure amount and be
unobservable to the guest.”
-- Gary Loveman, CEO
Netflix is an Analytical Competitor

Cinematch is a movie-recommendation “engine” based on
proprietary, algorithmically-driven software. It analyzes customers’
choices and customer feedback on movies and recommends films
that both delight the customer and optimizes inventory conditions.
Netflix balances the distribution of shipping requests across

frequent-use and infrequent-use customers. Infrequent-use
customers are given priority in shipping popular titles over
frequent-use customers.

CEMEX is an Analytical Competitor
CEMEX, the leading global supplier of cement
• Cement is highly perishable. It begins to set as soon it is loaded,
and the producer has limited time to get it to its destination.
• Traffic, weather, and an unpredictable labor market in
developing nations make it hard to plan deliveries accurately.
Predictive analytics enables CEMEX to guarantee delivery in a 20
minute window – a huge competitive edge.
Benefits to CEMEX include:
• Increased market share and command premium prices
• 35% increase in truck productivity
Leveraging Analytics Across the Enterprise
A significant percentage of customers with unpaid bills were

not deadbeats but customers with unresolved questions
about their accounts
Shifted collections from bill collectors to retention agents
whose goal is to resolve conflicts and retain satisfied
customers.
Customer lifecycle analytics have delivered more than $1
billion of enterprise value and $500 million in revenue by
reducing customer churn, getting customers to buy more,
and improving satisfaction rates.

Key Lessons
Possible to compete with Analytics

More important it can be a key differentiating
capability
• Hard to duplicate
• Takes time and effort to build and sustain
• Highly adaptable
• Produces results
Overview
Context
Conclusion

Analytical Maturity Model and Roadmap
Stage 5
Analytical
Competitors
Stage 4
Analytical
Companies
2 Stage 3
Analytical Aspirations
Stage 2
Localized Analytics
1
Stage 1
Analytically Impaired
Analytical Competitor: Key Building Blocks

Where/how to compete
1 Strategy
Leadership commitment
Attracting/building talent
2 People
Managing talent
Process redesign
3 Process
Fact based culture
Data Integration
4 Technology
Tools and infrastructure

It Doesn’t Happen Overnight . . .
Takes a while to put data and infrastructure foundation in

place, and even longer to develop human capabilities, a fact-
based culture, and “success stories”
Barclay’s five year plan for “Information-Based Customer
Management”
UPS – “We’ve been collecting data for six or seven years, but
it’s only become usable in the last two or three, with enough
time and experience to validate conclusions based on data.”
Overview
Context
Conclusion

Conclusion
Using analytical capability to drive performance

is a viable competitive advantage
Requires you to think differently, act differently
and achieve different and better results
“In business, as in baseball, the question isn’t

whether or not you’ll jump into analytics. The
question is when.
Do you want to ride the analytics horse to
profitability…or follow it with a shovel?”
-- Rob Neyer, ESPN

Acknowledgement
This presentation has benefited from a recent

publication “ Competing on Analytics” by Thomas
Davenport and Jeanne Harris, published by Harvard
Business School Press
Thank you!

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Analytics: The Next

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved. 1

Copyright © 2007, SAS Institute Inc. All rights reserved.

Context: Can you relate to this situation?

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved. 2

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved. 3

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved. 4

Average Life Span of S&P 500 Company

Copyright © 2007, SAS Institute Inc. All rights reserved.

 42 percent of global executives are focusing

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved. 5

Acquiring new customers 1 (38%)

Several challenges affecting the growth agenda

 Market related challenges

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved. 6

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved. 7

Copyright © 2007, SAS Institute Inc. All rights reserved.

Specific challenges for customer retention

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved. 8

 Need for renewed customer centric focus

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved. 9

 What does Analytics mean?

Copyright © 2007, SAS Institute Inc. All rights reserved.

What does Analytics mean?

 Analytics a simple definition

Copyright © 2007, SAS Institute Inc. All rights reserved. 10

Customer and Descriptive and

Copyright © 2007, SAS Institute Inc. All rights reserved.

Success Stories around Analytics

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved. 11

 Use of FICO scores in acquisition campaigns

Copyright © 2007, SAS Institute Inc. All rights reserved.

 Use of predictive models to understand drivers

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved. 12

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved. 13

Examples of analytical techniques for internal

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved. 14

 There are several opportunities for applying

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved. 15

 Does using analytics help drive better

Copyright © 2007, SAS Institute Inc. All rights reserved.

Organizations are becoming more analytical.

Copyright © 2007, SAS Institute Inc. All rights reserved.

Copyright © 2007, SAS Institute Inc. All rights reserved. 16

42 percent of global executives are focusing

Market related challenges

Need for renewed customer centric focus

What does Analytics mean?

Analytics a simple definition

Use of FICO scores in acquisition campaigns

Use of predictive models to understand drivers

There are several opportunities for applying

Does using analytics help drive better

Netflix balances the distribution of shipping requests across

A significant percentage of customers with unpaid bills were

Possible to compete with Analytics

Takes a while to put data and infrastructure foundation in

Using analytical capability to drive performance