how companies are achieving competitive advantage through analytics

How companies are achieving competitive advantage through analytics

Tony Boobier

Insurance Leader EMEA

1 © 2011 IBM Corporation

Insurance Leader EMEA

IBM Business Analytics

Dramatic changes across industries require new approaches…

EconomyInvestment income is no

longer a dependable source of profit

CustomersCustomers are more price conscious and less loyal and demand personalized, high service levels

Channel managementNeed to simplify back-office processes so

that distribution channels can be more efficient and profitable


CompetitionCompetition is intensifying

with increased mergers and acquisitions, divestitures,

and new entrants

high service levels

RegulationRegulatory reporting requirements and a demand for transparency are increasing

RiskTechnology investments driven by regulatory requirements need to be leveraged in other business areas

GrowthGrowth market segments have become the focus of expansion with a need to grow the current

customer base

A need for change is a need for smarter planet.


‘We have entered the decade of Smart’Sam Palmisano, CEO IBM 2010

Our world is becoming

INSTRUMENTEDOur world is becoming

INTERCONNECTED


INTERCONNECTEDVirtually all things, processes and waysof working are becoming

INTELLIGENT

INSTRUMENTEDWe now have the ability to measure, sense and see the exact condition of everything.

•Today, there are 1 billion transistors for each person on the planet. 1

•By 2010, 30 billion RFID tags will be embedded into our world and across entire


embedded into our world and across entire ecosystems.1

Everything will become instrumented:supply chains, healthcare networks,cities and even natural systems like rivers.

1 Sam Palmisano speech, November 12, 2008

INTERCONNECTED

People, systems and objects can communicate and interact with each other in entirely new ways.

• The internet of people is 1 billion strong. Almost one third of the world’s population will be on the web by 2011.1

• There were nearly 4 billion mobile phone subscribers


• There were nearly 4 billion mobile phone subscribers worldwide by the end of 2008. 1

The Internet of things—cars, appliances, cameras, roadways, pipeline, pharmaceuticals and even livestock—is headed to 1 trillion.

1 Sam Palmisano speech, November 12, 2008

INTELLIGENT

We can respond to changes quickly and accurately,and get better results by predicting and optimizing for future events.

• Every day, 15 petabytes of new information are beinggenerated. This is 8x more than the information in all U.S. libraries.1

• An average company with 1,000 employees spends


• An average company with 1,000 employees spends $5.3 million a year to find information stored on its servers. 1

New computing models manage the massive amounts of data generated by the proliferation of end-user devices, sensors, and actuators. Combined with advanced analytics, these technologies are makingus smarter.

1 New Intelligence White Paper from ThinkForward website

+ + =An opportunity to think and act in new ways—


An opportunity to think and act in new ways—economically, socially and technically.

‘Location’ is a key component of thinking in different ways

We are Already Integrating Location with Analytics

• Postal delivery optimisation• Movement analytics for tourists• Minority integration support• Law enforcement


• Law enforcement• Railroad track analysis• Cancer research• Insurance fraud analytics • Flood prediction

Welcome to the world of ‘Geo Analytics’

Examples of Spatial Analytics in Use

Using IBM DB2 database with Spatial Extender:

BNSF - incredibly complex spatial queries for railroad analyticsEmory University - Dr. Fusheng Wang - cancer researchIrish insurance company - analysis of insurance flood riskMedicare Australia – analysis of healthcare fraud analysis


IBM and ESRI

2011 ESRI wins Global Technology Alliance Award : IBM partner conference Las Vegas

2011 SpotOn Systems Inc (acquired by ESRI last week) wins ISV Achievement Award Las Vegas


week) wins ISV Achievement Award Las Vegas

What smart things are happeningin your industry today?


Where are the greatestopportunities for progress?

New Intelligence:A smarter planet gives organizations the vision to see without being there.

German supermarket: Uses smart RFID labels to manage inventory with real-time sales data, improving

Matiq: Employs RFID tags to trace meat and poultry from the farm to store shelves to ensure safety and freshness

Where does the location element of a ‘Smart Planet’ fit in….?


manage inventory with real-time sales data, improving product availability and enhancing the consumer experience.2

the farm to store shelves to ensure safety and freshness and provide more transparency to consumers.1

U.S. power company: Saves $1.2 million annually by using an RFID-based fleet optimization system to reduce the amount of repair work on their vehicles.2

IBM Deep Thunder: Leverages computing power, visualization and data analytics to generate high-resolution weather forecasts for areas as fine as 1 to 2 square kilometers.3

1 Approved Smart Planet Client References2 Smarter planet sales deck3 Sam Palmisano speech, November 12, 2008

Green and Beyond:A smarter planet empowers organizations to do more, using less.

StatoilHydro: Links advanced real-time sensing capabilities in the field to collaborate and analyze

Landmark: Revolutionizes petroleum frontier exploration in Texas by integrating data sources to



capabilities in the field to collaborate and analyze resources across the enterprise for an expected 5% boost in oil and gas production and 30% cost reduction.1

exploration in Texas by integrating data sources to increase the likelihood of finding profitable sources of oil.1

Stockholm, Sweden: An intelligent toll system in the city center resulted in 20% less traffic, 40% lower emissions and 40,000 additional users of the public transportation system.1

IBM’s Carbon Tradeoff Modeler: Manages and performs analytics to help companies reduce emissions and make smarter, more cost-effective energy choices.2

1 Approved Smart Planet Client References2 Smarter planet sales deck

Smart Work:A smarter planet puts organizations in position to be first and be right.

British Airways: Uses mobile device check-in and other self-service technologies to help facilitate a

Canadian airlines: Use passenger information to predict the number of no-shows for each flight, so they



other self-service technologies to help facilitate a trouble-free travel experience and save the airline $3.50 per passenger.2

predict the number of no-shows for each flight, so they can strategically overbook while minimizing the risk of bumping passengers.1

Max Bahr: A Dynamic Inventory Optimization Solution enables the retailer to meet demand for any of 40,000 products in more than 80 outlets with low replenishment and storage costs—boosting customer service ratings to 99%. 2

IBM Research Zurich Lab: Uses visualization software to render a 3D model of each patient, allowing doctors to interact with data that improves patient care.2

1 Smarter planet sales deck2 Approved Smarter Planet Client References

Dynamic Infrastructure:A smarter planet enables organizations to solve the problem before the problem occurs.

British banks : Utilize real-time data analytics of complex financial models to help understand and

Bank of Montreal: Created a synchronized secondary data center 100 kilometers from its primary facility to



complex financial models to help understand and manage their exposure to risk.1

River and Estuary Observatory Network: Will create the first technology-based real-time environmental monitoring and forecasting network to guide better policy, management and education for the Hudson River and estuaries worldwide.2

IBM Fire Program Analysis: Uses unique mathematical algorithms to determine where wildfires will likely occur, and helps optimize government funds and resources for battling those fires.1

data center 100 kilometers from its primary facility to meet government regulations and ensure the safety and availability of data in the event of a disaster.2

1 Original deck2 Approved Smart Planet Client References

IBM Research with MIT Management Research shows the urgency to act on analytics and tells about the paths organizations are taking to transformation

Research findings

The Roadmap to Success


Competitive advantage being

created by analytics is widening

Competitive analytics requires mastery of three

key competencies

There are two paths to analytic

sophistication

Page 19 11/29/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership. Copyright © Massachusetts Institute of Technology 2011.

The Journey from Aspirational to Transformed

Transformed(Leading)

Experienced

3 Key Analytic Segments of Ability


Aspirational(Growing)

Experienced(Learning)


Finding competitive advantage using analytics has increased in 12 months

Respondents who say analytics creates a

competitive advantage

58%

Organizations achievinga competitive advantage

with analytics are

2.2x


58%2011

37%2010 57%increase

2.2xmore 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.


Transformed or ‘Leading’ companies are getting greatercompetitive advantage by expanding the use of analytics

Respondents who cited a competitive advantage using analytics year-over-year

80%

2010

2011

Transformed / Leading 23%increase65%


63%

2010

2011

38%

2010

2011

39%

Experienced / learning

Aspirational / Learning

66%increase

5%decrease


Transformed (‘leading’) organizations are creating advantage by intensely focusing on applying analytics in three key areas of business

86%

Transformed

Enterprise risk

62%

Transformed

Customers

72%

Transformed

Speed of decisions


86%

6%

0%

Experienced

Aspirational

62%

49%

34%

Experienced

Aspirational


72%

49%

22%

Experienced

Aspirational

Percentage indicates those who exhibited an intense level of focus on a particular subject area.

Where can Analytics help– and where best is the location component?

10% 20% 30% 40% 50% 60% 70%

Majority of respondents

Enhancing customers’ overall experience

Optimizing the match of sales reps to customers

Defining marketing campaigns

Identify target customers

Allocating employees’ time and efforts

Customer

27 © 2011 IBM CorporationPage 27 11/29/2011 Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership. Copyright © Massachusetts Institute of Technology 2011.

Percentage of respondents who indicated their organ ization relies on data and analytics to execute the se activities. The question choices ranged from 1= Intuition /Experience, 3= E qual parts experience / data to 5= Data / Analytic s. Respondents above selected 4 or 5.

Aspirational Experienced Transformed

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 forecastsFinancial

Operational

Strategic

HR

How to Implement Analytics : 3 areas of competence

Manage, Understand, Act on the data

Analytic CompetenciesAnalytic Competencies

Skills developed as a core discipline

Information managementInformation management

Solid information

Data-oriented cultureData-oriented culture

Fact-driven leadership

Analytic skills and tools

1.Manage the data 2.Understand the data 3.Act on the data


core discipline

Enabled by a robust set of tools and solutions

Delivers actionable insights embedded

in processes

Solid information foundation

Standardized data management practices

Insights accessible and available

Analytics used as a strategic asset

leadership

Strategy and operations guided by

insights


Implementation

Transformed ‘leading’ organizations take either an enterprise or specialist path

Paths to transformation

Collaborative path

Information

TransformedHigh

Governance

Enterprise driven


Specialized path

Information management

proficiency

Analytic skills and tools proficiency

AspirationalLow

Governance approach

Line-of-businessdriven

HighLow

Collaborative organizations have to resist the urge to perfect the data

Key characteristics respondents said would increase confidence in data used for decisions

More timely data 31%


More relevant data

Better data collection

Better traceability of data

More precise data

Respondents were able to select up to three choices from a longer list of options. These are the top five answers.

24%

31%

21%

22%

Specialized organizations face problems ahead

Most view organizational challenges as more difficult to resolve than technology

Respondents who rate these challenges as extremely difficult to resolve


extremely difficult to resolve

44%Organizationalchallenges

24% 1.8xmore difficult

Technologychallenges


Focus on improving your analytic competencies

Three Steps to Transformation

Assess your analytic sophistication

Establish a strong Create a culture Develop a robust

1

2


Establish a strong information foundation

Create a culture that takes action

on analytics

Develop a robust set of analysis skills and tools

Tie approach together with an information agendawhich includes a location component

3


Summary


• Welcome to the decade of ‘Smart’• Analytics provide measureable differentiation• Location analytics can be a critical component