What is What is

Data WarehousData Warehousinging

All About?All About?

Peter NolanPeter Nolanwww.peternolan.comwww.peternolan.com

Agenda

What do you want, really?What do you want, really? What is the Data Warehouse all about?What is the Data Warehouse all about? Management Decision Making ProcessManagement Decision Making Process Role of the Data WarehouseRole of the Data Warehouse Major issues of the Data WarehouseMajor issues of the Data Warehouse What are people saying about Data What are people saying about Data

Warehousing?Warehousing? Typical applications of Data WarehousingTypical applications of Data Warehousing Case studiesCase studies Business benefits of Data WarehousingBusiness benefits of Data Warehousing What works?What works?

What Do You Want, Really?

Improved profitImproved profitabilityability Attention Attention to both revenue and coststo both revenue and costs

Improved decision making capabilityImproved decision making capability Make more effective decisions more oftenMake more effective decisions more often Consistent measures of business performanceConsistent measures of business performance Others?Others?

What is Data What is Data Warehousing Warehousing

All About?All About?

What is the DW All About?

The Data Warehouse is all aboutThe Data Warehouse is all about

“Supporting the management decision making “Supporting the management decision making process”process”

It’s that simple, and that complicatedIt’s that simple, and that complicated

Management Decision Making Process

How’s Business?

Why?What if?

Invest $$$

What is the Data Warehouse?

Time VariantTime Variant Subject OrientedSubject Oriented IntegratedIntegrated Contains non volatile snapshotsContains non volatile snapshots

A Data Warehouse is a collection of data in support A Data Warehouse is a collection of data in support of the management decision making process.*of the management decision making process.*

*Source: Building the Data Warehouse by W.H. Inmon

What Does a DW Look Like?

HighlyHighlySummarisedSummarised

LightlyLightlySummarisedSummarised

CurrentCurrentDetailDetail

Older Older DetailDetail(Tape/cdrom)(Tape/cdrom)

MMeettaa

DDaattaa

Role of the Data Warehouse

How’s Business?

Why?What if?

Invest $$$

Major Issues of Major Issues of Data WarehousingData Warehousing

Islands of Information

  

  

Admin System 1

End User Query

Abacus (Non-SNA)

Admin System 2

Admin System 3

Hidden Cost of EIS/DSS

Executive

Custom Reports

Spreadsheets

Legacy Systems: $9/year

$1$1

What are People Saying What are People Saying About About

Data Warehousing?Data Warehousing?

What are People Saying?

““The business case for warehouses is simple: The business case for warehouses is simple: they help turn data into a competitive tool”they help turn data into a competitive tool”

COMPUTERWORLDCOMPUTERWORLD

What are People Saying?

Tom PetersTom Peters We are living through a shift from selling virtually We are living through a shift from selling virtually

everyone the same thing a generation ago to everyone the same thing a generation ago to fulfilling individual needs and tastes... by supplying... fulfilling individual needs and tastes... by supplying... customised products and services. The shift [is] from customised products and services. The shift [is] from “get the sale now at any cost” to building and “get the sale now at any cost” to building and managing ... databases that track the lifetime value managing ... databases that track the lifetime value of your relationship with each customer. of your relationship with each customer.

What are People Saying?

Rapp & Collins Rapp & Collins it may almost be time to replace it may almost be time to replace

“location, location, location” “location, location, location”

with with

“database, database, database”.“database, database, database”.

What are People Saying?

Stanley Davis - Future PerfectStanley Davis - Future Perfect Mass CustomisationMass Customisation Standardise the Commodity and Customise the Standardise the Commodity and Customise the

Service that Surrounds ItService that Surrounds It

Example: Telephone callsExample: Telephone calls

What are People Saying?

Philip Kotler - Marketing ManagementPhilip Kotler - Marketing Management Mass markets are fragmenting into micro-Mass markets are fragmenting into micro-

markets; multiple channels of distribution are markets; multiple channels of distribution are replacing single channels...replacing single channels...The winners are those who carefully analyse The winners are those who carefully analyse needs, identify opportunities and create value-needs, identify opportunities and create value-laden offers for target customer groups that laden offers for target customer groups that competitors can’t match.competitors can’t match.

IDC

Perhaps the single most important ongoing Perhaps the single most important ongoing occurrence to affect data warehousing has occurrence to affect data warehousing has been the information explosion. Organisations been the information explosion. Organisations realise that, given the fundamental relationship realise that, given the fundamental relationship between knowledge and power, utilisation of between knowledge and power, utilisation of this information is key to their competitive this information is key to their competitive positioning. positioning.

Meta Group

Bottom Line: Data warehouses are an Bottom Line: Data warehouses are an increasingly critical component of the systems increasingly critical component of the systems that support the ever-increasing tempo of that support the ever-increasing tempo of business competition. business competition.

Typical Applications of Typical Applications of Data WarehousingData Warehousing

A Way to Test New Ideas

How do you test new ideas for profitability?How do you test new ideas for profitability? Data Analysis/Mining “tests” ideasData Analysis/Mining “tests” ideas Data Mining to find “diamonds”Data Mining to find “diamonds” There are “diamonds” in your dataThere are “diamonds” in your data Marketing Data WarehouseMarketing Data Warehouse

Small investment, fast returnSmall investment, fast return Likely source of “diamonds”Likely source of “diamonds”

A Classic DW Application Targeted Marketing

CUSTOMERSERVICE

ADMIN

CONTACTMGT

DISTRIBUTION

CAMPAIGNMGT

ANALYSIS

Marketing Cycle

Case StudiesCase Studies

Case Studies

Many businesses have benefitedMany businesses have benefited The following case studies are some examplesThe following case studies are some examples

Product Rationalisation

SituationSituation Half the product line found to be unprofitable due Half the product line found to be unprofitable due

to low number of clients and low premium to low number of clients and low premium paymentspayments

SolutionSolution Launch “Product Rationalisation”. Cut the number Launch “Product Rationalisation”. Cut the number

of products by half. Leads to “Business of products by half. Leads to “Business Simplification”Simplification”

Value Value Largest business project ever undertaken by 100 Largest business project ever undertaken by 100

year old companyyear old company

Target Marketing

SituationSituation Legislation changes causes confusion for Legislation changes causes confusion for

thousands over whether to retire. June 94.thousands over whether to retire. June 94.

SolutionSolution Profile customer database, select all those people Profile customer database, select all those people

who would benefit from retiring before legislation who would benefit from retiring before legislation change and target them for rollover products.change and target them for rollover products.

Value Value $440M deposited into rollover fund. Some $300M $440M deposited into rollover fund. Some $300M

up on product managers forecast.up on product managers forecast.

Cross Selling

SituationSituation Customer wishes to cross-sell existing clients Customer wishes to cross-sell existing clients

SolutionSolution Provide analysis capability to profile existing clients Provide analysis capability to profile existing clients

to determine who owned the product. Use DW to to determine who owned the product. Use DW to select targets who did not own the product.select targets who did not own the product.

ValueValue Response rate for new product purchase direct Response rate for new product purchase direct

mail 18%. (As opposed to 2% for third party mailing mail 18%. (As opposed to 2% for third party mailing list)list)

Up Selling

SituationSituation Customer wishes to up-sell existing clients Customer wishes to up-sell existing clients

SolutionSolution Provide ability to select existing customers to Provide ability to select existing customers to

upgrade productsupgrade products

ValueValue Response rate for upgrade direct mail 33%Response rate for upgrade direct mail 33%

Variance Analysis

SituationSituation Senior management does not receive timely P&L Senior management does not receive timely P&L

reportreport

SolutionSolution Provide easy to use tools - access to Provide easy to use tools - access to

revenue/expense database. Management conducts revenue/expense database. Management conducts own variance analysis by dept, division, and bankown variance analysis by dept, division, and bank

ValueValue $2M increase in net income from more timely $2M increase in net income from more timely

management decisionsmanagement decisions

Cost Management

SituationSituation Cut corporate spending by 10%. Implement program Cut corporate spending by 10%. Implement program

within 3 monthswithin 3 months

SolutionSolution Use relational databases. Create flexible applications Use relational databases. Create flexible applications

for 285 departments to analyse expense data. for 285 departments to analyse expense data. Support senior management summary reports, Support senior management summary reports, consistent with department detailsconsistent with department details

ValueValue Cut expenses by 10% - or $100M - from prior yearCut expenses by 10% - or $100M - from prior year

Resource Allocation

SituationSituation Misallocation of departmental expenses increases Misallocation of departmental expenses increases

costscosts SolutionSolution

Combine revenue, expense, headcount and Combine revenue, expense, headcount and asset/liability information into one database. asset/liability information into one database. Provide easy to use tools for access by all levels of Provide easy to use tools for access by all levels of management.management.

ValueValue $7 Million increase in net income through better $7 Million increase in net income through better

resource allocationresource allocation

Profitability

SituationSituation Unprofitable retail customers are causing drain on Unprofitable retail customers are causing drain on

resourcesresources

SolutionSolution Use CIS and product profitability to build customer Use CIS and product profitability to build customer

profitability modelprofitability model

ValueValue Use model to reprice products and create Use model to reprice products and create

household pricing. Increase net income by $20Mhousehold pricing. Increase net income by $20M

Segmentation

SituationSituation Marketing did not know what kind of customers Marketing did not know what kind of customers

were using serviceswere using services

SolutionSolution Combine CIS with cluster-demographics to build Combine CIS with cluster-demographics to build

customer profiles by product and market areacustomer profiles by product and market area

ValueValue Developed products to meet needs of customers. Developed products to meet needs of customers.

Increase net income by $3 millionIncrease net income by $3 million

Target Marketing

SituationSituation Direct Marketing budget substantially reducedDirect Marketing budget substantially reduced

SolutionSolution Develop Direct Mail Model, combining segmentation Develop Direct Mail Model, combining segmentation

analysis and product usage researchanalysis and product usage research

ValueValue Target marketing reduced direct mail costs by $3MTarget marketing reduced direct mail costs by $3M

Business BenefitsBusiness Benefits

Business Benefits

More cost-effective decision makingMore cost-effective decision making Better business intelligenceBetter business intelligence Enhanced customer serviceEnhanced customer service Enhanced asset/liability managementEnhanced asset/liability management Aligned with corporate downsizingAligned with corporate downsizing Relationship to Business Process Relationship to Business Process

ReengineeringReengineering

What WorksWhat Works

Likely High Payback Projects

High Volume, Low Cost productsHigh Volume, Low Cost products Marketing CampaignsMarketing Campaigns Customer Value IndexCustomer Value Index

Customer profit contributionCustomer profit contribution Tiered servicing of customersTiered servicing of customers

Product launch, modify, termination, pricingProduct launch, modify, termination, pricing Customer/Product understandingCustomer/Product understanding

What Works

Senior Manager(s)Senior Manager(s) Making big decisions on scant dataMaking big decisions on scant data Demanding informationDemanding information

Marketing Manager(s)Marketing Manager(s) Demanding better sales targetingDemanding better sales targeting

Do something you can’t do nowDo something you can’t do now

What works is generally not easy to doWhat works is generally not easy to do

What Doesn’t Work

IT technology driven projectIT technology driven project Let’s try this new box, tool, toy ...Let’s try this new box, tool, toy ...

Pie in the sky wishful thinkingPie in the sky wishful thinking There seems to be a lot of this aboutThere seems to be a lot of this about

Trying wide range of source systems firstTrying wide range of source systems first DW as an extension of MIS/EISDW as an extension of MIS/EIS

Places to Start

75% of DWs start in:75% of DWs start in: Marketing/SalesMarketing/Sales Customer Information SystemsCustomer Information Systems

All benefit from integrating data from All benefit from integrating data from multiple source systemsmultiple source systems

All contribute to new revenue and profitAll contribute to new revenue and profit Most of the other 25% start in Most of the other 25% start in

Performance measurement projectsPerformance measurement projects Financial reporting and analysisFinancial reporting and analysis

Places not to Start

Financial SystemsFinancial Systems eg. Ledger, Accounts Receivable, Product eg. Ledger, Accounts Receivable, Product

CatalogueCatalogue

Not customer focusedNot customer focused These systems are already ‘good’These systems are already ‘good’ Provides ‘better’ numbers for accountantsProvides ‘better’ numbers for accountants Little opportunity for new revenueLittle opportunity for new revenue

Cost Justifications

These are hard to do in advanceThese are hard to do in advance Note that DW may be seen as “optional extra”Note that DW may be seen as “optional extra” Near impossible to justify $1M, 2 year projectNear impossible to justify $1M, 2 year project Much easier to justify Much easier to justify

$100-$200K 3-4 Month Project$100-$200K 3-4 Month Project Aimed at profit projectAimed at profit project Specific targeted audienceSpecific targeted audience Even then it’s hardEven then it’s hard

Summary

What do you want, really?What do you want, really? What is the Data Warehouse all about?What is the Data Warehouse all about? Management Decision Making ProcessManagement Decision Making Process Role of the Data WarehouseRole of the Data Warehouse Major issues of the Data WarehouseMajor issues of the Data Warehouse What are people saying about Data What are people saying about Data

Warehousing?Warehousing? Typical applications of Data WarehousingTypical applications of Data Warehousing Case studiesCase studies Business benefits of Data WarehousingBusiness benefits of Data Warehousing What works?What works?

Thank You for Your Thank You for Your Time!Time!