Christer Johnson, Principal, Ernst & Young RReellaatteedd SSttoorriieess IBM: Firms Looking to External Data Sources to Elevate Analytics Value. Read the story ( http://data- informed.com/ibm-rms-looking- external-data-sources-elevate- analytics-value/) Domain Expertise Vital to Unlocking To Find the Value in Your Data, Stop Searching for It by Christer Johnson (http://data-informed.com/) | April 11, 2014 5:30 am | 1 Comments Mobile devices, smart phones, and devices used in customer transactions deliver some 5 billion gigabytes of information to corporate databases every day. Naturally, many corporate analysts and sales and marketing teams are inspired by the opportunities to mine the data to gain valuable insights about customer behaviors and preferences. Starting with a large pool of data, paradoxically, can actually make it harder to nd value. To nd it, companies shouldnt focus on how to derive value from data, but rather on the business decisions that the company can make more e!ciently and e"ectively. To use an explorer analogy, there is a reason explorers who set out with a clear goal or destination in mind tend to be the ones we remember. Columbus didnt set out to get value from the ocean. He sought an ocean route to Asia and ran ashore in the Americas along the way, ultimately gaining awareness of a large land mass between Europe and Asia to the west. Once a key business challenge has been identied and it comes time to generate value from big data, companies should proceed sequentially through the following three steps in the analytics value chain: Collect and manage data e"ectively 1. Perform sound and appropriate analytics 2. Use the results from steps 1 and 2 to drive the key business decisions 3. Before actually collecting and analyzing any data, however, it is important to set the stage for obtaining value by thinking carefully about what decisions you need to drive in step 3, and then work backward to map out the type of analytics and data that would support those decisions. Experience has shown us that the companies that derive the most value from data and analytics routinely start by asking, What decisions need to be made better and faster? In other words, they start with the end in mind and then gure out which analytics need to be performed and which data might be relevant. Obtaining value from analytics is about having the right insights, at the right time, and in the right place to make impactful decisions. It is not just about producing interesting information. Lets look at how one telecommunications company was able to shift its data collection and analysis approach to support this strategy. An analyst at the company developed a churn model with marketing data to predict the likelihood that customers would drop their accounts within 15 days. The model generated an accuracy rate of almost 85 percent, but the 15-day warning o"ered the company insu!cient time to prevent customers from leaving. As a result, the highly accurate model did nothing to JJooiinn tthhee CCoonnvveerrssaattiioonn (http://cta-service-cms2.hubspot.com /cs/c/?&cta_guid=74807e22-84ef- 4e77-baa9-1551b00e72d6& placement_guid=659de830-867b-439a-809e- 872d132cc6ec&portal_id=215445& redirect_url=El9oj%2B0vrUd6hNDNVQ%2B /yyFEuHEB6CO1bXw7W /8%2BY%2Bi0CnljQ3oqiHFaPVjSCplouKat%2BO9iXwE%3D& iv=ydENuXx3pWw%3D&hsutk=&canon=http %3A%2F%2Fdata- informed.com%2Funcover-value-data-stop- focusing-uncover%2F) (http://cta- service-cms2.hubspot.com /cs/c/?&cta_guid=e912b2ca-34"-4226-829c- 40a28d7bea07&placement_guid=ae05c418- e4a9-484a-898f-7ec0af3fdc05& portal_id=215445& redirect_url=poUj59lKV17Zko4TFxbDR7k8RIjcduAeKlxfBblDwwxXHPcI3 /547hd5jMQJCzidCJ /x97pv2NonImAy44Sh5zG0h /%2BFsA6UkDnqPybSZcd3TMtVWQo8BYiVK /3o0QBptm0Jp8viYUpHbE%3D& iv=9YEr6y8x5BE%3D&hsutk=&canon=http %3A%2F%2Fdata- informed.com%2Funcover-value-data-stop- focusing-uncover%2F) (http://cta- service-cms2.hubspot.com /cs/c/?&cta_guid=cbc6249e- 9d39-4ab8-951b-35cfaa5a04e6& placement_guid=8f45ef68-49df- 4455-8a88-5222115317da& portal_id=215445& redirect_url=MzJwdJJPXjl6aqfUA7qMvzmOGNDfmccnWfgV2UafyznbTq iv=i/X3WQhuqIc%3D&hsutk=&canon=http %3A%2F%2Fdata- informed.com%2Funcover-value-data-stop- focusing-uncover%2F) (http://cta- service-cms2.hubspot.com /cs/c/?&cta_guid=bdbf54b8-57e2-473a- 8104-6a5a3656fb3d& placement_guid=738a0fcd-e7aa-498b- 9d96-98f31426118c&portal_id=215445& redirect_url=CS4jwCy8%2Bo2kfA To Find the Value in Your Data, Stop Searching for It http://data-informed.com/uncover-value-data-stop-focusing-unc... 1 of 4 6/4/14, 11:36 PM Value of Machine and Mobile Data. Read the story ( http://data- informed.com/domain-expertise-vital- unlocking-value-machine-mobile- data/) Government Data Chiefs Find Varied Measures for Analytics Value. Read the story ( http://data- informed.com/government- data-chiefs-nd-varied-measures- analytics-value/) The Challenge of Aligning HR Surveys and Data with Business Value. Read the story ( http://data- informed.com/the-challenge- of-aligning-hr-surveys-and-data- with-business-value/) help the company achieve its desired goal of reducing attrition because the company didnt have time to make business decisions that could impact a customers choice to leave or stay. Several months later, a new analyst attacked the attrition problem from a di"erent perspective. He realized the goal was to predict, as soon as possible, customers at risk of leaving. The company required time to make decisions and take actions to keep the customer even if it meant predicting churn with a lower overall accuracy rate. By starting with the key requirement, that the company needed more advanced notice regarding customers likely to churn, the analyst realized he should explore new and di"erent analytical techniques and data sources. In relatively short order, the analyst decided to talk with the operations unit of the company to see if data existed on dropped calls and when the coverage dropped from 4G to 3G. The data was available, and he quickly gained access to it and was able to merge it with the existing customer data used to create the original model. Using the new data, the analyst built a model that identied, with only slightly lower accuracy than the rst model, customers likely to leave within 60 days. That additional lead time gave the company more time to take action and design programs and o"ers that signicantly improved customer retention. In other words, the company claried the necessary timing of the decisions it needed to make and then built an analytical model to meet that timing. One way to prioritize the business decisions that deserve a more rigorous analytic approach is to adopt a more exploratory data-mining approach centered on identifying what drives a specic business metric, such as revenue or cost. This approach di"ers from the traditional method of forming a (narrow) hypothesis and then looking to either prove or disprove that hypothesis. The traditional approach increases the chance of missing critical insights into what truly drives revenue or cost because the potential drivers are too narrowly dened. Similar to the di"erence between a multiple- choice question and a free-form answer, the former gives an answer but the latter allows for new thinking. One company, which recently analyzed its sales and pipeline data, had long held a hypothesis that revenue was directly related to pipeline. As it turned out, there was minimal correlation between pipeline and revenue because the company had no way to measure or represent the quality of each sales opportunity entered into the pipeline. As the company put more pressure on the sales force to expand the pipeline, sales resources began entering lower quality opportunities to meet the demand. Using exploratory data-mining techniques to identify which deals had a higher win probability, the company determined that the win rate when the competitor eld in a pipeline entry was left blank or unknown was close to 5 percent. That is much lower than the 30 percent win rate on entries in which the competitor eld was lled in. Thus, exploratory data mining helped the company rethink a long-held belief that encouraging sales people to expand pipeline is a key driver of sales. Subsequent analysis was designed to support a more nuanced approach to drive pipeline quality and to prioritize e"orts on the deals with the highest probability of winning. Once the company realized that pipeline was not strongly correlated with revenue, managements eyes were opened to explore other factors that drive changes in revenue. One of the factors they identied was price discounts o"ered at the end of the quarter. The company realized that 30 percent of its sales were tied to a product for which the price was not signicantly correlated with changes in sales. The companys previous emphasis on providing quarter-end discounts had trained its customers to wait until the last minute to receive the discounts the company o"ered. This analysis helped the company make better decisions about when to lower price and when not to lower price. Companies that can consistently nd the most e"ective ways to extract value from their data will be the ones positioning themselves to win in the global marketplace. Companies that dont approach data with an end goal of nding insights that help them solve specic business issues likely will nd themselves oating in an ocean of big data, wasting resources and, even worse, losing their competitive edge. Christer Johnson is a Principal within Ernst & Youngs National Advisory Practice (http://www.ey.com /US/en/Services/Advisory/Risk), Enterprise Intelligence, Analytics. He brings 20 years of experience leveraging advanced analytics and mathematical techniques to help his clients improve the e!ciency and e"ectiveness of business decisions and processes across industries including government, transportation, consumer package goods, healthcare, insurance, life sciences, and telecommunications. /Cua0kscaHvHl1c0sieHCkCqXEh4Aaszazl0jS36YJeu5PFoIxerbfZrZiwjG %3D%3D&iv=km9v6rL1NeY%3D&hsutk=& canon=http%3A%2F%2Fdata- informed.com%2Funcover-value-data-stop- focusing-uncover%2F) (http://cta- service-cms2.hubspot.com /cs/c/?&cta_guid=12cf3789-4e3a-47ba-b05b- b08b9d8e89c2&placement_guid=c23e3344- f4fa-4f06-9822-b8933756f120& portal_id=215445& redirect_url=fHqYmiIhBEekQfwAgwetmFia0mm3pUHXX2vW1dRayfUujS iv=uCoqHl%2BsJBE%3D&hsutk=& canon=http%3A%2F%2Fdata- informed.com%2Funcover-value-data-stop- focusing-uncover%2F) SSeeaarrcchh
MMoosstt PPooppuullaarr AArrttiicclleess Use Predictive Analytics to Improve the Customer Experience Take a Data-Centric Approach to Managing Your Unstructured Data Cincinnati Bengals Take a Moneyball Approach to Talent Evaluation Data Informeds Top 10 Stories of 2013 Can Big Data Grill the Perfect Burger? To Find the Value in Your Data, Stop Searching for It http://data-informed.com/uncover-value-data-stop-focusing-unc... 2 of 4 6/4/14, 11:36 PM (http://cta-redirect.hubspot.com/cta/redirect/215445/d22d61d6-"77-4565-867f-1a8c909bf112) Tags: analytics (http://data-informed.com/tag/analytics/), big data (http://data-informed.com/tag/big- data/), data management (http://data-informed.com/tag/data-management/), data science (http://data-informed.com/tag/data-science/) One Comment Sam Austin Posted April 17, 2014 at 6:10 pm | Permalink Bravo, this is spot on. Without questions to guide inquiry, and data that is collected, cleansed and segmented with a documented process, scrupulously mindful of its potential uses and limitations, data cant tell us anything that would justify the time and e"ort it takes to analyze it, and we can set little store by what it does tell us. Yet too many still seem to think that data analytics can answer all their questions without the necessity of formulating even one, and that some magic button must exist that will both reverse the ills of prior neglect and obviate the necessity of rigorous and consistent data hygiene. Stop the madness! Reply 1. Post a Comment Your email is never published nor shared. Required elds are marked * Comment Name* Email* Website Notify me of followup comments via e-mail Most Recent Posts Share 40
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