Analytics The Widening Divide Mit Ibm Report

Neil Beckley, FSS Leader , IBM Growth Markets
Analytics: The Widening Divide

How companies are achieving competitive advantage through analytics
2009 IBM Corporation
What you will take away from this session
1 2 3
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Understand Why Analytics matters
Insight into the Business benefits that can be realised
Understand IBMs leadership in the BAO sector and how to engage
Table of contents
Introduction The analytics advantage in todays marketplace How analytics creates competitive advantage Two paths to transformation Roadmap for creating competitive advantage
Page 3
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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.
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
the use of analytics as a competitive differentiator in selected industries will explode. International Institute for Analytics - 12/3/10
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
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
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
Builds on the 2010 partnership study:
Analytics: The New Path to Value

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Key findings
Organisations are challenged with how to innovate for differentiation, grow revenues and reduce costs
Primary Business Challenges
Innovating to achieve competitive differentiation Growing revenue Reducing costs and increasing efficiencies Profitably acquiring and retaining customers Increasing operating speed and adaptability Managing regulatory compliance Managing risk or reducing fraud 10%
Top-line focused Internally focused
60% 50% 46% 44% 35% 14%
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
Primary obstacles to widespread analytics adoption
Lack of understanding how to use analytics to improve the business 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 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
38% 34% 28% 24% 23% 23% 22% 21% 21% 15%
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. 2009 IBM Corporation
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
In 24 months
Data visualization 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
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
Builds on the 2010 partnership study:
Analytics: The New Path to Value

Page 9 10/21/2011
Analysis by IBM and MIT SMR team
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
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Introduction
This study provides a compelling call to action for all clients 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?
3
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Table of contents
The analytics advantage in todays marketplace How analytics create a competitive advantage Two paths to transformation Roadmap for creating competitive advantage
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Findings
The ability to create competitive advantage using analytics surged dramatically in 12 months; the bottom-line impact is clear
Respondents who say analytics creates a competitive advantage
2011
Organizations achieving a competitive advantage with analytics are
58%
2.2x
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.
2010
37%
57%
increase
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Findings
Segmenting the data enabled us to examine how organizations use analytics to create a performance and competitive advantage Analytic sophistication segments
Aspirational
Limited users of analytics Generally depend upon spreadsheet reporting
2011
Experienced
Actively increasing analytic capabilities Expanding business intelligence foundations to broader, deeper analysis
2011
Transformed
Advanced analytics capabilities Insights influence behaviors and impact performance
2011
32%
34%
45%
46%
24%
20%
2010
2010
2010
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.
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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
2011
80%
65%
Transformed
2010
23%
increase
2011
63%
38%
Experienced
2010
66%
increase
2011
Aspirational
2010
5%
39%
decrease
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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
Transformed
organizations creating a competitive advantage are
70%
Experienced
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.
55%
Aspirational
34%
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Findings
Transformed organizations are creating advantage by intensely focusing on applying analytics in three areas of the business
Speed of decisions
Transformed
Enterprise risks
Transformed
Customers
Transformed
72%
Experienced
86%
Experienced
62%
Experienced
49%
Aspirational
6%
Aspirational
49%
Aspirational
22%
0%
34%
Percentage indicates those who exhibited an intense level of focus on a particular subject area.
Each respondents 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.
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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
Streamlining operational processes Managing supply chain or logistics Allocating annual budget Establish financial forecasts
Aspirational Experienced Transformed
Financial
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.
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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%
Enhancing customers overall experience

Customer
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
HR
Strategic
Operational
Financial
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.
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Table of contents
The analytics advantage in todays marketplace How analytics create competitive advantage Two paths to transformation Roadmap for creating competitive advantage
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Analytic competencies
Transformed organizations master three competencies to drive sustainable competitive advantage

Analytic Competencies
Manage the data Information management Solid information foundation Standardized data management practices Insights accessible and available Understand the data 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 Act on the data Data-oriented culture Fact-driven leadership Analytics used as a strategic asset Strategy and operations guided by insights
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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 Ability to capture, and aggregate data Culture open to new ideas Analytics as a core part of business strategy and operations Embed predictive analytics into processes Insights available to those who need them
78% 77% 77% 72% 66% 65%
Characteristics identified based on discrete factor analysis
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Table of contents
The analytics advantage in todays marketplace How analytics create competitive advantage Two paths to transformation Roadmap for creating competitive advantage
Page 23
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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
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Experienced organizations take either a data-centric enterprise path or an analytics-centric functional path to move towards Transformed Paths to transformation
High
Collaborative path
Transformed
Enterprise driven
Information management proficiency
Data-oriented culture
Specialized path
Governance approach
Low
Aspirational
Line-of-business driven Analytic skills and tools proficiency High
Low
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The two paths have contrasting strengths and weakness

Collaborative path Information management [
Collaborative efforts are underway to integrate enterprise data Moving towards enterprise-level information governance
Specialized path ] 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
Primarily uses scorecards and dashboards to make insights readily accessible and available Lacking predictive skills
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 guide future strategies and day-to-day operations Leaders open to new ideas
Page 26
Uses analytics to improve operational and financial metrics Struggles toWeak executive support find
Moderate
Level of 10/21/2011
competency:
Strong
Table of contents
The analytics advantage in todays marketplace How analytics creates competitive advantage Two paths to transformation Guidance for moving forward
Page 27
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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
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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?
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Recommendations
Key messages you should remember Three key findings
Organizations that use analytics to create a competitive advantage significantly outperform their industry peers 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
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Recommendations
Entry point
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 organizations business imperatives, and discuss how analytics-driven priority industry solutions can be leveraged to address them
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?
10/21/2011
3
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Appendix
Appendix
BAO BVA overview BAO Functional Assessment overview IBV BAO study assessment
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Business Analytics & Optimization (BAO)

BVA Portfolio Enhancements for Q4/Q1
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:
Link to all BAO BVA Enablement
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 clients existing architecture Define what might the project plan look like for implementing the proposed solution

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 2009 IBM Corporation

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. 6. 7. 8. 9. 10. 11. 12.
Define the Conceptual Architecture Design the Use Case Architecture Begin to define Logical Data Flows Build a Phased Plan for Implementation Define the To-Be Architecture Develop Conceptual Architecture with Product Mapping Complete Logical Data Flow Design 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
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
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Recommendations
Step 1: Assess your analytic sophistication (C-Suite)
Information management

Robust set of tools and talents
Analytics-driven organization
Transformed Experienced
Collaborative Specialized
Integrated, simplified information platform
Enterprise integration underway LOB-centric data management
Scorecards, dashboards Predictive analytic tools and skills
Driven by enterprisewide focus Driven by line-ofbusiness metrics
Aspirationals
Ad hoc data management
Spreadsheets and standardized reports
Analytics are not integral to strategy
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Recommendations
Step 1: Assess your analytic sophistication (Sr. VPs and LOBs)
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Step 1a: Competency assessment for Experienced organizations Observed competency levels
Collaborative Specialized
Information management
Solid information foundation Standardized data management practices Insights available and accessible
Analytic Tools and Skills

Skills developed as a core discipline Enabled by a robust set of tools Delivers actionable insights embedded in processes
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. Copyright Massachusetts Institute of Technology 2011.
Recommendations
Step 2a: Focus on improving your analytic competency levels

Information management competency
Establish a strong information foundation
1
Effective information governance
Challenging questions
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? How can you make sure everyone trusts the data used to drive insights and decisions?
Standardized data quality
Integrated, simplified information
What can you do to improve the consistency and accuracy of your information across the organization?
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
1
Skills nurtured as a core discipline
How effective is your organization at attracting and developing the analytic skills it needs?
Champions seed expertise
What incentives are in place for analytic talent to mentor others?
Robust tools to analyze, visualize Centralized expertise partnered with local analysts
How prepared is your organization to integrate emerging analytical tools? 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
1
Guiding strategy and operations
How can the leadership team better promote the use of analytics in decision making? How willing is your organization to adopt new ideas, founded on advanced analytics, which challenge a current strategic approach or tactic? Are your key executives visibly using facts to underpin their decisions? Are the same insights about customers including interaction history and organizational value -- shared with everyone who interacts with them?
Open to new ideas
Fact-driven decisions
Insights shared broadly
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 2009 IBM Corporation
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Neil Beckley, FSS Leader , IBM Growth Markets

Analytics: The Widening Divide

2009 IBM Corporation

What you will take away from this session

Understand Why Analytics matters

Insight into the Business benefits that can be realised

Understand IBMs leadership in the BAO sector and how to engage

2009 IBM Corporation

2009 IBM Corporation

Why analytics matter to our clients

2009 IBM Corporation

IBM Institute for Business Value

Builds on the 2010 partnership study:

Analytics: The New Path to Value

60% 50% 46% 44% 35% 14%

Organizational Data Financial

Organizations want to see insights more clearly and act on them

Increased or sustained value Decreased in value

IBM Institute for Business Value

Analytics: The New Path to Value

Analysis by IBM and MIT SMR team

2009 IBM Corporation

There are two paths to analytic sophistication

These findings chart the paths to analytic transformation

2009 IBM Corporation

2009 IBM Corporation

Organizations achieving a competitive advantage with analytics are

2009 IBM Corporation

2009 IBM Corporation

2009 IBM Corporation

2009 IBM Corporation

2009 IBM Corporation

2009 IBM Corporation

Enhancing customers overall experience

2009 IBM Corporation

2009 IBM Corporation

Transformed organizations master three competencies to drive sustainable competitive advantage

2009 IBM Corporation

Characteristics of a Transformed organization

78% 77% 77% 72% 66% 65%

Characteristics identified based on discrete factor analysis

2009 IBM Corporation

2009 IBM Corporation

2009 IBM Corporation

Information management proficiency

Line-of-business driven Analytic skills and tools proficiency High

2009 IBM Corporation

The two paths have contrasting strengths and weakness

Specialized path ] Information management [

Analytic skills and tools

Analytic skills and tools

2009 IBM Corporation

Three steps to client transformation

1 Assess your analytic sophistication 2

3 Tie approach together with an information agenda

2009 IBM Corporation

2009 IBM Corporation

Key messages you should remember Three key findings

2009 IBM Corporation

2009 IBM Corporation

2009 IBM Corporation

2009 IBM Corporation