Data to Knowledge to Results

Review and Analysis of Paper by Davenport et al

Team: Something Different Myron Burr Kevin McComas Easwar Srinivasan Bill Winett

Data vs Information
Data : Measures, Transactions Knowledge / Information Profit maximizing product mix Parts per hour Billing rate Click through rate Profit maximizing bundling of solutions Individualized, targeted web pages

What are the Issues?

Background:
Firms are spending billions on IT applications ( ERP, POS scanners, web and e-commerce systems, and CRM) Generated billions of transaction records

Observation:
Very little data is converted to knowledge (less than 10% in studied firms)

Problem Statements:
Lost opportunities for improved results Unrealized business value from these investments

Proposed Approach to Resolution

Davenport et al, researched over 100 companies Developed a model for building analytic capability Demonstrated how to realize results from this capability

Framework

Strategy
What are our core business processes? What key decisions need analytic insights? What information matters?

Clear strategy leads to good measurements and therefore good data gathering

Context
Process needs a foundation Required ingredients for success Grounded in
Firms strategy (and the information needed to execute this strategy) Skills and experience of staff

Organization and culture Data-oriented / Fact-based Technology and Data

Skills and Experience

Key Roles
DB Administrator: loads, organizes and checks data Business Analyst / Data Modeler Decision Maker / Outcome Manager

Skills: Depth depends on above role

Technology Skills Statistical Modeling and Analytic Skills Knowledge of the Data Knowledge of the Business Communication and Partnering

Without skilled staff, IT applications are a waste of $$$.

Organization and Culture

62% of managers: organization and culture biggest barriers to getting significant return on IT investment Related to skills and experience Value Data-oriented / Fact-based analysis and decision making Organization of analytics staff
Centralized or decentralized depends on:
Sophistication of the analysis Amount of local knowledge needed Cultural orientation of the firm

Technology and Data

Specific hardware and software, networking and infrastructure Transaction versus analytic approach Integration of analytic technologies Requires human insight; cant automate 60 to 80% of cost in cleaning up and integrating data

Transformation
Data to Knowledge
Analytic and Decision Making Process
Depends on experience and relationships of analysts and decision makers Working closely with decision makers to understand the questions:
Standard, highly-structured: Inventory? Sales? Semi-structured: Optimum inventory level? Production versus forecasting? Unstructured: customer segment migration?

An evolving and iterative process Use decision audits to evaluate effectiveness of process

Outcomes
Desired financial outcomes (greater profitability, revenues, or market share) may require changes in:
Behaviors: e.g., cost control Processes and Programs: e.g., development of new marketing initiative

Extensive communication may be required Implementation of decisions will determine result.

Application Methodology
Flowchart
High quality transaction data? No Implement new systems and data architectures Yes

Supportive senior executives?

No

Launch small pilots and educate managers

Yes

Broad need in organization?

No

Launch analytical initiative in single area

Yes

Analytical skills and culture in place?

No

Launch analytical organizational change program

Yes Integrate analytical capabilities into business

Implementation Options
Business needs to dictate extent of implementation and level of focus

Examples

Source: http://www.cs.csi.cuny.edu/~imberman/DataMining/KD D%20beginnings.pdf

More Results
Earthgrains eliminated 20% of products, increased profits by 70% Owens & Minor won $100M contract by showing customer how to save money Wachovia Bank improved performance by modeling branch locations Harrahs Entertainment plans to use customer data to increase cross-selling Fleet Bank saved >$12M encouraging customers to change from branches to ATMs

Outcome: Increased Profitability

Cumulative Profitability Dependence on Route Complexity
50 45
Cum. Profit ($Millions)

40 35 30 25 20 15 10 5 0 0 5 10 15 20 Number of Routes 25 30 35 40

Other Applications of Data to Knowledge to Results

Source: http://www.cs.csi.cuny.edu/~imberman/DataMining/KDD%20beginnings.pdf

Take-Aways
To get the most from your IT investment: Hardware, software, networking and infrastructure only the starting point You need to commit significant skilled human resources Develop sophisticated analytic processes Instill culture that values data and creating information Make decisions on info and then execute

Additional Resources
SAP.com Oracle.com Google Analytics Accenture.com Spotfire.com i2.com Salesforce.com cio.com b-eye-network.com juiceanalytics.com WonderWare.com

Questions?