Future Skills YOUR STUDY AND CAREER GUIDE FOR SKILLS OF THE NEW ECONOMY
The World of work is changing! “Prior to the start of the Information Age in the late 20th century, organisations had to collect data from non-automated sources. Businesses then lacked the computing resources to properly analyze the data and, as a result, companies often made business decisions primarily on the basis of intuition.”
INDUSTRIES Aerospace Automotive Banking Communications Education Energy & Utilities Financial Services Government Health Insurance Healthcare Providers Hospitality & Entertainment Insurance Life Sciences Manufacturing Media Retail
Gophers burrow through life without seeing the havoc they create. They can’t help having tunnel vision. But you can. With proven business intelligence and analytic software from SAS. www.sas.com/gophers SAS and all other SAS Institute Inc. product or service names are registered trademarks or trademarks of SAS Institute Inc. in the USA and other countries. ® indicates USA registration. Other brand and product names are trademarks of their respective companies. © 2007 SAS Institute Inc. All rights reserved. 00000US.0407
SKILLS FOR THE NEW ECONOMY
“We are awash with information. Sometimes we complain that all of this information brought to us on Blackberries, instant messages, voicemails, online forums, and on-demand TV, conspire to keep us in a state of persistent partial attention. It’s easy to see that the tools for innovation, for collaboration, and for creativity, are more powerful than ever. We just need the skill sets to take control of them and use them, not be used by them.” Dr Jim Goodnight, CEO/Founder SAS Institute
Contents Case Study: Mark Mulvaney Department for Work & Pensions Page 2 Business Intelligence what’s it all about. Page 3 Intelligence, Creativity & Courage: Essentials for Tomorrow’s Business Leaders. Page 4 History of Business Intelligence. Page 8 Case Study: Maite Salazar, Internal Consultant RBS, PHD Student / University of Edinburgh. Page 10
The changing face of industry. Page 12 Case Study: Alison Potter, Vice President, Global Head of Profitability, JPMorgan Asset Management. Page 14 So you want to be a Business Analyst? Page 15 The AA – reaping the benefits of SAS in Marketing. Page 15 The Future World of Work Competing on Analytics. Page 16
CASE STUDY: Mark Mulvaney Information Systems & Infrastructure Architect Department for Work & Pensions - Information Directorate Mark discusses DWP’s use of analytics to better serve the public What does your organisation do? In DWP business intelligence is used to understand what different parts of the Department are doing, what its customers are doing and to make efficiencies. Our directorate provides a service to other directorates and we provide the systems and the data to marshal the department’s analytical capabilities, whether it’s operational research or social research or statistics or economics, it’s mostly done on our systems. We work on behalf of housing benefit, local authorities, the Crown Prosecution Service and we get HMRC data and we merge it all together. We also deliver analytical intelligence, using mostly SAS, and we have about 500 to 600 SAS users. What would be a good example of the type of work you do? A good example would be The Pension Service. They are at the leading edge of customer intelligence. They’ve won industry marketing awards because what they’ve done is so effective. Just like a public company, a marketing company or a company like Tesco, would analyse your spending characteristics and your financial information and aim tailored products towards you. We do a similar sort of thing. We have pension contributions and savings information, so instead of people having to come to us we go to them and say we think you’re entitled to this, please fill this form in. This is leading edge and It’s all part of the government’s agenda of reducing poverty by trying to make sure people get what they are entitled to using the data and information based decsions rather than waiting for them to come to us.
Can you tell us a little bit about your academic background? I did a computer science BSc at the University of Greenwich but now I’m more of a business analyst as well as an information systems analyst. How did you first come to understand the requirement in the DWP for analytics? I joined as an IT programmer . Did you have any analytics skills/training before you obtained your current role? When I joined, DWP had already made a choice that analytics was an important as well as more information based decision making. The part of the organisation I joined at the time, The Analytical Services Division as it was called in those days, was about 300 people . Do you think that the type skills you have obtained provided you with any advantages in getting jobs or promotions within the Department? Definitely. If I hadn’t got them I wouldn’t be here now, so it was a really good choice. Our directorate is generally driven by people who have done some sort of numerate degree, such as economics or statistics . Do you feel that the use of analytics is going to become more important in the future world of work? Oh, definitely. I think that people are realising the value of what they can get out of information. A private company wants to maximise profits, so making efficiencies in their processes and accurately based costing etc. It’s actually the skills from marketing, like the stuff that the Pension Service does, using
our analytics tools and our data that’s amazing and it’s really helping the public. It’s impact on national poverty and pensioner poverty are the biggest things and I think the Pension Service has done a lot to help this using, analytical tools and business intelligence. The key for them was really the understanding how to use business analysis and data analysis skills and tie them together. In the old days a techie was a techie. Now you need to be multi skilled. The thing is there’s a realisation within government that we need information to make decisions: We are looking at things like how do chil-
dren get to school, looking at the eco impact of living a long distance from schools and the related traffic situation. We know when people go into hospital and when people leave and come back into the country and we can start tying up data and know where we can correctly award benefit. It impacts all our lives. If you look at the Pension Service, it’s being done by people who understand the business and information decision making. It’s understanding business processes and it really doesn’t matter what business, whether it’s a government department or a private company. Having business aptitude, I think that’s the most important thing. n
SKILLS FOR THE NEW ECONOMY
Business Intelligence What’s it all about? Business intelligence is becoming an important strategic tool for business management. Business intelligence software offerings can help companies gain insight into their business, make better decisions and ultimately improve business performance. But, when it comes to acquiring business intelligence, many small to medium-sized companies are often at a disadvantage. Compared to larger companies, they may lack the resources and the appropriate systems and software to process their data and turn it into meaningful business insight. Or the systems and methods they use cannot keep pace with their company’s growth and changing needs. And this can limit their ability to optimize performance and compete effectively.
What Is Business Intelligence? When people think of business intelligence they may think of data, information, reporting, analysis and on line analytical procession (OLAP) cubes. But over the last several years, business intelligence has become much more than that. Companies are trying to make use of the enormous amounts of data and information generated by their ERP systems and other applications, and business intelligence is now an essential part of strategic and tactical business management. In fact, a recent survey of 1,400 CIOs by Gartner, an independent IT research firm, reveals that business intelligence has surpassed security as the top technology priority in 2006. Business intelligence is becoming a strategic tool to help people lead, measure, optimize, discover, and innovate in order to change the landscape of their organization. The challenge lies in being able to access the right information at the right time and
transform it into insight, knowledge and smart decisions. And this is how business intelligence software can help. In terms of business intelligence offerings – business intelligence can be described as any technology that enables companies to gain insight into their business (and their data) to better understand what is going on. In this context, business intelligence encompasses all solutions, tools and features which enable users to gain insight to make better decisions about current and future activities. When it comes to acquiring business intelligence, many small to medium-sized companies are often at a disadvantage. Compared to larger companies, they may lack the resources and the appropriate systems and software to process their data and turn it into meaningful business insight. Or the systems and methods they use cannot keep pace with their company’s growth and changing needs. And this can limit their ability to optimize performance and compete effectively.
Better business performance The ability to access, use and share data and information in an efficient and relevant way helps improve business performance. Business intelligence capabilities empower employees to: • Align day-to-day operations with overall company strategy and objectives • Identify and understand the relationship between business processes and their impact
on performance • Access information relevant to specific user roles and responsibilities • Analyze data from documents and spreadsheets in an easy way • Gain contextual insight into business drivers • Monitor the vital business indicators that are needed to move an organization forward such as: • Current status and trend of essential financial
ratios • Effectiveness and profitability of sales channels • Crucial operational metrics In short, business intelligence helps companies gain a comprehensive and integrated view of their business and facilitate better and more effective decision-making. n
Goldfish have a memory span of 3 seconds. They can’t even see the past, much less the future. But you can. With proven business intelligence and analytic software from SAS. www.sas.com/goldfish
INDUSTRIES: Business Intelligence gives you the information when you need it, in the format you need. By integrating data from across your enterprise and delivering self-service reporting and analysis, IT spends less time responding to requests, and business users spend less time looking for information, so more time is spent on making better, more informed decisions.
Aerospace Automotive Banking Communications Education Energy & Utilities Financial Services Government Health Insurance
Healthcare Providers Hospitality & Entertainment Insurance Life Sciences Manufacturing Media Retail
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INTERVIEW: Dr. James Goodnight
SKILLS FOR THE NEW ECONOMY
Intelligence, Creativity & Courage: Essentials for Tomorrow’s Business Leaders Education is near and dear to my heart. As you’ll soon discover I have some pretty strong opinions about the hard work we have to do to bring our schools and universities in the UK and abroad up to speed. Education opens a pathway to possibilities for students, communities , and nations, maybe even the world. We neglect it at our own peril. Dr Jim Goodnight, CEO/Founder SAS Institute, at the International Confernece and Annual Meeting of AACSB/EFMD in Paris, France, 2006. However, what you are most interested in today is Business Education, and as a businessman who leads a thriving international company I’d like to take a look at where we stand today and what we might need to prepare for on the road ahead. Ironically, the size and scope of the change at hand is actually making the world small. Because today’s world is a deeply connected world. Our high-speed Internet infrastructures and our increasing international interdependence are making doing business and living life very different. What I’d like to offer here today is a sense of the scope of this global transformation, the skills that will become essential as a result, and a call to action for schools and universities whose purpose it is to prepare us to earn and learn in this new, fastpaced, internationally interconnected world. Take SAS for example - we now have more than 10,000 employees in 425 offices in 51 countries around the globe. The staff in our worldwide offices collaborate on everything from sales to marketing to research and development. Our R&D groups are increasingly operating in 24-hour mode, with developers in the US, Germany, Denmark, India, China, and Japan, driving innovation and creative exchange around the clock. We are definitely not alone in using this strategy. Indeed it’s probably time for us all to quit talking about companies outsourcing jobs. What we should be talking about is the internal and external world sourcing of jobs, leveraging our diverse global assets in an elegant array of physical, fiscal, and human-capital infrastructure. Moreover, we are awash in information. There are now literally billions upon billions of records, hundreds of millions of databases, untold number of opportunities to learn more about our companies, customers, and communities, from the smallest of
transactions and interactions. Today’s connected cohorts, from business leaders to teenage massively multiplayer online gamers, have more information at their fingertips to tackle their challenges than ever before. And while sometimes we complain that all of these connections, all of this information, brought to us in Blackberries, instant messages, voice mails, online forums, and on-demand TV, conspire to keep us in a state of persistent partial attention, it’s easy to see that the tools for innovation, for collaboration, and for creativity, are more powerful than ever. We just need to develop the skill sets to take control of them and use them, not be used by them. Richard Florida, the award-winning author and economist from George Mason University, persuasively posits that while some may argue that these connections and information stores are “flattening” the world, it actually is becoming more “spiky.” What he means is that the ability to take advantage of connections and information is not even. Some countries, counties, cities, provinces, and places are embracing the change at hand at a much faster pace. Their acceptance puts them out front in a very important race - the race for creative talent. Richard has written a couple of compelling books on this topic: The Rise of the Creative Class and The Flight of the Creative Class. His premise is that the change we are seeing is a transformational shift from the agrarian age to the industrial age to the knowledge age, or what he calls the creative age. Moving into the creative age means leveraging technology, talent, and tolerance to drive success. It also means fundamentally overhauling our societal infrastructures, things like schools, public policy, and tax systems to get there. However, some companies and communities are much better at this than others. The people in some places enjoy the mixture of music, art, science, technology
Dr Jim Goodnight, CEO/Founder SAS Institute
and broader cultural acceptance, because it gives rise to powerful economic and personal development. Other people in other places are not as ready, willing, or able to move in this direction. The challenge is that in a connected world creative class members quickly move to places that allow them to flourish, be they companies or countries. Last year Richard and I wrote an article for Harvard Business Review called Managing for Creativity. In the article we used SAS as an example of a company that deeply believes in harnessing the power of creative capital. Our company’s business is deeply dependent on the creativity of people. So much so that we take the retention of talent as a leading indicator of success. While many are busy hiring headhunters to find talent, we focus on creating the best kind of environment possible to retain talented people, people who already know our technology, customers, and challenges. By engaging our best, allowing them to creatively contribute to our success, empowering them and holding them accountable, we foster an environment that becomes a talent magnet. Countries are moving quickly to use the same kind of strategy. They are taking advantage of both the connected and spiking trends to draw talent and drive success. For example, Canada
“We are awash with information. Sometimes we complain that all of this information brought to us on Blackberries, instant messages, voicemails, online forums, and on-demand TV, conspire to keep us in a state of persistent partial attention; It’s easy to see that the tools for innovation, for collaboration, and for creativity, are more powerful than ever. We just need the skill sets to take control of them and use them, not be used by them”
PROFILE: Base 3 Systems
SKILLS FOR THE NEW ECONOMY
PROFILE: Base 3 Systems
A Career in Analytics with SAS Software? ®
Richard (The MD)
At the core of the different interpretations of analytics is data. With companies gathering a vast amount of information about their customers and business processes, the key challenge for many businesses is how to use this information to inform and improve the decisions they make. Information is power, but only if it is understood and utilised. For me analytics is concerned with assisting businesses to correctly and accurately interpret their information to achieve competitive advantage. This is an exciting area to be involved with and the purpose of this article is to offer an opinion of how to pursue a consultancy career in this space with Base 3 Systems. An alternative route to analytics per se would be to target general analytics roles with industry leaders, many of which will have SAS software as the analytics tool of choice. However, this article is purely about pursuing such a role at Base 3 Systems, and whilst this is biased accordingly it is my belief that this commentary is more generally applicable. Base 3 Systems is a professional services company and a member of the SAS Alliance Consulting Program. We are the largest independent consultancy specialising solely in SAS software within the UK and have a pedigree of delivering business insight to our clients with this technology. Key to our success is a strong understanding of our clients’ objectives and operational processes in conjunction with a high degree of technical knowledge around the software we use and supplementary systems. We have a reputation of delivering high-quality answers to business problems and questions by exploiting the power of SAS software. We recruit continuously through the year for entry-level consultants. In 2007 Base 3 Systems had five in-takes onto its Advance Programme providing 50 opportunities for graduates and post-graduates to kick-start a career within analytics. This track into analytics begins with a seven-week intensive training course covering the core technologies of SAS software and delivers the key skills required by our consultants. Our recruitment process is a fairly conventional three stage process: CV review, telephone interview, face to face interview and aptitude screening. Assuming your CV has made it past the first stage you will then receive a telephone call. This is an informal conversation when you will be told more about consultancy at Base 3 Systems. What I will be looking for here is confirmation that you understand what you are applying for, that you have pre-requisite levels of energy and enthusiasm and that you can communicate effectively. Advance notice will be given, my advice is to prepare. The final stage will be a face-to-face interview and a series of aptitude tests to examine your suitability in more detail. The aptitude tests provide insight into your analytical abilities, quantitative skills, problem solving and logical thinking. The interview seeks to establish your communication skills and presents an opportunity to demonstrate, through examples, the qualities and behaviours we expect to be present in all of our consultants. Obvious as it may be, the best advice I can give you for
Written by Richard Skillicorn, Michael Judge, Gurbinder Singh and Paul Fairbairn. getting through an interview stage is to think of how you will convey your suitability for the role. Based upon the results of the interview and tests you may then find yourself on our training programme.
Michael (The Training Manager)
The Advance Programme is a classroom based intensive seven-week course covering SAS software, delivered by our experienced in-house staff, and designed to engage and stimulate inquisitive minds. The level of training is unrivalled in the industry, both in quality and quantity, and is certainly not for the faint hearted. Determination and commitment are a prerequisite. You will be put through your paces in learning and understanding technical content, and applying this knowledge to various scenarios in the form of real-world case studies. Continual assessment throughout the entire programme enables you to develop into effective consultants. Following completion of the Advance Pro-
gramme, you will be placed into client facing roles across the country, applying the knowledge you have developed to genuine business challenges and beginning the journey towards achieving your career goals and objectives.
Gubby (The Mathematician)
Having graduated with a Mathematics degree at the University of Cambridge in 2006, I went travelling to India. Back in the UK I taught mathematics and science to pupils aged from 11 to 18. Whilst teaching I was inspired to continue my own learning and took the opportunity offered by Base 3 Systems. Shortly after completion of the challenging training programme I was assigned to one of Base 3 Systems’ clients in the financial services sector. Within the first week I was amongst a team of analysts and attending meetings, setting me up with my first projects and utilising the skills developed at Base 3 Systems’ HQ. Only three months into my assignment and my first set of analyses were used to make business changing decisions, and I had participated in team building pursuits such as a walk to the summit of Snowden, which helped fully integrate me into an existing team.
Paul (The Physicist)
I graduated in 2004 from the University of Durham with a degree in Theoretical Physics which put me in good stead for a computer based analytical role. My main motivation for applying to Base 3 Systems was its reputation for excellent training and the opportunities it offered by working with leading business sector companies. The training program I underwent was extremely detailed and I found myself to be more than prepared for any analytical challenges that were to confront me when I was placed in my current role in the financial sector. I have been responsible for campaign running and have also had the opportunity to learn from and work with people from fields such as risk, marketing, marketing analytics, decision science and finance. I consider the help, tuition and continued support that Base 3 Systems has given me to be invaluable; their assistance has allowed me to achieve an excellent start in a role that I find both rewarding and enjoyable. SAS and all other SAS Institute Inc. product or service names are registered trademarks or trademarks of SAS Institute Inc. in the USA and other countries. ® indicates USA registration.
Base 3 Systems is an independent software development consultancy and Alliance Consulting Partner of the global software vendor SAS®. Since our inception in 1996 we have provided world class solutions using SAS software for our blue-chip clients across a number of industry sectors. We are seeking a number of graduates / post-graduates to join us as entry-level consultants. Prior to deployment with one of our clients you will undertake a seven week training programme. This will be conducted at our offices in the Yorkshire Dales, building skills in core technologies underlying SAS software and covering foundation skills around systems analysis and design necessary for your career. Our consultants are self-driven, strong communicators and exhibit excellent analytical abilities. Typically they will possess a degree in mathematics, statistics, economics, computing, a business related subject or a primary science. However, choice of degree is not a key requirement. Core to success is having a logical, inquisitive mind and an ability to apply knowledge to solve real-world problems. We offer a superb working environment, an attractive salary and an unparalleled level of training in SAS software and systems analysis techniques. If you are a team player, relish the thought of a career where every day is different and want the opportunity to achieve your full potential then apply by e-mail, attaching a covering letter and current CV, to firstname.lastname@example.org Please mark the subject matter of your application “TX001”, FAO Karen Tweedley. Note that applicants must possess a European Union passport and/or be eligible to permanently work within the United Kingdom. Base 3 Systems Limited, The Low Barn, Beamsley, Skipton, North Yorkshire, BD23 6HJ. Tel: 01756 718080. Fax: 01756 718087 E-mail: email@example.com Website: www.base3.com
INTERVIEW: Dr. James Goodnight
SKILLS FOR THE NEW ECONOMY
“In times of drastic change it is the learners who inherit the future. The learned usually find themselves equipped to live in a world that no longer exists.” leverages its education system to bring in the best and brightest and then encourages them to immigrate. India and China are no longer talking about their ever-strengthening math, science, and engineering programs as the main strategy to stop their brightest stars from studying and living abroad. They now want to build up their “creative” infrastructures to support innovation and entrepreneurship as a means to keep their stars shining at home. Last year in his annual address to the country, the Education Minister of Singapore championed an in-country creativity campaign driven by education. Their slogan is “Thinking Schools, Learning Nation” and fostering creativity and driving innovation is their winning ticket. Given the scope of the change at hand, from connecting to spiking, what are the skills our students need? As educators, particularly business educators, to what end do we prepare curricula, co-ops, and classes, given the world these students will likely face? I want to make the case for at least three essential skills – intelligence, creativity, and courage. There is something about the confluence of these that holds the promise of making a difference for our students, communities, and countries. By intelligence I’m not using the classical academic definition that requires some kind of IQ test. I’m also not talking about multiple intelligences. Please forgive the generality of the term, but what I’m talking about is the tough-minded tools for living and learning. I’m most interested in the basics - the ability to take information, assess its sources, synthesize it, analyze it, and use it to make decisions. More and more business schools are looking to build these broader skill sets in their students’ use of information - from data-mining to analytics to decision making. It’s also about the ability to learn how to learn, to embrace continual learning. As Eric Hoffer, a 20th century American philosopher noted, “In times of drastic change it is the learners who inherit the future. The learned usually find themselves equipped to live in a world that no longer exists.” For example, SAS swims in pools of information. We can do amazing things with massive amounts of data. I’ve been personally working on a project to use our multi-threading capabilities to analyze billions of records to predict customer profitability in a large bank. While we might be able to process these data in minutes, there’s a real problem. If we don’t have business leaders who understand what the data mean, have a handle on what questions they are trying to answer, or know how to apply the results, all of this work is meaningless. You see there is no such thing as data-driven decision making. It’s analysis-driven deci-
sion making that really makes a difference. It’s a combination of curiosity and capability that will conquer. The January edition of Harvard Business Review referred to this skill set as the ability to “compete on analytics.” The phrase was drawn from the work of Tom Davenport, a Distinguished Professor at Babson College, who analyzed a host of companies, from Amazon.com to Harrah’s Casino to Marriott Hotels, who are leveraging analytical intelligence skills to make a major difference in how they compete and win in the marketplace. Tom makes the case for analytical intelligence in pretty strong terms. He went as far as to posit that “analytical talent may be to the early 2000s what programming talent was to the 1990s.” Some would argue these skills have always been essential for science, technology, engineering, and math education. To reach the highest levels of each you need to be able to analyze data, learn, and adapt. But now these skills, because of the daily processing of massive amounts of information in almost every industry, are essential in the business world as well. Remember, we are continuously connected - information is ubiquitous and the ability to process that information to serve customers, improve products, or streamline operations, may be the difference between success and failure. Now take a minute and think about this. I challenge you to look at your standard MBA curriculum and ask, “Is this set of courses and experiences preparing our students for a world increasingly driven by deep analytical intelligence and evidencebased decision making?” I’ll let you answer the question for your school or university. There are already some good examples of universities and colleges, even high schools, that are beginning to weave analytical intelligence more directly into their programs through our Global Academic Program. For example, in the US the University of Memphis offers a rigorous undergraduate certificate in data analysis and programming using SAS, which makes perfect sense as FedEx is a power user of analytics and prefers to hire from their hometown student pool. The University of Connecticut is weaving data mining and analytics into their business programs, particularly because GE is next door. Similar programs are underway at the Grenoble Ecole de Management in France, the University of Los Andes School of Management in Colombia, the University of New South Wales in Australia, Oxford Saïd Business School in the UK, and a host of others. But intelligence is not enough. All science and no art is dangerous. We have to think about creativity as well. And as Florida argues, every person has a creative or artistic side. It is the unleashing of that creativity in the context of analytical intelli-
gence that holds powerful promise. At SAS we have developed an idea called the Information Evolution Model to help organizations think about how they use information. The model has five levels, each more developmentally mature than the last. Level one is Operate, where individuals who have specialized skills are the keepers and processors of information. Level two is Consolidate, where departments or teams begin consolidating and sharing information to mine the past and report on the present. Level three is Integrate, a bold step forward, where the organization begins pulling their information together across the entire organization. Level four is Optimize, where they finally begin using predictive analytics and higher-level skills to discover the best ways to operate. However, level five is the stage of the model toward which we should strive. Level five is called Innovate. It’s where we finally combine the science of analytics with the art of creativity. This is where the creative spark meets the fuel of information to transform operations. When we have business leaders with the intelligence to understand, synthesize, and analyze their environment, coupled with the creativity to find new and novel solutions and strategies, we are almost there. The final step, however, may be the hardest. We need leaders with the courage to do something with the information, analysis, and creativity at their fingertips. You see, our Information Evolution Model points to this challenge when we argue that it is the people, processes, and culture that are the hard part of the equation. We can have the best technology, along with all the intellectual and creative capabilities, in the world. However, the hard work begins in boldly engaging difficult conversations, involving broad constituencies, and driving toward thoughtful solutions. We can know that our business will fail without a hard turn in R&D, change in sales strategy, or a new approach to expenses. We can know that a proposed solution may transform our country’s tax code or end fraud in our healthcare programs. However, if we don’t have the courage to take on the hard, sometimes painstaking work of engaging, involving, and transforming our companies and communities, it is all for naught. You may even have the answer to world poverty but fail to convince the right agencies and world powers, and absolutely no one is saved. I don’t know how you teach courage in your programs. Maybe it’s best taught with case studies or mentoring. All I know is your students will need it if they want to make a difference. Make no mistake about it - courage is necessary to calm the caustic cynics and temper the true believers that always dominate the conversations surrounding change. Courage is necessary to champion new and novel solutions, to build a reasoned center of thoughtful critics and careful advocates to take up the banner of transformation. This is where I am with schools and universities - we are in a time where we need massive transformation to take on new challenges. And the chorus of those who see it is getting louder. Now we need the courage to do something about it. And the challenge is not a uniquely American one. While US higher education is often pointed to as the cream of the crop, the truth is that it is a handful of our 3,000 universities that fit that profile. Most of our schools and universities are using an industrial factory model on an agrarian calendar trying to meet the needs of an information age. We are trapped in old models designed for a very different time. Our arguments are too often about finding funding rather than fundamentally redesigning the educational system. We expend too much energy testing the outcomes of outdated models and too little energy trying new technologies. We are probably not alone in this, but we seem to have an affinity for pouring more and more money into already failing schools. It’s as if we think that more money will magically make boring lectures and dusty chalk boards really come to life. Our education leaders still don’t accept that there is something fundamentally different going on. In the age of the X-box and Play
INTERVIEW: Dr. James Goodnight
SKILLS FOR THE NEW ECONOMY
At SAS we have developed an idea called the Information Evolution Model to help organizations think about how they use information. The model has five levels, each more developmentally mature than the last. Level one is Operate, where individuals who have specialized skills are the keepers and processors of information. Station, in the age of massively multi-player online games, with kids playing with peers from all over the world, standard strategies just aren’t going to work. We cannot simply try harder at an outdated strategy. It is painful to watch. That’s why we decided to start Cary Academy. Cary Academy is a private day school, grades 6-12, located right next to the SAS world headquarters in Cary. It is designed to do things very differently. We have more computers than kids, we have faculty that are challenged to be innovative, and we have students that push the boundaries of creativity and innovation. The teachers and learners are free to unleash their love of collaboration, technology, and innovation in the classroom and in online venues as well. Kids operate in technology studios, design websites, and engage in powerful project-based learning. It is inspiring to watch. And I know we are not alone. There are a host of innovators worldwide who are challenging the status quo to transform their education systems. The Bologna Process here in Europe is trying to open access and improve higher-education transferability between EU countries. The emergence of community colleges in China is making adult education more accessible and driving the rise of the middle class. I saw an example last year of leaders using online fundraising to raise money for rural schools in Brazil, which is now bringing resources to remote schools nestled deep in the rain forest. But progress is still too slow and these examples are far too isolated. For the most part we are still facing tomorrow’s world with yesterday’s schools. We need to take a deep breath and look at all of our policies, programs, and practices in our education systems and ask the hard questions about whether or not they are improving or expanding learning, and more importantly, how do we know? As Richard Florida argues, this education transformation must resemble the one we went through in the 19th century as we embraced the industrial revolution. As we made that economic transformation we fundamentally transformed education. Countries that wanted to compete in the industrial economy founded and funded secondary schools, tertiary schools, community colleges, and adult-training resources. And as the creative economy emerges we need to ask what now should we initiate and fund? It’s a small world, or at least smaller than it used to be, and creativity is a commodity, with talent moving to inviting environments like moths to a flame. And difficult challenges face us in a great period of societal and economic transformation.
It’s clear that we need your help, as educators of the next generation of difference makers. We need your help to prepare intelligent, creative, and courageous leaders prepared to face our challenges, build our economies, lead our companies, and transform our schools. Put simply, with your best we can successfully take on even the worst of challenges on the road ahead. But to do these big and bold things we have to harness the collective capacity of the next generation. We have to engage them and hold them to a higher standard. To begin we have to first see the change in our midst. To many of you it may seem so obvious. But some in our circles may need to go through this in stages, somewhat like Elisabeth Kübler-Ross’ study of death and dying. I’m sure you can hear it in their comments: • Denial: There’s nothing new here.
• Anger: I hate all this change, and I’m NOT going to take it sitting down! • Bargaining: OK, I’ll change a little, but I’m not throwing out the baby with the bath water. • Depression: Maybe I should retire? • Acceptance: OK, I can do this, Let’s try it a new way. Regardless of the process, we need the courage to walk through this jungle of transformation, because it’s the right thing to do for our students, our communities, our nations, and our world. In this time of drastic change we need to work together as education, government, and business leaders to prepare a new generation of learners, so they can “inherit the future.” Let our legacy be their learning.
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HISTORY OF BUSINESS INTELLIGENCE
SKILLS FOR THE NEW ECONOMY
History of Business Intelligence Prior to the start of the Information Age in the late 20th century, businesses had to collect data from non-automated sources. Businesses then lacked the computing resources to properly analyze the data, and as a result, companies often made business decisions primarily on the basis of intuition. As businesses started automating more and more systems, more and more data became available. However, collection remained a challenge due to a lack of infrastructure for data exchange or to incompatibilities between systems. Analysis of the data that was gathered and reports on the data sometimes took months to generate. Such reports allowed informed long-term strategic decision-making. However, shortterm tactical decision-making continued to rely on intuition. Thus we have business intelligence, a term and a definition that date to a seminal October 1958 IBM Journal article by Hans Peter Luhn titled A Business Intelligence System.
Luhn wrote, In this paper, business is a collection of activities carried on for whatever purpose, be it science, technology, commerce, industry, law,
government, defense, et cetera. The communication facility serving the conduct of a business (in the broad sense) may be referred to as an intelligence system. The notion of intelligence is also defined here, in a more general sense, as “the ability to apprehend the interrelationships of presented facts in such a way as to guide action towards a desired goal.”
In this paper, business is a collection of activities carried on for whatever purpose, be it science, technology, commerce, industry, law, government, defense, et cetera.
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SKILLS FOR THE NEW ECONOMY
“Business intelligence has now become the art of sifting through large amounts of data, extracting pertinent information and turning that information into knowledge from which actions can be taken.”
In modern businesses, increasing standards, automation, and technologies have led to vast amounts of data becoming available. Data warehouse technologies have set up repositories to store these data. Improved Extract, transform, load (ETL) and even recently Enterprise Application Integration tools have increased the speed of collecting the data. OLAP reporting technologies have allowed faster generation of new reports which analyze the data. Business intelligence has now become the art of sifting through large amounts of data, extracting pertinent
of Computing Information Systems and Mathematics
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HISTORY OF BUSINESS INTELLIGENCE
information, and turning that information into knowledge from which actions can be taken. Business intelligence software incorporates the ability to mine data, analyze, and report. Some modern BI software allows users to cross-analyze and perform deep data research rapidly for better analysis of sales or performance on an individual, department, or company level. In modern applications of business intelligence software, managers are able to quickly compile reports from data for forecasting, analysis, and business decision-making. In 1989 Howard Dresner, later a Gartner Group analyst, popularized BI as an umbrella term to describe a set of concepts and methods to improve business decision-making by using fact-based decision support systems
Key intelligence topics Business intelligence often uses key performance indicators (KPIs) to assess the present state of business and to prescribe a course of action. Examples of KPIs are things such as lead conversion rate (in sales) and inventory turnover (in inventory management). Prior to the widespread adoption of computer and web applications, when information had to be manually inputted and calculated, performance data was often not available for weeks 32604-160x128-Sugar 16/10/07 or months. Recently, banksMedia have tried to make
data available at shorter intervals and have reduced delays. The KPI methodology was further expanded with the Chief Performance Officer methodology which incorporated KPIs and root cause analysis into a single methodology. Businesses that face higher operational/ credit risk loading, such as credit card companies and “wealth management” services, often make KPI-related data available weekly. In some cases, companies may even offer a daily analysis of data. This fast pace requires analysts to use IT systems to process this large volume of data.
Trends Currently organizations are starting to see that data and content should not be considered separate aspects of information management, but instead should be managed in an integrated enterprise approach. Enterprise information management brings Business Intelligence and Enterprise Content Management together. Interesting signs in this direction are recent acquisitions by Oracle, SAP, IBM and Hewlett-Packard (HP) in the Business Intelligence Area. IBM for example earlier bought a market-leading ECM vendor, Oracle bought Hyperion and HP bought Knightsbridge -- a 4:29 pmin the Page 1 leader BI industry.
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CASE STUDY: Maite Salazar
SKILLS FOR THE NEW ECONOMY
Maite Salazar, Benchmarking and Customer Research Manager RBS, PhD Student / University of Edinburgh What is your current role at the Royal Bank of Scotland? At the moment, I am managing the Benchmarking & Customer Research Team in Operational Support and Development (OS&D). The objective of the team is designing, improving and conducting customer and market research in order to count on high quality Voice of the Customer that will drive strategic decisions. Additionally, we spend a lot of time and resources identifying and understanding the best practices in the financial industry and in other sectors, in order to adapt them to our current situation. In short, we look externally at what the best companies do and we look internally at what customers are telling us to derive the strategy of our businesses partners. What does your part of the business do? OS&D is a support department. We operate as internal consultants for RBSG. We cover a wide range of supporting services for our business partners. They will come to OS&D with their needs such as, customer research, quality issues (“too many complaints), performance problems, forecasting concerns, etcetera. Depending on the nature of the problem, it will be allocated to one of our five areas. Then it will be about understanding the issue, identifying the root cause, analysing the data and coming up with a proposal. We also support the implementation of the possible solutions; pretty much everything to help our business partners. Do you work in Head Office or the retail side of the bank on the high street? We are back office, pure operations. OS&D is located in what we call Manufacturing, versus the other area that is Retail. While Retail is in charge of the Branches and the “selling” activities, Manufacturing produces all the processes which make those products to happen. Manufacturing is a complex division which covers Mortgages Operations, Retail Services Operations, Payments, Group Brands, Ulster Operations…In addition to those, OS&D is formed by over 400 people providing support for all the processes in this operational world. OS&D supports the implementation of improvements in the processes, centralises voice of the customer, focuses on performance issues and resource planning and assists our business partners with whatever they need. It is about driving efficiency and effectives in our processes with the objective of customer excellence. Can I ask you a little bit about your academic background? My first degree, back in Spain, was Business Administration (Business Studies) at the University of Navarra, which was very quantitative, so every year we had few compulsory courses such us Algebra, Statistics, Probability, Econometrics, Calculus… In short, it was a four year degree quite heavy in numbers and analytics together with all the business subjects (Finance, Marketing, Strategy, Operations…). My second degree at the same University, was in Economics, with a clear emphasis in Marketing. After it, I started my post-graduate life in Navarra with the objective of linking Ana-
lytics and Marketing. In other words, I wanted to bridge the gap between the needs that customers have to design sound Marketing strategies and the models and theories developed in the Academic world. Because my university was not very strong on that specific area, they recommended me to move abroad to finish my education. I applied to the University of Edinburgh where in 2004, I’ve got my Masters in Management (Msc by Research) whit a dissertation on predicting cross-selling opportunities in the financial industry to promote customer retention. It combined my two areas of interest: the Marketing side of the retention objective and the Analytics, by modelling those cross-selling opportunities. After it, I started my PhD in Management with a clear focus on customer retention through cross-selling and up-selling modelling. That sounds like a lot of education! Yes it’s a lot – Nearly too much [she smiles]. Hopefully I will have it [my PhD] by the end of the year once my supervisor can give me the thumbs up to spend the time finishing it. So you are able to complete your thesis while you are working? Yes, I have to say that RBS have been very patient and great with me because during the months I was writing my thesis, they gave me the opportunity to work part time and they were very flexible. So if one week I needed to finish a chapter they were ok with me working less hours. They were very helpful, otherwise I would have really struggled with two years of work and the thesis but, fingers crossed, I will get it soon. Did you go directly to your job at RBS from Edinburgh? As soon as I started the process of writing my thesis, I met RBS at the SAS Annual Conference, in 2006 in Geneva, where I was awarded as a SAS Student Ambassador. RBS was also in the conference, and two RBS delegates attended my presentation and they pretty much offered me a job straight away. That’s great. I suppose that’s a good example of having the right skills for them? Yes, they really were looking forward to having someone who could link information and translate it into business – into business decisions and business situations – in other words, trying to make sense out of information. Before that I did work in Spain for another financial institution. I was working in an advertising company and running some research at the same time in the financial industry in Spain. Interesting that you worked in analytics, in marketing and advertising. People often think that analytics is limited to certain types of business and certain types of roles. It’s in everything. All businesses. As a part of my role in the advertising company I conducted quite a lot of marketing research, activity involving a lot of investigating the market and trying to
“I am a marketing person but I always felt a bit upset when you start talking about marketing and people don’t really take you seriously and they say ‘Ah well, marketing people are always just thinking about advertising but you can’t really ground your theories and ideas in anything’, so I was a little afraid of marketing having such bad press, such a bad image. So I thought we could support marketing decisions using analytics.”
get some information out of that. So it’s clear you had some analytics training before you joined RBS and you continued to build upon this after you joined. Yes, I had all the background from university but as I said it was quite based in maths, statistics and econometrics and I took all the courses I could as I really enjoyed them. Then when I moved up to Edinburgh, one of my supervisors who is a statistician, supported me on the analytics and pointed me in the direction of some courses that I could take, subjects that I had never touched before. Then I got in touch with SAS Academic Program in the UK and Geoffrey Taylor. I must say, that meeting SAS and Geoffrey changed my life and opened a complete new area full of opportunities to me. I guess you have already answered this to some extent but how did you really come to understand the need for analytics in business? I am a marketing person but I always felt a bit upset when you start talking about marketing and people don’t really take you seriously and they say ‘Ah well, marketing people are always just thinking about advertising but you can’t really ground your theories and ideas in anything’, so I was a little afraid of marketing having such bad press, such a bad image. So I thought we could support marketing decisions using analytics. I had a couple of projects and I took the analytical approach rather than the theoretical approach and they worked and I really enjoyed them. Then I thought Customer Relationship Management can be used as a kind of combination of both – looking at your customers from an internal perspective and trying to manage the information that you have and you will find the light at the end of the tunnel Did you have to pay for any of the training that you had during, or after, you attended university? My Masters and first year of PhD was sponsored by Fundacion Caja Madrid (from Spain). They offered me a grant to start my research program at the University of Edinburgh. Then I as awarded with a Research Award by SAS which covered the final year of my PhD. As a result of wining the SAS Student Ambassador Competition, I could have free SAS training. I went to SAS head office in Marlow a couple of times and spent a few days there getting some training in SAS and Enterprise Miner. The training was fantastic and the support services they have unbelievable. When you have a problem with the coding or you get stuck with some analysis, send them an email and within few hours, you get a response from them. More recently, RBS has sponsored me to become a Lean - Six Sigma Black Belt, a worldwide recognised accreditation that again is based in analytics. What are the benefits of being trained in analytics in your career? You have to enjoy it, I guess. Without that training RBS would never had approached me, without knowing me, without having my CV and having attended my presentation. They saw the kind of work that I do – combining analytics & business and they saw that I was the right person for them. It has offered me a career. I mean, when I was studying for my PhD I was not sure what I could use it for. Was I going to be an academic? I was not sure how I could approach a job with my skills but just by being at that conference I got the job. It’s great as I have been working for RBS for nine months part time and eight months full time and I have been already been promoted and it looks like in the future they will be
SKILLS FOR THE NEW ECONOMY
CASE STUDY: Maite Salazar
“Because companies have invested in training’ people are investing in software and on internal analytics and information systems and they will seek people who can get something out of that investment so people with these skills will be in a powerful position. And if they can join analytical skills with business skills you will have a very successful career in front of you.” lots of opportunities to me. RBS really care for its people. From a practical side, how would you describe the application of analytics in your day-to-day job? It’s making sense of data. We have a lot of data and information from consumers, sales and performance, productivity & number of calls, no of people absent et cetera. The problem is that raw data doesn’t mean anything. It doesn’t tell us anything about what we should be doing, what is more likely to happen. The data can be applied to every part of the organisation but the data itself doesn’t tell you anything. It’s just numbers and figures and graphs, but its translating these figures into actions that I think that analytics does. It’s like having a bridge: You have the data on one side and the business on the other, so how can we help the business? How can we do something that’s going to give us a competitive advantage in the market. It’s about taking action. I think that companies have been lucky so far because up to this point they have been making decisions based on intuition, but I don’t think that’s possible anymore. Some companies might still and they will be successful, but with so many companies around with processes that are so easy to copy and with companies with low labour costs making it so easy to replicate a product or service, I think that using intuition is no longer an option.
I can see it today. Managers or heads of department or directors, every time we make a suggestion, they want data supporting it. They want figures. They ask ‘Why should we invest £3 million in this project?’ They want hard data, they ask for the reasons why. Support your suggestion. I think this is the best thing about analytics as it allows you to support these suggestions – it’s something you can measure, you can show and you can prove. I think that is the right way for business to go and I hope that is what’s going to happen. Again, you are ahead of me but I was going to say, do you think in future the use of analytics will be more important for your role in business? I think that it is going to be crucial. Because of this I am thinking of doing more training and even a masters in statistics for the sake of keeping up to date with what’s going on in industry, in the marketplace and with new techniques. Do you think that analytics and the interpretation of data, these kinds of skills, are going to be more important for jobs than they are now? Will they be as important as some of the other skills? I think it’s going to be huge in the future. People without these skills are not going to have as many opportunities to grow, or to
grow as fast as people who can count and can translate and extract information from the data. Because companies have invested in training, people are investing in software and on internal analytics and information systems. They will seek people where they can get something out of that investment, so people with these skills will be in a powerful position. And if you can merge analytical skills with business skills, you will have a very successful career in front of you. Do you have any additional advice for anyone who is studying at the moment who wants to get into Financial Services industry, about what kind of skills they should look to get while still studying? Don’t be afraid of numbers – they can look scary but combining them with the so-called soft skills, a good business understanding, leadership, marketing and other management abilities put you on the right track. Business and Analytics with a bit of passion and hard work is a winning combination. Again, it’s coming back to analytics, but also business understanding. Because if you have a good understanding of business but you cannot support your decisions with data, then you’ve lost. If you have a good analytical understanding but you cannot make sense of the data, you are lost. I think that combining both is what will guarantee people a good position in the market and in the future.
RESEARCH FELLOW: WARWICK UNIVERSITY
Profile Charlotte Bean What is your current Title and Role? I am a research fellow in the Medical School at Warwick University. My role entails analysing large medical data sets in order to assist decision making and implementation of new policies regarding various health issues. I have worked in this role since September 2005. Can you tell us a little bit about your academic background. I obtained a first class Master of Mathematics (MMath) degree and a PhD in Computer Science, both from the University of Hull. Did you have any analytics skills/training before you got your current job? Yes, my PhD research helped to prepare me for the job that I do now. My research entailed the design of a data clustering algorithm using a particular mathematical tool. As such, I spent time carrying out background reading in the fields of statistics, machine learning and data mining. Did you move directly from your course to
your current job? No. I spent a few months working as a data mining analyst for QinetiQ, formerly the UK MOD’s research arm (DERA), before starting work at Warwick University. Was any training in analytics funded by your current employer? No, although some of my time during the working day is spent learning about new techniques by reading books and papers and there is some opportunity to attend relevant courses. I am currently studying for a self-funded MSc in Applied Statistics by distance learning.
statistical techniques to make sense of the vast amounts of data that are collected about a variety of different health issues. What are the benefits of being trained in analytics in your career? Did it provide you with any advantages (did it help with getting the job/any promotions etc)? Having some analytics training was a crucial pre-requisite for my current role. I have obviously gained experience of dealing with real data during my time in this job, but some previous knowledge of statistics and data was essential.
How did you come to understand the need for analytics in business/your career? The majority of my understanding stems from my experience of dealing with data. My project involvement generally entails liaising with a variety of people. As such, I have an understanding of how the data analysis I carry out is put to use in a wider context.
How do you feel that the use of analytics will become more important in the future world of work? Data is everywhere and is routinely used to make crucial decisions and to draw conclusions from important research. I therefore feel that there is a growing need for people with appropriate skills who can usefully interpret the constant influx of data.
How would you describe the application of analytics in your day to day job? A typical day in my job entails working with and analysing data. As such, I rely on various
Do you feel these skills will become more important in getting a good job in the future? This really depends on the type of work that a
person wishes to carry out. However, I believe that the number of jobs which rely on these skills will continue to grow. Do you have any advice for people looking to get into your particular sector? What should they study and what skills should they get before they leave university/college? In order to work in a University, I would advise people to study for a PhD. This tends to be a pre-requisite for many academic roles and provides a person with both academic training and a range of transferable skills relevant to the world of work.
WORLD CHANGING INDUSTRIES
SKILLS FOR THE NEW ECONOMY
The changing face of industry With the ever-changing world of technology causing the way business is done to be re-evaluated almost every other month, we aim to give you an overview of the most important industries out there and how these work hand in hand with computers and data inputting, which has emerged as one of the most vital skills for graduates today. Aerospace Industry Competition in the aerospace and defense sector has never been more fierce. Now, more than any other time, you have to operate lean and mean, from stem to stern and factory to foxhole. Not only do you need to show a return to shareholders, you need to demonstrate proven value and performance to your customers or risk losing business. Defense contractors have especially difficult challenges – from government oversight to supporting the defense customer’s mission and its complex requirements. Predicting and controlling risk is becoming more important as performancebased contracting grows. Vendors must deliver better value while accepting more responsibility for the performance and sustainment of their programs.
Automotive Industry Change is racing through the automotive industry at breakneck speed. Gone are the barriers separating national markets. The new landscape is global, filled with mergers and acquisitions, new channels of information and the overriding pressures to keep costs down while driving up quality, safety and customer satisfaction. Keeping pace with these changes and the massive quantity of data associated with them presents a challenge for even the most agile organization. A flood of information about customers, supply chains,
operations and post-production support streams in from multiple sources – but how do you take that data and turn it into knowledge you can act on? Imagine the ability to evaluate your supply-chain data in every conceivable format. Imagine knowing at a glance who your most profitable customers are or gaining early warning about product failures. Imagine having mission-critical information about your organization at the touch of a button. Envision being able to accurately answer all of your productivity, quality and profitability questions – before they’re asked.
Banking Today’s sluggish economy and shaky world order have brought harsh realities to the forefront in the banking industry. Banks worldwide face global competition, high customer attrition rates and the strain of new regulations that have brought increased scrutiny to corporate boardrooms. Because banks all face similar business issues, they share the same basic goals: reduce costs, increase profits, maximize shareholder value and return on equity. This ever-growing list of challenges is forcing banks to rethink strategies and develop business models that will keep them operating competitively in today’s high-tech, multichannel banking industry. Survival depends on quickly making the right strategic decisions – but how? The good news is that most of what you need already exists
“Imagine knowing at a glance who your most profitable customers are or gaining early warning about product failures. Imagine having mission-critical information about your organization at the touch of a button. Envision being able to accurately answer all of your productivity, quality and profitability questions – before they’re asked.”
throughout your organization in the form of data – huge volumes of it that you collect every day. For most banks, however, this goldmine of information is scattered throughout dozens of systems, geographies and lines of business. The challenge – and the prize – is to glean real intelligence from all that data.
Communications All around the world, communications service providers are investing billions to deliver converged services. These large investments in new infrastructure and next-generation service architectures are mandatory for survival. But can they help you stay ahead of your competition? Probably not. Being the first to deploy higher-speed networks or offer desirable features can generate short-term competitive advantages. However, those advantages will be short-lived, because new services must be launched on industry-standard architectures that your competitors can also adopt. In a world of converged communication and content, sustainable competitive advantage can only be achieved through your ability to consistently attract and retain profitable customers. Building customer profiles and then using this information to make smarter decisions at every customer touch point is the only way to minimize churn while maximizing profits. It is also the only way to make the right offers, at the right time, through the right channel. But addressing customer satisfaction, retention and profitability in this manner is not a one-time activity. Nor can it be the responsibility of a single department. It is a cross-functional discipline that must become a way of doing business. What worked yesterday may not work tomorrow, so the organization must continually strive to learn all there is to know about its customers and then adapt to meet their needs
Energy and Utility Industries The intelligence to fuel effective, forward-looking decisions in volatile markets Energy and utility companies operate in a unique climate of risk, uncertainty and volatility – where the challenges are intensifying daily. Upstream operators – those involved in the exploration and production of raw energy resources – are under pressure to make better use of their aging assets and diminishing reserves, while reducing exploration and development costs. Downstream operators – those focused on refining, storing and delivering energy – must grapple with transportation and security logistics, huge investments in refinery and distribution facilities, and uncertainty as to where and when market demand will appear. Utility companies are struggling to accurately predict retail demand, control supply costs, protect delivery systems, minimize regulatory disallowances and sustain good credit ratings – in an environment sharpened by deregulation. Across all sectors of the energy and utility industries, companies must make reliable decisions amid hundreds
Financial Services Increasing competition, consolidation, global expansion – the financial services landscape has been changing at a dizzying pace. But one old rule still applies: survival of the fittest. Those who want to survive – and thrive – will have to move fast to
SKILLS FOR THE NEW ECONOMY
WORLD CHANGING INDUSTRIES
keep up with customer demands, changing regulations and the risks of everyday business. Customers want efficient, inexpensive, personalized services available through a variety of channels. New regulations require frequent, accurate financial reports and diligent monitoring for illegal activity. Financial services institutions are striving to meet these demands and balance them with increasing costs, tighter budgets and controlled risk.
Hospitality and Entertainment For the fast-growing and highly competitive hospitality and entertainment industries, sustaining top-line and bottom-line growth is everything. Hotels and entertainment companies are challenged with building the brand, tapping emerging markets that are reshaping world tourism, focusing on human assets and leveraging technology. Hotels and entertainment companies need to maximize revenue from existing assets and investments, build customer value and sustain a reliable workforce. A number of business issues in particular present challenges for hospitality and entertainment providers: n Difficulty measuring total customer value n Inability to model customer preferences and behaviors n Ineffective targeting and promotions n Incomplete demand forecasting and pricing optimization n Difficulty acquiring and retaining a workforce that can consistently deliver superior service
Media Media executives face the complete transformation of their industry. Audiences have not only begun migrating to new media, they have brought their heightened expectations of immediacy, relevance, customization and participation back to traditional media channels. This shift leaves traditional media brands struggling with the balance between old and new ways of doing business. New formats and media sites quickly emerge into powerful competitors. Executives are forced to make strategic decisions about digitization, distribution, content management, subscription packages and advertising avails. They are scrutinizing their revenue-generation and subscriber-retention strategies in a quest to understand audience desires and expectations. To dominate their markets, media companies of any size – from giant conglomerates, interactive media sites, cable and satellite providers to publishers and film and music studios – need to harness the information hidden in their customer and operational data.
Manufacturing Making a great product isn’t enough anymore. Success requires that you enhance your competitive advantage. In this competitive world, manufacturers can no longer rely on low prices, high quality and on-time delivery alone to keep them on top. These attributes – advantages a decade ago – are now just requirements to stay in the game. And the rules of the game are constantly changing. Manufacturers face increasing globalization, more competition than ever, and customers whose demands reflect their own knowledge and expectations of a global market. Manufacturing companies today have extensive inventories to track and move, a greater number of products to generate, numerous suppliers to negotiate with and quality standards to maintain. They also have an ever-increasing need to acquire, satisfy and retain additional customers to remain profitable. Because of these complex pressures, it is imperative that all the links in the supply chain be managed successfully. n
“In a world of converged communication and content, sustainable competitive advantage can only be achieved through your ability to consistently attract and retain profitable customers. Building customer profiles and then using this information to make smarter decisions at every customer touch point is the only way to minimize churn while maximizing profits.”
CASE STUDY: Alison Potter
SKILLS FOR THE NEW ECONOMY
Alison Potter, Vice President, Global Head of Profitability, JPMorgan Asset Management As large corporations now consist of many different systems sorting through vast amounts of data, then having a good grasp of how to analyse this out to produce useful information is vital in order to give insight to the business managers on what the underlying trends are. What is your current Title and Role? I work within the Finance function of JPMorgan Asset Management. We are responsible for producing the Profitability Report using an Activity Based Costing (ABC) model which aligns the business to the main product or client channels using interview schedules, drivers and metrics to then fully allocate all costs across these channels. The report then provides a consolidated view of the business for senior management as well as a profit and loss report for each individual business manager. Can you tell us a little bit about your academic background I’m a graduate of King’s College London where I studied a BSc Management and Computer Science. I also am a Qualified Management Accountant - CIMA. Did you have any analytics skills/training
before you got your current job? Trained up as a Management Accountant doing the CIMA exams whilst working for the NHS. CIMA certainly teaches you the fundamentals of accounting as well as how to prepare management reports. In all management information it is not just the ability to get the numbers out accurately and in a timely manner but you need to be able to add the commentary to assist management in understanding the key variables so that they can make the appropriate decisions. Did you move directly from your course to your current job? After a couple of years of backpacking through Asia and Australia I returned to London and worked briefly in the advertising industry. I felt that this did not offer me enough of a career structure so left to start working for the NHS where I trained up as a Management Accountant. I then worked for a couple of years for
After a couple of years of backpacking through Asia and Australia I returned to London and worked briefly in the advertising industry. I felt that this did not offer me enough of a career structure so left to start working for the NHS where I trained up as a Management Accountant.
the examining body Edexcel before getting a job in the City with JPMorgan. Was any training in analytics funded by your current employer? For the most it was ‘on the job’ training. I arrived having a good knowledge of Excel but had to quickly become more expert on using pivot tables as this is our key tool for analysis work. There are also other systems that we use which allow us to drill down on the numbers and therefore understand and analyse out the causes of the variances – such as Essbase cubes. More specifically to our team we did all attend the SAS Activity Based Modelling course when we upgraded the system that holds our Profitability Model. How do you feel that the use of analytics will become more important in the future world of work? As large corporations now consist of many different systems feeding through vast amounts of data then having a good grasp of how to analyse this out to produce useful information is vital in order to give insight to the business managers on what the underlying trends are. So any software package that provides a drill down functionality is essential to be able to build up the commentary for management reporting. Do you feel these skills will become more important in getting a good job in the future?
Certainly within the Finance function of any business you can not succeed without such skills. Do you have any advice for people looking to get into your particular sector? What should they study and what skills should they get before they leave university/college? A vocational degree is not essential to becoming a financial analyst but it certainly helps in gaining experience of management information systems (MIS) and business requirements. Studying for professional exams as a trainee was certainly the most useful qualification that I worked for. In terms of starting work then having a good grasp of Excel and Access would certainly be an advantage over other candidates. And this is not just doing the courses themselves but then actually using these packages for practical examples will really test your understanding of them. These will give you a good understanding that can then be applied to many other software packages. n
MANAGEMENT INFORMATION OFFICE: SWANSEA UNIVERSITY
Profile: Andrea John What is your current Title and Role? Management Information Officer at Swansea University - provide academic/planning statistics and reports to management and administrative staff so that they can make informed decisions based on evidence. We are also responsible for completing the student funding returns to the Higher Education Funding Council for Wales. Can you tell us a little bit about your academic background. Completed a Joint Honours BSc in Pure Maths and Statistics and a PhD in Statistics, both at Swansea University Did you have any analytics skills/training before you got your current job? Yes - this is my third job since completing my PhD in 2003. First worked in the Office for National Statistics (ONS) in Newport as a Methodologist in the Sample Design and Estimation team. The role was highly analytical and numer-
ical - I received training in SAS programming and other statistical techniques that the Office uses that weren’t necessarily covered in my first degree, such as designing and implementing surveys, disclosure control and index numbers. Then worked for a local authority and had training in a geographical information system called ArcMap. This allowed me to present statistics visually using maps. Did you move directly from your course to your current job? No - see above. I did moved directly from completing my PhD to the ONS though. Was any training in analytics funded by your current employer? Yes. They have provided training in SAS and SAS Enterprise Guide. How did you come to understand the need for analytics in business/your career? The type of work that I undertake every day always requires a methodological approach so the need for this has always been present since I started working and indeed when I was com-
pleting my PhD. How would you describe the application of analytics in your day to day job? My day to day job involves the extraction, manipulation and analysis of large, sometimes complex student databases to produce products and reports that will help academic and administrative staff make informed decisions based on evidence. What are the benefits of being trained in analytics in your career? Did it provide you with any advantages (did it help with getting the job/any promotions etc)? Having a background in statistics and research is beneficial in my job, since this requires me to take a methodical approach when solving a problem and use my numerical and problem solving skills that I developed during my time at university. How do you feel that the use of analytics will become more important in the future world of work? I think it’s always going to be important. If you
want to make good, reasonable decisions, you need the evidence to back these up. Do you feel these skills will become more important in getting a good job in the future? Yes - particularly as more and more people are going onto further study and obtain degrees. Having good analytical and problem solving skills are essential and will help you stand out, particularly when applying for a graduate level job. Do you have any advice for people looking to get into your particular sector? What should they study and what skills should they get before they leave university/college? Try to get some practical experience. Often maths can be quite abstract - getting used to applying statistical techniques to real data is invaluable. Look for summer placements related to your field - I worked in the Statistical Directorate of the Welsh Office (now the National Assembly for Wales) during the summer of my second year and it was really useful. It looks good on application forms and your cv too.
SO YOU WANT TO BE...
SKILLS FOR THE NEW ECONOMY
So you want to be a Business Analyst? Business analysts examine business activities and use information technology (IT) to make them more efficient. For example they could produce an IT system that deals with orders, payments, despatch and stock control to save a business time and money. The work varies according to the employer, but generally they: • work closely with clients to find out about their business • research and cost IT solutions to business problems • design new IT systems, write new software and customise commercial software • set up and test the new system • write manuals to provide training for the users of the new system. The work must be done to deadlines and within budgets while causing as little disruption as possible to the client’s business. The working hours are generally Monday to Friday, 9am to 5.30pm, but extra hours may be required to meet deadlines. Business analysts are usually office based, but they often work in clients’ premises. They may travel throughout the UK. Salaries range from approximately £19,000 to £60,000 or more a year. A business analyst should: • have good communication skills to explain complex ideas to people with little or no technical knowledge
• enjoy problem solving • have a logical mind • have listening skills to understand what clients need • be interested in IT. Employers include management consultancies, software and systems houses, and some computing equipment manufacturers. Some large companies and public sector organisations employ in-house business analysts. Most entrants are graduates in subjects like computer science, information technology, business studies, accounting, maths, sciences and electrical/electronic engineering. However, any degree may be accepted if candidates have enthusiasm and aptitude for IT. Some entrants have an HNC/HND in IT or computing, but they usually also need relevant experience. Most training is provided in house by employers, although there may also be the opportunity to attend external courses. Business analysts may be promoted to consultant or senior consultant. They may move to other business areas like sales or project management. With experience they may become self-employed, working on a freelance basis or setting up their own consultancy.
The AA – reaping the benefits of SAS in Marketing Article from SAS.com/Success. Reprinted with kind permission.
Graeme McDermott Head of customer insight at UK motoring and travel organization, the AA. The AA offers a diverse product range to UK motorists, including membership, vehicle breakdown services and insurance. The AA has a very large membership portfolio – about 15 million in total. Over the past five years, many other organisations, including new market entrants, have increased their own direct marketing activity. As a result of this more competitive environment, the AA has worked to target customers through direct mail more effectively and has broadened multi-channel activity by contacting customers through other media such as the Web and telemarketing. More effective direct marketing depends on continuous improvement and refinement of the selection criteria based on a variety of factors, but most importantly the results of past campaigns, which is why advanced analysis with SAS is critical to the company’s success. Graeme McDermott, head of customer insight within the marketing department, works with a team of six SAS specialists. The team uses information in the AA’s central database to support reporting on customer segmentation, profitabil-
ity, lifetime value and other analytics across the organisation’s product range. “We had recruited some very good analysts, primarily on the basis of their SAS skills,” says McDermott. “Generally speaking, we found that our staff had the skills they needed. But the staff themselves felt they would like to acquire accreditation on the SAS Certified Professional Program for their own professional development.” “The good thing about SAS Certification is that it does not just test your ability to get the right answer to a question. It also tests your ability to write very efficient code and follow the logic. As a result, we’re seeing massive productivity gains even from highly experienced SAS analysts.” SAS skills are increasingly in demand in the marketplace, and based on his exposure to SAS Certification, McDermott appreciates its value as an objective measure of people’s capabilities. “SAS publishes a list of everybody who has attained certification if the candidate agrees, so it is very easy
for a potential employer to verify. I would certainly be more impressed by a candidate who had basic SAS Certification .“
THE FUTURE WORLD OF WORK
SKILLS FOR THE NEW ECONOMY
The Future World of Work Competing on Analytics On What Basis Do Companies Compete Today? A working knowledge research report by Professor Thomas Davenport of Babson College. This independent research study was conducted through the Babson Working Knowledge Research Center, and was co-sponsored by SAS and Intel. In virtually every industry, many former strategic alternatives are no longer viable or likely to be successful. Today, here are few regulated monopolies, or companies with unique geographical access. Proprietary technologies are rapidly copied by competitors, and breakthrough innovation in either products or services is rare. Most of the competitive strategies organizations are employing today involve optimization of key business processes. Instead of serving all customers, they want to serve optimal customers - those with the highest level of profitability and lifetime value. Instead of looking backward at their business performance and making ex post facto adjustments, they seek to understand how optimum non-financial performance drives optimum financial performance, and to make accurate forecasts of future performance so they can react in advance of situations. Instead of throwing money at business problems, they seek to optimize their use of capital. But strategies involving optimization require something different than those based on taking business as it comes. Above all, they require extensive data on the state of the business environment and the company’s place within it, and extensive analysis of the data to model that environment, predict the conse-
quences of alternative actions, and guide executive decision making. Moreover, they require analysts and decision makers who both understand the value of analytics and know how best to apply these for driving enhanced performance. Companies that strive to optimize their business performance using this data-intensive approach are competing on analytics and analytical capabilities. Many companies are pursuing optimizationbased strategies, but most have failed to develop the analytical capabilities necessary to make them succeed. The idea of competing on analytics is not entirely new. A few organizations – most within financial services and particularly in financial investment and trading businesseshave competed on this basis for decades. The trading of stocks, bonds, currencies, and commodities has long been driven by analytics. What is new is the spreading of analytical competition to a variety of other industries— from consumer finance to retailing to travel and entertainment to consumer goods—and within companies from individual business units to an business-wide perspective. Even the most traditionally intuitive industries are moving in this direction—professional sports teams, for example. Some soccer teams have begun to employ similar techniques. AC Milan uses predictive models to prevent player injuries by analyzing physiological, orthopaedic, and mechanical data from a variety of sources. Bolton soccer team, is known for its manager’s use of extensive data to evaluate player performance and team strategies. Analytical cultures
a n d processes are appearing not only in sports teams, but in any business that can harness extensive data, complex statistical processing, and fact-based decision making. Analytics is becoming a primary basis for competition for these firms. They use analytical tools to change the way they compete or to perform substantially better in the existing business model. The casino firm Harrah’s, for example, has chosen to compete on analytics for customer loyalty and service, rather than on building the mega-casinos in which its competitors have invested. Its MD, Gary Loveman, has commented, “We use database marketing and decision-science-based analytical tools to widen the gap between us and casino operators who base their customer incentives more on intuition than evidence:.” Amazon.com uses extensive analytics to predict what products will be successful, and to wring every bit of efficiency out of its supply chain. Amazon boss Jeff Bezos notes, ”For every leader in the company, not just for me, there are decisions that can be made by analysis. These are the best kinds of decisions. They’re factbased decisions.” Analytical cultures and processes are appearing not only in professional sports teams, but in any business that can harness extensive data, complex statistical processing, and fact-based decision making.
“Companies that are recognized leaders in using analytical techniques for performance improvements also are using sophisticated experimental designs to measure the overall impact or “lift” of intervention strategies and using these results to continuously improve subsequent analyses.”
Some attributes of Analytically Oriented Companies Virtually every major company uses some form of statistical or mathematical analysis, but some take analytics much further than others. Some good example are: Gary Loveman, CEO of Harrah’s; Jeff Bezos, the founder and CEO of Amazon; Rich Fairbank, the founder and CEO of Capital One; and Barry Beracha, formerly CEO of Sara Lee Bakery Group. Each of these executives has stated both internally and publicly that their companies are engaged in some form of analytical competition. For example, Fairbank commented: It’s all about collecting information on 200 million people you’d never meet, and on the basis of that information, making a series of very critical long-term decisions about lending them money and hoping they would pay you back. Fairbank summarizes this approach as “Information-Based Strategy.” Beracha, before he retired as CEO of Sara Lee Bakery, simply kept a sign on his desk saying - in a reference to the line on US dollar bills, “In God we trust; all others bring data.” Every firm can calculate simple descriptive statistics about aspects of its business (the average revenue per employee, or average order size), but the most aggressive analytical competitors go well beyond basic statistics. They are using predictive modelling, for example, to identify not only the most profitable customers, but those with the most profit potential, or those most likely to stop being customers. They are combining and pooling both internal and external data in such a way as to gain a more comprehensive picture and understanding of their customers than was ever thought possible. They are optimizing their supply chains, so they can determine the impact of an unexpected constraint, simulate alternative supply chains, and route shipments around problems. They are establishing prices in real time so as to provide the highest yield possible from a customer transaction. In financial performance analysis, they create complex models of how their operational and cost measures relate to their financial performance. No matter what the business function, it’s possible to improve performance through the use of sophisticated analytical techniques. Companies that are recognized leaders in using analytical techniques for performance improvements also are using sophisticated experimental designs to measure the overall impact or “lift” of intervention strategies and using these results to continuously improve subsequent analyses. Capital One, for example, conducts more than 30,000 experiments a year with different credit card interest rates, incentives, direct mail packaging, and other parameters to maximize
THE FUTURE WORLD OF WORK
SKILLS FOR THE NEW ECONOMY
both the likelihood that a potential customer will sign up for a credit card, and that they will pay Capital One back. One of the hallmarks of an analytically oriented firm is the use of sophisticated analytics not just in one business function or process, but across multiple aspects of the business. Successful analytical competitors have realized the power of these tools and approaches and are adopting them across their businesses. UPS, for example, has traditionally focused on analytics for operations and logistics. More recently, it has developed a strong analytical focus on customers, assessing the likelihood of customer attrition, or identifying sources of problems for customers. Executives at several analytical competitors warned against losing a clear business purpose for analytics. Harrah’s, for example, has targeted much of its analysis on increasing customer loyalty, although it has extended it into such related areas as pricing and promotions as well. Analytical competitors can broaden their focus beyond a narrow function, but they are careful not to become too diffuse in their analytical targeting so that they continue to support their primary strategies. The Importance of A Company wide Management Approach Business intelligence applications often have been managed at the departmental level, with analytically oriented business functions selecting their own tools, managing their own data warehouses, and training their own people. However, if analytics are to be a company’s basis for competition, and if they are to be broadly adopted across the firm, it makes more sense
to manage them at across the entire organisation. This ensures that there is a critical mass of skills, that critical data and other resources are protected, and that data from multiple business functions can be correlated. The company-wide approach may include both organizational and technical capabilities for business intelligence. At the organizational level, for example, Procter & Gamble recently consolidated its analytical organizations for operations and supply chain, marketing, and other functions. This will allow a critical mass of analytical expertise to be deployed to address P&G’s most critical business issues. From a technology standpoint, many firms have had highly dispersed analytical technology in the form of many spreadsheets. However, one researcher suggests that between 20 and 40 percent of spreadsheets contain errors. Furthermore, the proliferation of user-developed spreadsheets and databases inevitably leads to multiple versions of key indicators within an organization. Because of these problems, many firms are attempting to consolidate and integrate their technologies for business analytics.32 F I R M S What’s the Business Value of Analytics? Analytics can be used to pull almost every lever of organizational performance. However, we found several business objectives and issues that were driving most of the analytical activity in the firms we studied. They include the following: • Customers or consumer- Several organizations were focused on customer or consumer analytics, which encompass a variety of specific objectives. They might include, for exam-
ple, identifying the most profitable or desirable customers, or those with the lowest risk of non-payment. Customer analytics also include identifying the current customers who are most likely to stop being customers. They also might include customer-specific pricing or product/ service offerings based on the customer’s past or predicted future buying frequency and habits. Companies that pursued this set of analytics among our study respondents included Harrah’s, Procter & Gamble, Progressive Insur-
ance, Barclays, and Capital One. •S upply chain- Analytics for logistics and the supply chain are well-established in many large firms, with the primary orientation usually being reduction of in-process inventory. Supply chain analysis also might encompass matching demand and supply, routing shipments around logistical problems, reducing incidences of stock running out and overstocks, alternative supply simulations, plant
STATISTICS & AUDIT DIRECTORATE: UK TRANSPLANT
Profile Steve Ash: Student Statistician What is your current Role? I am a Student Statistician in the Statistics & Audit Directorate within UK Transplant (UKT), the NHS organisation responsible for coordinating organ donation and transplantation. My department provides a comprehensive statistical service to the transplant community in the UK and ROI. Among other things this involves providing regular reports on transplant activity, monitoring centre performance and responding to enquiries and requests for information from the government, health authorities, the media and others. Can you tell us a little bit about your academic background. I am here on a year-long placement as part of my degree course – I’m studying for a BSc in Statistics at the University of Bath. Did you have any analytics skills/training before you got your current job? On my course I had used R quite frequently. However, I had no experience whatsoever of SAS – the main analytics software used in my workplace.
Was any training in analytics funded by your current employer? Yes. When I began here I was given tutorials to learn the basics. I was also sent on a 3-day programming course. I was well-supported as I learned how to use the software but many of the best techniques you learn come from experiencing it yourself and seeing how it works. How did you come to understand the need for analytics in business/your career? I’m still learning! Analytics is vital to our work – decisions constantly have to be made on how to improve the medical care available before, during and after a transplant, and that is exactly what analytics is for: enabling you to make decisions as to what the most effective plan of action will be. How would you describe the application of analytics in your day to day job? We do a lot of work on developing organ allocation schemes and studies on factors that affect the outcome of a transplant. Our job is to provide the evidence to guide decision-making and then monitor the effects of
changes in policy. What are the benefits of being trained in analytics in your career? Did it provide you with any advantages (did it help with getting the job/any promotions etc)? It helps you get the job done! We use analytics pretty much all day every day – you can’t avoid it! How do you feel that the use of analytics will become more important in the future world of work? In the past business strategies, performance improvements and the like were determined through years of study and experience. Analytics is all about being able to produce evidence in a short period of time to enable informed decisions to be made by almost anybody, without the need for deep knowledge. With developments in analytics decisions which used to be tedious, drawn-out affairs will be made so much simpler. Do you feel these skills will become more important in getting a good job in the future? Absolutely – with more and more companies
deciding that analytics is the way forward there will be a lot more jobs in that area. Ironically, a field that has developed to remove the need for specialism may well become specialist itself! Do you have any advice for people looking to get into your particular sector? What should they study and what skills should they get before they leave university/college? A Mathematics or Statistics course is a must; knowing the theory behind the analysis is a great help when you come up against problems in your work! An interest in Biology isn’t vital but definitely makes the medical side of the job even more interesting. Previous experience of computing comes in handy too, because it shows that you’re capable of picking up a new programming language, which you will most likely have to do on the job. One thing I would certainly recommend is the University placement scheme. A year’s experience in the workplace is a huge advantage once you graduate – with a year’s worth of using analytics day-in-day-out under your belt it’s a massive boost to any CV. At least, that’s what I’m hoping!
THE FUTURE WORLD OF WORK
SKILLS FOR THE NEW ECONOMY
How Do Firms Become Analytical Competitors? In order for a firm to become an analytical competitor, the supply of and demand for data and analysis must be in alignment. The supply issues are much easier to deal with and are generally available in the marketplace, although their absence in a firm is certainly problematic. The supply factors for analytical competition include the following:
and distribution centre sitting decisions, and price optimization. Among the companies in our study, WalMart is the leading exponent of supply chain analytics. • Financial performance and cost management- One domain of business value for analytics can revolve around performance management. Monitoring and decision making on financial information is not often thought of as a competitive strategy, but it can be. At MCI, (the company once known as WorldCom which recently emerged from bankruptcy and was acquired by Verizon), managing the business with accurate information on costs and their allocations is crucial to the company’s strategy. • Research and new product/service development- Perhaps the most active use of analytics in research and product development is in the pharmaceutical industry. We interviewed three pharmaceutical firms (Millennium, Novartis, and Vertex), each of which was attempting to conquer the overwhelming complexity of relating chemical, clinical, and genomic data. Many pharmaceutical firms have embarked upon discovery techniques involving highthroughput screening, which yields an enormous amount of data and a need to analyze and make sense of all of the experimental results. No firm has yet mastered all of these complexities, but statistical modelling and analysis is a focus for anyone who hopes to compete in the industry. • Strategic planning- Several of the firms we interviewed are using statistical analysis for the first time in strategicplanning. Their objective is to determine what markets and customer types to address with what products and services. In the insurance industry, for example, while pricing decisions are made on detailed analysis of actuarial risk and loss patterns, stra-
tegic planning often has been purely intuitive. O ne insurance firm we interviewed (The Hartford), however, is using analytics to assess new business opportunities, considering market segmentation, economics, risk adjusted returns, and the cost of capital for the opportunity. Capital One is using detailed analytics to assess what financial products to offer customers in addition to credit cards; car loans are one example of a product that was tested extensively before a broad rollout, and it has become a profitable business for the company. • Human resources- Several firms mentioned they were beginning to do human resource planning with analytics, but the most aggressive users today seem to be professional sports teams. Both the Boston Red Sox and the New England Patriots, for example, use statistical analysis to identify the most promising players to draft. The Patriots have been particularly successful in this regard, using analytics to stay below the stringent salary cap in the National Football League. In fact, the Patriots have won three of the last four Super Bowls with a relatively low-cost payroll, the 19th highest in the league in the 2004-5 season. • Other Areas- There are undoubtedly other business areas in which analytics would prove to be of value, but the ones above were the most common in our study. It is likely, however, that many decisions previously made on intuition and hope will soon be addressed with detailed analysis. Procter & Gamble, for example, pulls together an analytical team whenever it considers the supply chain opportunities an acquisition might offer to drive synergy savings. One might hope that more analytical approaches will improve the dismal record of success many companies have experienced in mergers and acquisitions.
High-Quality Data The most important factor in being prepared for sophisticated analytics is the availability of sufficient volumes of high-quality data. This is less of a problem today than it was previously for many organizations, which have made substantial progress in accumulating transaction data the past several years. Whether the data come from ERP systems, point-of-sale systems, or Internet transactions, many organizations have a greater volume of data than ever before. The difficulty is primarily in ensuring data quality, integrating and reconciling it across different systems, and deciding what subsets of data to make easily available in data warehouses (i.e., having a clear strategy for data access). Many organizations remain highly fragmented, and have issues involving integration across their diverse business functions and units. Even such basic points as agreeing on the definition of who is a customer can be problematical across lines of business. As we noted above, the lowest-ranking firms in our scale of analytical competition still face significant difficulties with these basic data issues. The leading firms, however, have largely overcome them. Previous studies of firms’ analytical capabilities have found even leading-edge companies tend to be good at either qualitative knowledge management or quantitative data management, but rarely both. A Capable Technology Environment In order to take advantage of good data, an organization also needs a capable hardware
and software environment. Complex analytics chew up a good deal of processing power, so the workstations and servers used for this purpose need to be substantially more powerful than those used for conventional office tasks. Apex Management Group, for example, a health care actuarial firm, is transitioning to a 64-bit computing environment to deal with the complex and data-intensive statistical analyses it performs for its clients. Quantitative Expertise While analytical software becomes increasingly easy to use, firms that compete on analytics still require substantial quantitative skills—either in-house or contracted from outside. The statistical expert, in order to be useful, also will need to be familiar with the business problems in the function and industry; the quantitative skills of a good analyst are rarely equally applicable across diverse businesses. One pharmaceutical company, for example, attempted to use several bioinformatics experts to pursue analysis of commercial problems in marketing and operations, and found they were neither motivated nor expert at the applications. While statistical analysts who also understand business issues always have been difficult to find, it is increasingly possible to hire analytical expertise outside of a company— even from India or China in some cases. However, some firms we interviewed stressed the importance of a close and trusting relationship between quantitative analysts and decision makers. The need is for statistical experts who also understand the business in general, and the particular business need of a specific decision maker. Demand—The Critical Factor in Analytical Competition More difficult to create than supply is the demand for analysis and fact-based decision making within a company. In the earliest stages of analytical competition demand is created by particular business problems. As analytics becomes more central to the competitive strategy, demand becomes more generalized across an organization. Yet, unlike the supply factors described above, demand— the desire to use analytics as a primary competitive factor—cannot be bought in the marketplace. The key demand factors we identified include: Willing Senior Executives Several lower-stage firms we interviewed that made some use of business intelligence said
“Procter & Gamble, for example, pulls together an analytical team whenever it considers the supply chain opportunities an acquisition might offer to drive synergy savings. One might hope that more analytical approaches will improve the dismal record of success many companies have experienced in mergers and acquisitions.”
SKILLS FOR THE NEW ECONOMY
the lack of demand from top level senior executives was their single most significant barrier to engaging in analytical competition. These executives were more comfortable with intuitive decisions, or weren’t aware of the possibilities for analytical competition within their industry. Some were not averse to analytics, but didn’t have enough personal analytical experience to base their strategies on analytics and fact-based decisions. Without executives who want to use data and analysis to make decisions, even the best business intelligence applications will not be used. Amazon.com was viewed by founder Jeff Bezos as competing on analytics from its start. Its concept of personalization was based on statistical algorithms and Web transaction data, and it quickly moved into analytics on supply chain and marketing issues as well. Amazon recently used analytics to explore whether it should advertise on television, and concluded it would not be a successful use of its resources. The vision of the founders of these start-up businesses led to analytical competition. In other cases, the demand for analytical competition came from a new senior executive arriving at an established company. At Harrah’s, for example, the recruitment of Gary Loveman
as chief operating officer, and eventually CEO, greatly accelerated the company’s analytical orientation and led to a new basis for competition— competing on customer loyalty and service, rather than building the most expensive casino properties. Sometimes the change comes from a new generation of managers in a family business. At the winemaker E&J Gallo, when Joe Gallo, the son of one of the firm’s founding brothers, became CEO, he intensified the firm’s focus on data and analysis—first in sales, and later in other functions, including the assessment of consumer taste. The enemies of an analytical orientation are decisions based solely on intuition and gut feel. Yet these have always been popular approaches to decision making because of their ease and speed, and a belief that gut-feel decisions might be better. For those organizations without sufficient demand for data and analysis in executive decision making, the obvious question is whether such demand can be stimulated. If there is no senior executive with a strong analytical orientation, must the organization wait for such a manager to be appointed? One answer, of course, is for an analytical group to build a successful track record of analytical decisions that have
THE FUTURE WORLD OF WORK
The enemies of an analytical orientation are decisions based solely on intuition and gut feel. Yet these have always been popular approaches to decision making because of their ease and speed, and a belief that gut-feel decisions might be better. paid off- a set of success stories. However, it can take several years to build this type of reputation. Even more time-consuming at most firms is coming up to speed in human capabilities, to optimize business processes based on the outputs of analysis, and, in some cases, to build a sufficient body of data to support reliable predictive results. At UPS, one manager of customer data analytics noted that: “We’ve been collecting data for six or seven years, but it’s only become usable in the last two or three, with enough time and experience to validate conclusions based on data.” Several executives at other firms noted that it takes time for managers to understand data and be comfortable with the analytics based on it. An analytical executive at Procter & Gamble
suggested firms might begin to keep managers in their jobs for longer periods because of the time required to master analytical approaches to their businesses. However, despite the difficulty and expense of establishing these capabilities, many of the firms we have identified as early adopters of analytical strategies are clear leaders in their industries. This suggests the time and trouble necessary to become analytical competitors are definitely worthwhile. Summary This study has provided a glimpse into a new form of competition. Instead of competing on traditional factors, companies are beginning to employ statistical and quantitative analysis and predictive modelling as primary elements of competition. These firms have overcome the historical barriers to gathering and managing transaction data and some of the cultural resistance in organizations accustomed to “gut-feel” decision making, and are using complex analysis and data-intensive decisions to change the way they manage themselves and compete in the marketplace. They have marshalled both supply and demand factors for analytical competition, and are employing their capabilities across multiple functions. Opportunities for analytical competition are possible in every industry. Therefore, virtually every firm should consider how it might adopt analytical methods and capabilities. While not all of the steps will be applicable to all organizations, it’s likely everyone would find some of them appropriate. There is every reason to believe this approach will grow in acceptance. The necessary data will become increasingly available, and the analytical resources are increasingly accessible to all. Yet the move to analytical competitiveness is typically a journey of several years. “Companies that do not rapidly embrace these possibilities risk falling dramatically behind. No business can afford to lose its best customers, to spend more on logistics and inventory, to miss out on opportunities for new products and services, and to hire less capable employees than its more analytically astute competitors”.
SKILLS FOR THE NEW ECONOMY
Where to learn about SAS software Where to get SAS skills Where to find business analyst jobs Which books to read Where to find webcasts