Davenport Webinar Predictive Analytics

© 2011 SAP AG. All rights reserved. 1

Learn More About Predictive Analytics and SAP

Additional information SAP.com/PredictiveAnalyticsOr email us @ [email protected]

Online community & discussion board“SAP Predictive Analytics”

Upcoming webinarsRun Better with Predict Analytics & In-Memory Technology

Dr. David Ginsberg – December 6th, 2011

SAP Webcast Series: Unwire Your EnterpriseDiscuss the importance and growth of mobile technology and to explore how your organization can leverage powerful mobility solutions to capitalize on the immense rewards offered by developing and executing against a comprehensive mobility strategy.

Copyright © 2011, SAS Institute Inc. All rights reserved.

Predictive Analytics: Gaining Advantage by Using Analytics to Predict the Future

October 3, 2011 Brought to you by

Tom DavenportPresident’s Distinguished Professor of Management and Information TechnologyBabson College

Questions?

To ask a question … click on the “question icon” in the upper-left corner of your screen.

Type your question and name, and additional information if you wish, and click on the send button.

Brought to you by

1


Predictive Predictive Analytics at WorkAnalytics at Work

Tom DavenportTom DavenportBabson CollegeBabson College

Harvard Business Review WebcastHarvard Business Review WebcastOctober 3, 2011October 3, 2011

Thomas H. Davenport – Predictive Analytics4 | 2011 © All Rights Reserved.

What Are Analytics?What Are Analytics?

Optimization

Predictive Modeling/ForecastingRandomized Testing

Statistical analysis

Alerts

Query/drill down

Ad hoc reports

Standard Reports

“What’s the best that can happen?”

“What will happen next?”

“What happens if we try this?”

“Why is this happening?”

“What actions are needed?”

“What exactly is the problem?”

“How many, how often, where?”

“What happened?”

Descriptive Analytics(the “what”)

Predictive and Prescriptive Analytics(the “so what”)Degree

of Intelligence

2



Types of AnalyticsTypes of Analytics

What happened?(Reporting)

What is happening now?

(Alerts)

How and why did It happen?

(Modeling, testing)

What’s the next best action?

(Recommendation)

Cont

ent T

ype

Info

rmat

ion

Insig

htFuturePast

What will happen?(Prediction)

What’s the best that can happen?

(Optimization/simulation)

PresentTimeframe


Applications of Predictive Applications of Predictive AnalyticsAnalytics

What offers will customers accept?What price will they pay?Which recruit will become a high performer?How likely is it that this customer will leave?Which supplier is most likely to fail to deliver?

3


Thomas H. Davenport – Predictive Analytics7

Stage 5Analytical

Competitors

Stage 4Analytical Companies

Stage 3Analytical Aspirations

Stage 2Localized Analytics

Stage 1Analytically Impaired

Levels of Analytical Capability


Masters of PredictionMasters of Prediction

Marriott — optimal pricingNextel—customer attritionCisco—forecastingTesco—offerseBay—web site testingNetflix—movies you’ll likeZappos—shoes you’ll likeGoogle—page rank, advertising, HR

4



The Analytical DELTAThe Analytical DELTA

Data . . . . . . . . . . breadth, integration, quality, technologyEnterprise . . . . . . . . . .approach to managing analyticsLeadership . . . . . . . . . . . . . . . passion and commitmentTargets . . . . . . . . . . . . . first deep, then broadAnalysts . . . . . professionals and amateurs


DataData

The prerequisite for everything analyticalClean, common, integrated Accessible in a warehouseMeasuring something new and important

5



New Metrics / DataNew Metrics / Data

Wine Chemistry Smile FrequencyDefensive moves


Some Current Data and Some Current Data and Technology DilemmasTechnology Dilemmas

Analytics on premise, private cloud, public cloud?Different tools for “big data”?Is a data warehouse still necessary?Will “analytical apps” take off?How can analytics be embedded?

6



The Changing World of Analytics

Old BIOld BIAnalyst

Sandbox

EmbeddedAnalytics

AnalyticalApps

ProfessionalAnalysts

BusinessUsers

Multi-Purpose

Single-Purpose

Application Breadth

Primary Users


Some Actual Analytical Apps

Spend analysis in life sciencesAftermarket services revenue growth for equipment manufacturersAnalyzing mortgage portfoliosFinancial planning and modeling in the public sectorEnterprise risk and solvency management for insuranceContract compliance in transportationNursing productivity in health careField sales hiring analysis in pharmaEmployee attrition analysis in telecomEmployee satisfaction and store performance analysis in retail

7


Thomas H. Davenport – Predictive Analytics

Linking Data and DecisionsLinking Data and Decisions


Embedding Analytics in ProcessesEmbedding Analytics in Processes

16 | 2011 © All Rights Reserved.

Source: SAP AG 2006

Receives ASN

Releases ASN

DeliveryExecution

UpdateInventory

AccountingUpdate

Inventory

Delivery PerformanceDelivery Performance“How effective is our fulfillment

process?”

CLTVCLTV“Does this order justify extra

efforts?”

Inventory ForecastInventory Forecast“Will this be back in inventory?”

Defection RiskDefection Risk“What is the customer status?”

Global ATPCheck

RequestGlobal ATP

CreationSales Order

Fulfillment Request

CreationPurchase Order

Creation &Release Delivery

RequestReturns per CustomerReturns per Customer“What is the customer history?”

8



EnterpriseEnterprise

If you’re competing on analytics, it doesn’t make sense to manage them locally

No fiefdoms of data, technology, or organizationA centralized organization or CoE is increasingly common

P&G, Caesars, Walmart, etc.


Under Enterprise ManagementUnder Enterprise Management

Web analytics+ Marketing +

Actuarial +Predictive +

Supply chain/OR

HR analytics+=

EnterpriseAnalytics!

9



LeadershipLeadership

CEOs—Google, Netflix, Capital OneCFOs—Caesars, HumanaCIOs—P&G, SchneiderCOOs—Ebay, Chicos


The Best TargetsThe Best Targets……

Support a key strategic capabilityEngage top management commitment Create momentum for analytics across the enterpriseHave ambitious, yet pragmatic scopeAre data rich — or have the potential to beDramatically improve effectiveness of asset and/or labor-intensive activitiesHave broad implications across functions, processes, geographies, or business units

10



Are You Ready for Prediction/Optimization?Are You Ready for Prediction/Optimization?


Optimal response

embedded in real-time process

Predictions of response by

target/ segment

Key targets and segments defined

Prediction and differentiated

action embedded in

process

Different approaches for

different targets/

segments

Well-defined, common, clean, and integrated

data

Data in Order

Key Targets/Segments

Differentiated Action

Institutional Action

Real-Time Optimization

Predictive Action


AnalystsAnalysts

5-10%“Data Scientists”—Own/RentCan create new algorithms

Analytical Semi-Professionals—Own/RentCan use visual and basic statistical tools, create simple models

Analytical Amateurs--OwnCan use spreadsheets, use analytical transactions

15-20%

70-80%

* percentages will vary based upon industry and strategy

1%Analytical Champions--OwnLead analytical initiatives

11



Roles for IT and CIOs in All ThisRoles for IT and CIOs in All This

Restructure the entire IT organization to emphasize decision-making

e.g., P&G’s “Information and Decision Solutions”

Establish a COE, competency center, or consulting group around analysis and decisions

e.g, Kimberly-Clark’s BICC

Include analytics and decision processes in the broader information provision process

E.g., Cisco Advanced Services “Production Analytics”


Keep in MindKeep in Mind


►Five levels, five factors for building predictive analytical capability

►Data and leadership are the most important prerequisites

►Make sure your targets are strategic►Tie all your predictive analytics work to

specific decisions►This is not business as usual—there is a

historic opportunity to transform your industry!

12


Questions?

To ask a question … click on the “question icon” in the upper-left corner of your screen.

Type your question and name, and additional information if you wish, and click on the send button.

Brought to you by

Thank you for participating

This presentation was made possible by the generous support of SAP.

Learn more at SAP.com/PredictiveAnalytics

Brought to you by

13

Documents

Davenport Webinar Predictive Analytics