Staying ahead of the pack with business intelligence

WITH the rapid change in today's business scenario and in respect to the highly competitive market, more and more companies are turning to business intelligence (BI) and analytics software as a source of competitive advantage.

This is particularly so among consumer-oriented companies such as banks, insurers, mobile operators, car manufacturers, hotels and resorts operators and video rental companies.

Currently, BI software is mainly used for understanding customer behaviour such as to help the company identify who their loyal customers are, how the customers behave on certain new products and identify which customers bring in the most revenue.

With these valuable information, companies can then develop their sales and marketing plan to serve their customers better and thereby provide them with the competitive edge.

"Competitive edge is really about building customer experience, and to build customer experience, you first need to understand your customer," said The Royal Bank of Scotland Bhd vice-president and head of wealth management, Michael Hui Hoong Tho.

"Take The Royal Bank of Scotland, for example. We are a niche bank. In our business, our customers are multi-bank account holders. So, the key is to understand the customers.

"By understanding them better, they will learn to trust us to look after their money," Hui said at a SAS Malaysia roundtable discussion on "The Stakes of Not Knowing" in Kuala Lumpur recently.

Even government agencies and regulators such as Malaysia Deposit Insurance Corp (PIDM) are using BI and analytics software to measure the performance.

"We are a small organisation, so we need a tool to make sure our company's capability is maximised and is efficient every day.

"The information we have is huge. As such, we have to make sure that our decision is not based on gut feeling, but on facts," said PIDM general manager of insurance, risk assessment and monitoring division, Md Khairuddin Arshad.

Insurance Services Malaysia Bhd chief executive officer Carl Rajendram concurs.

"Information or statistics alone can no longer be a competitive advantage. Unfortunately, this thinking still prevails in many industries," he said.

While the future of BI and analytics software looks bright, there are a few challenges facing the industry.

Foremost is the under-utilisation of analytics software, said SAS Institute Inc senior vice-president and chief marketing officer Jim Davis.

He said most companies around the world are still using the software on the surface level, that is, they have yet to fully maximise the software's capability.

"The analytic tools are created to do more than that. It can help a company consolidate, lower operational cost, improve efficiencies as well as help the company to innovate and create new products.

"But only 20-30 per cent of organisations are using the BI and analytics tools to their full capability," Davis added.

Question: What is stopping these companies from harnessing the software's full value?

Answer: The panelists at the roundtable said organisation culture and lack of qualified people.

"There are two challenges: one is the scarcity of qualified people and the culture aspect," said Resorts World Bhd executive vice-president of resorts operations, Alan K.C. Teo.

"That's why a lot of companies are not using the software to its full potential. The more matured the organisation is, the more difficult it is to achieve this full optimisation level.

"(To achieve this level,) companies have to come to a stage where they are more open minded.

But there's always this mindset among employees that: "I have been with the company for 30 years. I know what can and cannot go wrong. You are going to tell me that just a few numbers will tell me something different?"

Q: What does "competitive edge" mean to your organisation or your industry?

Hui: Competitive edge is really about building customer experience, and to build customer experience, you first need to understand your customer.

Teo: I agree that competitive edge is about the total experience as well. For us (Resorts World), it is about giving value to our customers.

It is about the value of having fun in our resort and how much they (customers) enjoy themselves when they are with us.

Md Khairuddin: For PIDM, competitive edge is not so much about total experience. We are looking at the mandate as well as the vision. Our vision is to be one of the best (deposit insurance corporations) in the world, which is why we look at our foreign counterparts such as the Federal Deposit Insurance Corp and the Federal Citizen Information Centre.

Q: Can information itself be a competitive edge?

Carl: I believe information can no longer be a competitive edge. Statistics shouldn't be a competitive edge. Unfortunately in many industries, information itself is still a competitive advantage. Interestingly for the banking industry, people are talking about having too much information.

For example, the subprime crisis. Too much information, unstructured information can be a bad thing. People are talking about information stress. You are hungry for information, but you don't know what to do with it. So, the key is to have people with the skill to interpret the information.

Q: Have the uncertainties about the outcome and implications of the slowdown in the US economy stop companies from investing their money in BI and analytics tools?

Teo: You can have two marketing programmes: Generic broad-based marketing where you hope that it hits something and you get certain returns. But you have to spend a lot more to get this little returns.

Another is to develop a marketing programme targeted at a specific group. I know that I will get a higher per cent of returns for this investment, so it costs me less to invest in this marketing programme and I get a higher return. This is an area which we try to use as much as possible.

Md Khairuddin: Competition is very stiff among the banking industry. The pie is not expanding as much as we want. For PIDM, it is specifically looking at three sectors: mortgage, retail base and small and medium enterprises (SMEs).

As such, analytics are important for regulators like us because all the information need to be processed efficiently and timely to ensure that before the time comes we will know when the market will be stabilised. Otherwise, the likelihood is that you never know what hits you.

We have to be ready because we are talking about millions of depositors.

Nevertheless, because we are newly established), we don't have any legacy system. To be the best, you have to get the best system in place. For us, that's analytics.

Carl: The amount of data that is being generated on a daily basis is tremendous. Partly due to a compliance reason, we need to invest in analytics because we need to filter all our information.

For instance, we have an online portal where we have these guys who monitor it 24/7 and all they are looking at are tonnes of logs from all over the world. There is so much information which they need to compile into a little report on a weekly basis and a slightly thicker one on a monthly basis. The only way to do that whole security surveillance is through analytics.

That's because in the case of fraud, once it happens it is too late. It would be a loss in reputation. As such, you want somebody else to filter that information and give you what you want.

You still need people to interpret the end report but you need this data warehouses and business intelligence to give you that final idea and what is going to happen and where you need to look at in the future.

This is not really by choice, but by evolution. It is something which small companies previously never looked at BI, but now everybody is looking at it.

Teo: There is a lot of data floating around. The value of analytics is how to convert this into information. If not, you will never be able to process the amount of data that is available in the market.

Q: How many per cent of companies who bought analytics are actually utilising it to the maximum?

Davis: I don't think the majority of organisations have reached a point in which they have maximised the potential of analytics.

Based on the information evolution model, it helps organisations understand how well they are committed to fact-based decisioning and what is keeping them from realising their full potential.

There are five levels in that model. Seventy-five per cent of organisations that we talk to are stuck in between level two and level three of this model.

Level one is dominated by individuals. You don't want to be in an organisation stuck with individuals because you run the risk of having inconsistent results. This is where (BI and analytics) tools can become dangerous.

If you are a level two organisation, the use of data has been standardised at the department level. It means everybody in a given department use the same tools and the same data and they come up with the same results.

Within that department, that used to be ok. But now when we want a few things like to detect fraud, that does not work anymore.

If you are a level three organisation, you are taking more of an enterprise-wide view on information. So now you are sharing information across departments. you begun to tackle the political issues (the people, the process and the culture) of the organisation.

If you are a level four organisation, you are into optimisation. You are now using the information that you discovered at the enterprise level. You are now looking at it in terms of putting programmes in place to optimise your bottom line.

Finally, if you are a level five organisation, this is what we called a level of innovation where companies use analytics and data information to do things better to run their current business.

At this point, the organisation is fully committed to fact-based decisioning. Their data is an asset that is critical to the success of the organisation and they are beginning to do new things. New lines of business also come out of it.

Q: How does a company become a level five organisation?

Davis: Most companies find themselves stuck in level two or three, not because of technology issues but soft issues. If you want to move up in this model, you got to look at the company's infrastructure, that is, the hardware and software, people, processes and culture.

The reason why CIOs only last two years in most companies is that companies have a problem in implementing new ways of doing business. They give CIOs money and they say, "fix it". But the CIOs are not going to be able to fix it alone. The companies then fire the CIOs and bring in somebody new and spend more money.

Q: Does investing in analytics put you a step ahead of the competition?

Hui: There is a potential to it.

Davis: It depends on what you do with it and the people factor. The potential is there, but it is all on how you are going to execute around it.

Teo: If you don't use it, I don't think there is an advantage at all.

Davis: One of the reasons why we came up with the information evolution model was that in SAS' case, we don't make a majority of our revenue on initial sales, but on renewals. So if you buy our tools but you don't achieve value, you are not going to renew it.

It is thus important for us that we try to work with the companies on their people and culture issues. Otherwise our software is only going to be around in the first year and then it's gone.

Md Khairuddin: Businesses need to know what they want. There is certainly no one size/approach. It has to commensurate with the business that they want.

For me, it is look back at your business needs. Not simply because other people have it, I want to have it.

Hui: I will assure you that different institutions looking at the same data will come to different conclusions about the risks of individuals or companies.

The decisioning part is what matters now. That's based on your ability to manage that risk, and wanting to do the business.

Q: How do you instill a climate of fact base in the company and the issue of talents and retaining them and to leverage on the technology that you have?

Md Khairuddin: When we recruit people, one of the main criteria we look for is the attitude of wanting to learn. For our staff to embrace this new culture as well as the information technology, I just remind them to think how to make their task simpler. One of the tools is with BI.

Carl: If you want to change (a company's) culture, you have to change at the top. The Bank Negara Malaysia governor has a strong stand on human resources - on attracting and retaining talent.

But in terms of policy, this is something where Malaysia lags in the region, especially in the financial services because we have not made it easy to attract and retain the best people. We have an insular view because of local priorities. This is where we have lost out.