Podcasts Use Cases University Map Glossary Whitepapers Webinars Guides & eBooks

Management Skills Visualizations Predictive Analytics Marketing Operations Cloud

Christer Johnson, Principal, Ernst &
Young
RReellaatteedd SSttoorriieess
IBM: Firms Looking to External Data
Sources to Elevate Analytics Value.
Read the story ( http://data-
informed.com/ibm-rms-looking-
external-data-sources-elevate-
analytics-value/)
Domain Expertise Vital to Unlocking
To Find the Value in Your Data, Stop
Searching for It
by Christer Johnson (http://data-informed.com/) | April 11, 2014 5:30 am | 1 Comments
Mobile devices, smart phones, and devices used in customer
transactions deliver some 5 billion gigabytes of information to
corporate databases every day. Naturally, many corporate
analysts and sales and marketing teams are inspired by the
opportunities to mine the data to gain valuable insights about
customer behaviors and preferences.
Starting with a large pool of data, paradoxically, can actually
make it harder to nd value. To nd it, companies shouldnt
focus on how to derive value from data, but rather on the
business decisions that the company can make more
e!ciently and e"ectively. To use an explorer analogy, there is
a reason explorers who set out with a clear goal or
destination in mind tend to be the ones we remember.
Columbus didnt set out to get value from the ocean. He
sought an ocean route to Asia and ran ashore in the
Americas along the way, ultimately gaining awareness of a
large land mass between Europe and Asia to the west.
Once a key business challenge has been identied and it
comes time to generate value from big data, companies
should proceed sequentially through the following three steps in the analytics value chain:
Collect and manage data e"ectively 1.
Perform sound and appropriate analytics 2.
Use the results from steps 1 and 2 to drive the key business decisions 3.
Before actually collecting and analyzing any data, however, it is important to set the stage for
obtaining value by thinking carefully about what decisions you need to drive in step 3, and then work
backward to map out the type of analytics and data that would support those decisions. Experience
has shown us that the companies that derive the most value from data and analytics routinely start by
asking, What decisions need to be made better and faster? In other words, they start with the end
in mind and then gure out which analytics need to be performed and which data might be relevant.
Obtaining value from analytics is about having the right insights, at the right time, and in the right
place to make impactful decisions. It is not just about producing interesting information.
Lets look at how one telecommunications company was able to
shift its data collection and analysis approach to support this
strategy. An analyst at the company developed a churn model
with marketing data to predict the likelihood that customers
would drop their accounts within 15 days. The model generated
an accuracy rate of almost 85 percent, but the 15-day warning
o"ered the company insu!cient time to prevent customers from
leaving. As a result, the highly accurate model did nothing to
JJooiinn tthhee CCoonnvveerrssaattiioonn
(http://cta-service-cms2.hubspot.com
/cs/c/?&cta_guid=74807e22-84ef-
4e77-baa9-1551b00e72d6&
placement_guid=659de830-867b-439a-809e-
872d132cc6ec&portal_id=215445&
redirect_url=El9oj%2B0vrUd6hNDNVQ%2B
/yyFEuHEB6CO1bXw7W
/8%2BY%2Bi0CnljQ3oqiHFaPVjSCplouKat%2BO9iXwE%3D&
iv=ydENuXx3pWw%3D&hsutk=&canon=http
%3A%2F%2Fdata-
informed.com%2Funcover-value-data-stop-
focusing-uncover%2F) (http://cta-
service-cms2.hubspot.com
/cs/c/?&cta_guid=e912b2ca-34"-4226-829c-
40a28d7bea07&placement_guid=ae05c418-
e4a9-484a-898f-7ec0af3fdc05&
portal_id=215445&
redirect_url=poUj59lKV17Zko4TFxbDR7k8RIjcduAeKlxfBblDwwxXHPcI3
/547hd5jMQJCzidCJ
/x97pv2NonImAy44Sh5zG0h
/%2BFsA6UkDnqPybSZcd3TMtVWQo8BYiVK
/3o0QBptm0Jp8viYUpHbE%3D&
iv=9YEr6y8x5BE%3D&hsutk=&canon=http
%3A%2F%2Fdata-
informed.com%2Funcover-value-data-stop-
focusing-uncover%2F) (http://cta-
service-cms2.hubspot.com
/cs/c/?&cta_guid=cbc6249e-
9d39-4ab8-951b-35cfaa5a04e6&
placement_guid=8f45ef68-49df-
4455-8a88-5222115317da&
portal_id=215445&
redirect_url=MzJwdJJPXjl6aqfUA7qMvzmOGNDfmccnWfgV2UafyznbTq
iv=i/X3WQhuqIc%3D&hsutk=&canon=http
%3A%2F%2Fdata-
informed.com%2Funcover-value-data-stop-
focusing-uncover%2F) (http://cta-
service-cms2.hubspot.com
/cs/c/?&cta_guid=bdbf54b8-57e2-473a-
8104-6a5a3656fb3d&
placement_guid=738a0fcd-e7aa-498b-
9d96-98f31426118c&portal_id=215445&
redirect_url=CS4jwCy8%2Bo2kfA
To Find the Value in Your Data, Stop Searching for It http://data-informed.com/uncover-value-data-stop-focusing-unc...
1 of 4 6/4/14, 11:36 PM
Value of Machine and Mobile Data.
Read the story ( http://data-
informed.com/domain-expertise-vital-
unlocking-value-machine-mobile-
data/)
Government Data Chiefs Find Varied
Measures for Analytics Value.
Read the story ( http://data-
informed.com/government-
data-chiefs-nd-varied-measures-
analytics-value/)
The Challenge of Aligning HR
Surveys and Data with Business
Value.
Read the story ( http://data-
informed.com/the-challenge-
of-aligning-hr-surveys-and-data-
with-business-value/)
help the company achieve its desired goal of reducing attrition
because the company didnt have time to make business
decisions that could impact a customers choice to leave or stay.
Several months later, a new analyst attacked the attrition
problem from a di"erent perspective. He realized the goal was to
predict, as soon as possible, customers at risk of leaving. The
company required time to make decisions and take actions to
keep the customer even if it meant predicting churn with a
lower overall accuracy rate. By starting with the key requirement,
that the company needed more advanced notice regarding
customers likely to churn, the analyst realized he should explore
new and di"erent analytical techniques and data sources.
In relatively short order, the analyst decided to talk with the
operations unit of the company to see if data existed on dropped
calls and when the coverage dropped from 4G to 3G. The data
was available, and he quickly gained access to it and was able to merge it with the existing customer
data used to create the original model. Using the new data, the analyst built a model that identied,
with only slightly lower accuracy than the rst model, customers likely to leave within 60 days. That
additional lead time gave the company more time to take action and design programs and o"ers that
signicantly improved customer retention. In other words, the company claried the necessary timing
of the decisions it needed to make and then built an analytical model to meet that timing.
One way to prioritize the business decisions that deserve a more rigorous analytic approach is to
adopt a more exploratory data-mining approach centered on identifying what drives a specic
business metric, such as revenue or cost. This approach di"ers from the traditional method of forming
a (narrow) hypothesis and then looking to either prove or disprove that hypothesis. The traditional
approach increases the chance of missing critical insights into what truly drives revenue or cost
because the potential drivers are too narrowly dened. Similar to the di"erence between a multiple-
choice question and a free-form answer, the former gives an answer but the latter allows for new
thinking.
One company, which recently analyzed its sales and pipeline data, had long held a hypothesis that
revenue was directly related to pipeline. As it turned out, there was minimal correlation between
pipeline and revenue because the company had no way to measure or represent the quality of each
sales opportunity entered into the pipeline. As the company put more pressure on the sales force to
expand the pipeline, sales resources began entering lower quality opportunities to meet the demand.
Using exploratory data-mining techniques to identify which deals had a higher win probability, the
company determined that the win rate when the competitor eld in a pipeline entry was left blank or
unknown was close to 5 percent. That is much lower than the 30 percent win rate on entries in which
the competitor eld was lled in. Thus, exploratory data mining helped the company rethink a
long-held belief that encouraging sales people to expand pipeline is a key driver of sales. Subsequent
analysis was designed to support a more nuanced approach to drive pipeline quality and to prioritize
e"orts on the deals with the highest probability of winning.
Once the company realized that pipeline was not strongly correlated with revenue, managements
eyes were opened to explore other factors that drive changes in revenue. One of the factors they
identied was price discounts o"ered at the end of the quarter. The company realized that 30 percent
of its sales were tied to a product for which the price was not signicantly correlated with changes in
sales. The companys previous emphasis on providing quarter-end discounts had trained its
customers to wait until the last minute to receive the discounts the company o"ered. This analysis
helped the company make better decisions about when to lower price and when not to lower price.
Companies that can consistently nd the most e"ective ways to extract value from their data will be
the ones positioning themselves to win in the global marketplace. Companies that dont approach
data with an end goal of nding insights that help them solve specic business issues likely will nd
themselves oating in an ocean of big data, wasting resources and, even worse, losing their
competitive edge.
Christer Johnson is a Principal within Ernst & Youngs National Advisory Practice (http://www.ey.com
/US/en/Services/Advisory/Risk), Enterprise Intelligence, Analytics. He brings 20 years of experience
leveraging advanced analytics and mathematical techniques to help his clients improve the e!ciency
and e"ectiveness of business decisions and processes across industries including government,
transportation, consumer package goods, healthcare, insurance, life sciences, and
telecommunications.
/Cua0kscaHvHl1c0sieHCkCqXEh4Aaszazl0jS36YJeu5PFoIxerbfZrZiwjG
%3D%3D&iv=km9v6rL1NeY%3D&hsutk=&
canon=http%3A%2F%2Fdata-
informed.com%2Funcover-value-data-stop-
focusing-uncover%2F) (http://cta-
service-cms2.hubspot.com
/cs/c/?&cta_guid=12cf3789-4e3a-47ba-b05b-
b08b9d8e89c2&placement_guid=c23e3344-
f4fa-4f06-9822-b8933756f120&
portal_id=215445&
redirect_url=fHqYmiIhBEekQfwAgwetmFia0mm3pUHXX2vW1dRayfUujS
iv=uCoqHl%2BsJBE%3D&hsutk=&
canon=http%3A%2F%2Fdata-
informed.com%2Funcover-value-data-stop-
focusing-uncover%2F)
SSeeaarrcchh

MMoosstt PPooppuullaarr AArrttiicclleess
Use Predictive Analytics to Improve the Customer
Experience
Take a Data-Centric Approach to Managing Your
Unstructured Data
Cincinnati Bengals Take a Moneyball Approach
to Talent Evaluation
Data Informeds Top 10 Stories of 2013
Can Big Data Grill the Perfect Burger?
To Find the Value in Your Data, Stop Searching for It http://data-informed.com/uncover-value-data-stop-focusing-unc...
2 of 4 6/4/14, 11:36 PM
(http://cta-redirect.hubspot.com/cta/redirect/215445/d22d61d6-"77-4565-867f-1a8c909bf112)
Tags: analytics (http://data-informed.com/tag/analytics/), big data (http://data-informed.com/tag/big-
data/), data management (http://data-informed.com/tag/data-management/), data science
(http://data-informed.com/tag/data-science/)
One Comment
Sam Austin
Posted April 17, 2014 at 6:10 pm | Permalink
Bravo, this is spot on. Without questions to guide inquiry, and data that is collected, cleansed
and segmented with a documented process, scrupulously mindful of its potential uses and
limitations, data cant tell us anything that would justify the time and e"ort it takes to analyze it,
and we can set little store by what it does tell us. Yet too many still seem to think that data
analytics can answer all their questions without the necessity of formulating even one, and that
some magic button must exist that will both reverse the ills of prior neglect and obviate the
necessity of rigorous and consistent data hygiene. Stop the madness!
Reply
1.
Post a Comment
Your email is never published nor shared. Required elds are marked *
Comment
Name*
Email*
Website
Notify me of followup comments via e-mail
Most Recent Posts
Share 40

Data Informed
+ 680
Follow +1
Meet the Staff and Contributors Meet the Staff and Contributors

To Find the Value in Your Data, Stop Searching for It http://data-informed.com/uncover-value-data-stop-focusing-unc...
3 of 4 6/4/14, 11:36 PM
About Us Contact Us Advertising News Room Privacy Policy Site map Terms and Conditions
20 Carematrix Drive, Dedham, MA 02026, USA | Sales and Customer Service: 1.781.751.8799 | Email: customer@wispubs.com (mailto:customer@wispubs.com)
Copyright 2012-2014 Wellesley Information Services. All rights reserved.
MapR Looks to Enhance Hadoop Accessibility with App Gallery (http://data-informed.com/mapr-looks-
enhance-hadoop-accessibility-app-gallery/)
Webinar: Correlating Sales Data with Customer Behavior Data to Improve Sales and Customer
Interaction (http://data-informed.com/webinar-correlating-sales-data-customer-behavior-
data-improve-sales-customer-interaction/)
An Execs Advice to Data Analysts for Getting Heard in the Boardroom (http://data-informed.com
/executives-advice-analysts-getting-heard-boardroom/)
Cincinnati Bengals Take a Moneyball Approach to Talent Evaluation (http://data-informed.com
/cincinnati-bengals-take-moneyball-approach-talent-evaluation/)
To Find the Value in Your Data, Stop Searching for It http://data-informed.com/uncover-value-data-stop-focusing-unc...
4 of 4 6/4/14, 11:36 PM