Reaching for Analytics

The current economic challenge is honing and shaping how organizations will run for years to come. Those business leaders who are meeting today's challenges by cutting costs and conserving cash are certainly gaining valuable experience. Will that experience help them to lead their companies through future business cycles, when unforeseen challenges once more emerge?

In today's world of information everywhere, business decision-making is often burdened with too much information. In fact, in a recent IBM Corp. survey of more than 225 business leaders, more than one-third said that they have significant challenges in extracting relevant information, using it predictively, and using it to understand risk. One in two business leaders indicated that they do not have sufficient information from across their organization to do their jobs.

Nowhere perhaps is this more true than within the ranks of financial executives. Four in ten of finance respondents admitted that they frequently made major decisions with incomplete or untrusted information. Meanwhile, six in ten said that finance and accounting would benefit from more accurate information and seven in ten said that predictive information would drive better decision-making. There's little question that financial leaders, like their line of business peers, are looking for ways to close frustrating gaps and optimize performance -- both financial and operational.

Bringing Greater Insight to Decision-Making

In a business environment that has little resemblance to the past, old ways of decision-making and management are breaking down. Business leaders sense an inflection point, an opportunity to revisit their use of information, or analytics, and fundamentally alter the way in which they conduct business. While analytic methods have been available for some time, today's tools and techniques are designed to bring greater insight and predictability to decision-making. Statistical methods, including complex algorithms previously the domain of academics, are now being routinely used to solve formerly intractable or overlooked business challenges.

A prominent mutual funds company, for example, looking at low profitability scores on a particular product -- a fund of funds -- decided to stop offering it. When the firm looked at its information another way, the score changed: Their most profitable customers had a striking predisposition to include this fund of funds in their portfolios. Product management was able to tweak the offering to improve profitability rather than put customer loyalty -- and the future acquisition of top customers -- at risk by dropping the product in question. Had a multivariate analysis of both product and customer information not been conducted, the wrong decision would have been made.

For the intelligent enterprise, the new reality is this: Personal experience and insight are no longer sufficient. New capabilities are needed for better decisions. Innovative solutions, in various stages of pilot or deployment, are providing just that. Finance leaders have a key role in bringing financial and performance information together in unprecedented ways like these:

• Workforce optimization. Staffing objectives are being set on the basis of strategic business plan, historical trends, and future scenarios. Analytically based decisions are put into action to achieve these goals.
• Risk assessment. The operational risks of IT infrastructure are being quantified and evaluated based on potential impact to the underlying business processes. Decision-makers then objectively select appropriate actions to mitigate this risk.
• Customer service. Unstructured data such as customer emails and phone calls are being analyzed to identify trends, improve customer care, and provide more targeted marketing based on new insights culled from previously unmanageable information.
• Marketing. Significant correlations have been established between customer loyalty; specific products and channels; and the bottom line. Based on mathematical modeling and simulations, business leaders develop and prioritize new programs to improve customer experience.