5

Insights for
executives

Predictive analytics
The C-suites shortcut to the business of tomorrow

Of special interest to

Chief executive officer

Chief financial officer
Chief marketing or sales officer
Chief information officer

In the era of big data, companies across a range of industries are recognizing the need for
better intelligence and insight about their business. They want to work out how to make the
best decisions, drawing on the right information, at the right time.

Finding and accelerating growth opportunities drawing on internal and external data to
help model and predict business outcomes, identify the most profitable opportunities and
differentiate the business from its rivals.

One organization that has been pioneering in its use of predictive analytics has been the
United States Postal Service. Using an analytical approach, it predicted which workers
compensation claims and payments were unwarranted and saved some US$9.5 million
during 2012 alone. This is not an isolated example: many leading organizations have started
to regard their information as a corporate asset.

Improving business performance enabling agile planning, more accurate forecasting,

better budgeting and trusted decision-making support.

Business benefit can be gained by creating systems that can convert information
into actionable insights, all within the context of key business priorities. Some of
these include:

| 5 Insights for executives

Managing risk and regulatory pressures improving reporting processes through the
exploitation of more robust data, while also identifying potential risk areas, such as
compliance violations, fraud or reputational damage.
Exploiting emerging technologies continually identifying new opportunities to gain
insights from data.

Whats the issue?

Very few companies are fully exploiting the potential of predictive analytics.
And these new aspirations also often collide with the struggle to contain and
cut IT spend.
The key questions start with the ability to quantify the value of available
information within the context of an organization, a department or business
function working out which data sources might help to strengthen the
generation of new insights.

At the outset, issues range from working out how to derive benefits from
information and in which context such data might be relevant. There is also
a need to prioritize those activities, not least as views may differ sharply
between what IT considers important versus what the rest of the business
does. Finally, there is the challenge of determining how to perform and
operationalize analytics, while taking the impact on processes and behaviors
into account.

Why now?
We operate in a digital world, with vast and constantly increasing
volumes of data being generated. Every minute of the day, more than
200 million emails are sent globally, while Google receives more than 2
million search queries. The retailer Walmart now handles about 1 million
transactions every hour, adding to a database that is nearly 2.5 petabytes
in size. By 2020, some 450 billion online transactions are expected to take
place every day. Sources of data, both structured and unstructured, are
multiplying rapidly, from external social networking interactions to internal
call center transcripts. Indeed, organizations now embrace data as a fourth
factor of production, alongside capital, people and materials. They use it to
help sharpen their business performance by differentiating their offerings,
uncovering new opportunities and minimizing their risk exposure.

Predictive analytics is not brand new, but the technologies that help
firms make sense of their data have only recently become available. This
is allowing firms to uncover and exploit patterns in their historical data,
identifying both risks and opportunities ahead. In short, businesses can use
data to look forward, rather than at past performance.
Leading organizations increasingly recognize that predictive analytics can
deliver more than just customer insight; it can also have a positive impact
on compliance, security, fraud detection and risk management.

Predictive analytics is not brand new, but the technologies that help firms make sense of their
data have only recently become available.

5 Insights for executives |

How does it affect you?

Many businesses report a disconnect between their desire to capitalize on
data and their ability to do so. It becomes even more imperative for business
and IT to develop a joint model and terminology for valuing information,
which is directly linked to the organizations key performance indicators.
Efficient analytics-enabled business processing measurably impacts
performance by supporting better planning, forecasting and decisionmaking. It can help boost revenues, reduce risks and increase agility. But
getting this right often demands that traditional IT and operational roles,
structures and culture adapt to a new way of working, not least through the
introduction of specialist positions, such as data scientists.
The adoption of analytics also brings with it new risks. Traditional levels of
comfort around data quality, privacy, intellectual property and reputation
management must evolve. This, in turn, impacts peoples behavior.

| 5 Insights for executives

Efficient analytics-enabled business processing

measurably impacts performance.
Ensuring that all parts of the business are engaged, so that the full picture
is captured and information gaps are minimized, is another challenge.
Customer data is a typical example: sales holds some data, such as billing
addresses and transaction records, while marketing may hold customer
feedback insights, and logistics holds physical delivery details. Information is
often either duplicated or inconsistent, if it is available at all.
Nevertheless, correctly navigating such challenges is worth the effort. In
an era of consumerization, those organizations able to monitor and predict
customer behavior and preferences closely, without crossing the line on
privacy, can gain significant advantage.

Whats the fix?

Bringing technology-driven analytics to bear on a project involves several
key steps:

As such steps become embedded, a portfolio of analytics projects

should be developed. Quite simply, with limited resources, the most
important initiatives need to be pushed to the front. As part of this, an
implementation roadmap needs to be set out that also charts the likely
impacts a given project might have.

2.

1.
Understand the problem and
address it in a way that it becomes
clear which insights need to be
discovered through predictive
analytics.

Collect the information needed

to tackle the problem. This demands
an analysis of which data is most
needed, what is already available and
where any key gaps lie, along with
an assessment of data quality and a
sense of where missing data might
be sourced.

3.

4.
Act on the findings even if they
imply a major shift by adapting
processes and behaviors to capitalize
fully on the transformative potential
of predictive analytics.

Perform the analytics, using

mathematical algorithms to help
uncover patterns within the data.
These findings need to be translated
back to the business problem to help
interpret the outcomes in the most
useful context.

5 Insights for executives |

Whats the bottom line?

The information war has already started. From here on in, business
performance will depend to a great extent on an organizations ability to
gain access to the right information and to exploit it fully.
At a high level, predictive analytics can help companies to:
Move from a retroactive and intuitive decision-making process to a
proactive data-driven one
Build models that more closely predict future real-world scenarios and
their related problems and opportunities
Uncover hidden patterns and relationships in the firms data

| 5 Insights for executives

More specifically, information-led companies will be able to sharpen

their competitive edge. There are numerous examples of what this might
deliver: attracting more valuable and loyal customers, charging prices
closer to the market rate, ensuring more focused and relevant marketing
campaigns, running more-efficient and less-risky supply chains, ensuring
the best product or service quality levels, ensuring highly individualized
customer service and guaranteeing a deep understanding of how process
performance drives financial performance.

Want to
learn more?
The answers in
this issue are
supplied by:

Andy Rusnak
Enterprise Intelligence Leader
Americas Advisory Services
Ernst & Young LLP
+1 215 448 5029
Andy.Rusnak@ey.com

Christer A. Johnson
Principal
Americas Advisory Services
Enterprise Intelligence - Analytics
Ernst & Young LLP
+1 703 747 0628
christer.johnson@ey.com

Gary Angel
Principal
Americas Advisory Services
Enterprise Intelligence - Digital Analytics
Ernst & Young LLP
+1 415 894 8255
gary.angel@ey.com

For related thought leadership, visit www.ey.com

5 Insights for executives |

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