CMC Focus on: Customer Intelligence

There is an age old story in the IT industry which has been hijacked and used over and over again by marketing managers from all parts of the business. It tells of how WalMart in the US managed to boost sales of beer to men in their late 20s by analysing buying patterns and discovering that such men popped into the stores on 'nappy runs'. So, according to legend, armed with this knowledge WalMart put beer and nappies on the same shelves and watched sales of both rise.

It's absolute rubbish of course - find me a single shop in the world that sits alcohol and nappies on the same shelf! But it does illustrate at least the basic thinking behind that most abused and corrupted of concepts - business intelligence (BI). One of the problems with most information technology is that it's geared up to generate, gather and store massive amounts of data. Rather less of it is dedicated to the intelligent analysis of that data and turning it into useable and current business decision making information. So, data warehouses gets bigger and bigger and less and less useful.

This, the second in our monthly series of supplements looks at BI - or as it shall hereafter be known CI: customer intelligence - and highlights some of the bigger players in the market and some intelligent users of intelligence software.

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Intelligent Design

It's one of the biggest challenges to face any organisation: how to turn information into knowledge? More pertinently, how to turn information into actionable knowledge? Information technology has typically been used to accumulate data - often at the expense of common sense - leading to the phenomenon known as data deluge. The concept of drowning in data has become all too familiar to all too many organisations.

This has been seen in sectors such as data warehousing, where it seems that size very much matters. The problem with many data warehouse implementations however is that a warehouse is somewhere that you store things, not somewhere that you put things and turn them into something more useful. That many data warehouses become unwieldy and ultimately unusable is perhaps unsurprising in the circumstances.

Such technologies also appeal to a darker aspect of management thinking. The adage that knowledge is power is one that resonates with executives and leads to an information miser mentality. Specifications for data accumulation and management are all too often based around the concept of gathering as much data as possible and then holding on to it, rather than sharing it with the relevant constituencies.

This phenomenon extends to the CRM market as well where the occurrence of islands of information is familiar. Information flow throughout an organisation is often not achieved with data in a CRM system isolated from the call centre or from other operational systems. The end result is that information that could be used to up-sell, cross sell or simply enable the provision of better customer service is trapped in the system.

One solution has been the deployment of business intelligence technologies with the emphasis increasingly shifting towards the idea of customer intelligence. BI is an all encompassing term that has been used - and abused - by vendors with a variety of technology offerings. It has variously been applied to data mining, OLAP and analytics among others. As such, BI has become a somewhat degraded term in its own right, although still one with a good deal of currency.

A general definition would be that BI refers to tools and systems that play a key role in the strategic planning process of the corporation and which allow a company to gather, store, access, and analyze corporate data to aid in decision making. They should illustrate business intelligence in the areas of customer profiling, customer support, market research, market segmentation, product profitability, statistical analysis, and inventory and distribution analysis.

Alok Shende, Director - ICT Practice, Frost & Sullivan, noted: "The BI market is projected to be $70 million in 2007 from $47.4 million in 2005. BI is slowly permeating the enterprise space as CIOs get full comprehension of BI. BI also has to consider multiple disparate silos across enterprises. They have to look at multiple sources to derive competitive advantage. High-end analytics is approximately 6 per cent of the BI market while the rest comprises respectively of OLAP, data warehousing and ETL."
It’s certainly still big business. New licence revenue in the worldwide business intelligence software market will hit $2.5 billion in 2006, an increase of 6.2 per cent over last year, according to research firm Gartner. This is likely to continue with projects ongoing growth through 2009, when license revenue is expected to reach $3 billion.
The findings, based on a Gartner survey of 1,400 CIO's, indicate that business intelligence has surpassed security as the top technology priority this year. "Moving forward, BI will become part of business innovation itself," said Gartner research vice president Frank Buytendijk. "Sharing information with customers, suppliers, and other stakeholders increases loyalty and in many industries provides competitive differentiation. BI will become pervasive in operational and workplace applications as organizations seek to optimize their business."

According to Gartner, Business Objects commands more than 20 per cent of the BI software market, based on new licence revenues of $427.2 million in 2004. "With more than 20 per cent of the market, these license revenue figures from Gartner reaffirm what we already knew — Business Objects is the clear market share leader in business intelligence," said Rene Bonvanie, chief marketing officer at Business Objects. "Our software empowers users at every level of an organization with the information they need, when they need it. We provide users with the ability to turn information into something that can improve the performance of their job and their organisation."

As well as independent specialist firms like Business Objects, enterprise software firms such as Oracle and Microsoft have been making significant pushes into the BI space. Both companies want to make BI embedded in their existing technologies. As Microsoft puts it: "The goal is to reach every individual, add value to every decision, and help organisations align people and initiatives to business strategy."

Earlier this year Microsoft announced its intended acquisition of partner ProClarity for its visualisation front ends, developed on the existing Microsoft BI, SQL Server 2005, Office and (most important) SharePoint Portal Server platform. The upcoming release of 2007 Microsoft Office also broadens Microsoft's reach in BI, and this acquisition will build on that with what the company terms "business logic-driven guided analysis".

Oracle's acquisitions of PeopleSoft and Siebel brings with them embedded BI and analytics functionality. What was Siebel Analytics is now Oracle BI Enterprise Edition. Pureplay BI vendors argue that this level of embedded functionality is not on a par with the dedicated functionality that independent products can offer. But as always with any form of technology good enough will be good enough for many customers.

BI remains a compelling proposition for most organisations - and one that can deliver tangible benefits. A survey of executives at 350 companies in seven countries and across four industries by IDC found that marketing executives have become increasingly dependent on BI technologies to improve performance.

As marketing organisations face increasing pressure for improved accountability and alignment with budget, their key objective is the ability to provide insight into current and forecasted needs of individual customers and market segments - and act upon those needs. The survey results indicate that marketing organisations that invest in BI technology and utilise it efficiently also achieve better financial results and a higher return of marketing investment.

Two trends were identified by IDC: the proliferation of more niche segments, and the fragmentation of media and content - and thus the channels - to reach the intended audiences. These trends are making it increasingly more challenging for marketing organisations to conduct targeted campaigns to qualified audiences.

The top benefit, according to the survey's findings, is being able to optimise customer communications, followed by generating action-ready insight based on customer value metrics. Marketing organisations that use BI tools show a 16 per cent higher ability to provide insight into customer needs and are more effective in predicting customer behaviour by 24 per cent than those who don't.

"A marketing organisation's effectiveness is directly impacted by its ability to leverage customer/market insight through the usage and benefits of BI applications," said Rich Vancil, Vice President of CMO Advisory Research, IDC.
"Marketing leaders, represented by one-third of the study's participants, leverage customer and market insight, including prediction of customer behaviour, to achieve greater effectiveness in customer retention, acquisition of new customers, revenue growth and market share expansion. The consequence of greater effectiveness in each of these areas is improved marketing ROI."

Market Makers

CMC invited two of the leading market makers in the BI space to provide their own commentaries on the evolving industry: Phil Winters, SAS and Renaut Besnard of Microsoft.

The future direction of customer intelligence

Phil Winters, vice president of customer intelligence, SAS International:

When referring to Customer Intelligence (CI), we must be clear that this is different to Customer Relationship Management (CRM). CRM is an approach that businesses should undertake, which can't be 'sold' per se. CRM applications, which continue to have variable degrees of success, are operational applications that automate the day-to-day channels and functions used to interact with customers – those confusing these applications with the actual job of managing customer relationships are usually the people pointing to "failed CRM projects".

CI however, is a strategy which creates totally new insight into an organisation’s customers. It then applies that new intelligence to the business and measures the value generated. That new insight illustrates the behaviour of customers, the current and future profitability of those customers, and the potential risks they introduce to the organisation. With the latest insight, businesses are able to identify new trends and predict future propensities – all based on solid fact.

CI is not just consulting or software – we define CI as an end-to-end process, which should be provided by a software platform architected specifically to generate intelligence, allowing people with a variety of backgrounds to use CI successfully in their day-to-day jobs.

We believe there are four trends currently converging, pushing the future uptake and success of CI strategies.

Firstly, companies are recognising that they can take an end-to-end platform like the SAS CI platform and avoid the time, cost and risk involved in building the correct solution from scratch. No longer do they think of data integration, data mining, business intelligence (BI), campaign management and reporting as totally separate tasks that somehow must be merged together. They can rely on a seamless platform that allows them to focus on solving the business issues instead of waiting on IT to "provide the data."

Secondly, recent studies focused on this topic, for example IDC's recent report on BI value, are clearly showing that leaders utilising BI have a demonstrable 16 per cent higher bottom line return over the laggards, adding more fuel to the fire that CI should be used as a competitive advantage over others in the market.

The third development is the increased availability of knowledge and experience within the field. The more savvy providers are now transferring their combined experience to their client’s teams, so that those teams can continue to grow. There is no longer the expectation that companies will either rent the knowledge by the man-day or be left with a bucket of software tools to decipher through trial and error.

For example, at SAS, we provide industry intelligence solutions that tell our customers exactly what needs to be collected, how it needs to be cleaned, modified and presented, which models will create that valid future view, what the best form of execution will be for that new intelligence and what KPIs should be used to measure their effect.

Lastly, there is the growing realisation that CI is an ongoing strategy. Companies will always create new intelligence which will need to be managed and acted upon. All companies will benefit from a CI strategy that includes a platform and the implementation of industry best practices. This establishes the foundation for companies to continuously challenge their existing insight and improve their competitive edge.

We've seen that organisations are at varying levels of maturity with CI. Some are still focused on tools and IT issues, whereas the more mature organisations are looking at new trends – like real-time and inbound contact with customers – to drive the events that happen.

The highest level of maturity though, is found in those organisations that realise CI is about much more than providing the right product at the right time at the right price – it’s about using customer intelligence to positively change the experience a customer has with their company. This is what we see as the future of CI, and there are organisations we work with that are already successfully beginning to delight their customers through this optimal use of CI.

Renaud Besnard, Office Business Applications product marketing manager of Microsoft UK:

Business Intelligence does not only offer insights to Customer Relationship Management processes: offers vital integration within organisations

Traditionally, Business Intelligence (BI) is used to make decision-making easier on a tactical level. For example, a product manager may look at the analysis of collected data before making a discount schedule and consequently the pricing decision of a new product. Analysts such as Gartner, IDC and Forrester are all expecting rapid growth of BI budgets in 2006. Renaud Besnard, Office Business Applications product marketing manager of Microsoft UK, explains the contributions to this forecast and why he believes that BI now applies to every decision-maker at all levels; from strategic, tactical to operational.

BI solutions can largely augment the strategic value of and ROI on a standalone CRM solution by providing unique insights into its performance against key objectives. This is typical of today’s evolving use of BI – increasingly embedded into everyday workflow processes. However, this is not an easy task; a large organisation may already have up to a dozen legacy tools, while smaller companies may rely on a collection of home-grown applications or small proprietary tools. The only effective way to achieve this joined-up business vision is to deploy a complete, fully-integrated and easy-to-use BI solution that works across diverse environments.

Ideally, they need a complete BI solution to handle processes such as planning, analysis and reporting for all departments to achieve better results faster, based on timely accurate data. While big strategic decisions are significant but infrequent, recurrent daily operational decisions have less individual impact but on aggregate, also significantly drive the business – a complete BI platform that helps drive better, faster decisions at all levels from senior management to front-line workers becomes essential.

A complete BI system focuses on the complete processes that actual information workers follow. For example, salespeople want to access customer information, manage their sales, access product experts inside their company and make proposals without 'reinventing the wheel'. More fluid processes help them get their jobs done, but typically are not part of traditional customer relationship management systems.

In addition, Performance Management features such as scorecards can be integrated with compatible CRM solutions to monitor key metrics and trends around win/loss status, lead and opportunity analysis as well as ratios and product analysis. These allow CRM managers to drive better business results by linking objectives, strategy and performance.

Also a very important aspect of a successful BI system is the ability to reach all information workers by making it easy and simple to use. For example the provision of an accessible user-interface such as Excel can offer a familiar experience to new users and give confidence to experienced users. By providing a BI system that integrates and works across the businesses core applications and CRM/ERP packages the business can truly deliver 'business intelligence' in essence democratising this information so that everyone can make decisions, no matter how big or small, that they can be confident in.

It's no wonder that Business Intelligence is currently seen as priority number one for UK CIOs, it delivers real competitive ‘business’ advantage. However our experience tells us that it is not uncommon for companies to lose sight of their business due to disconnected business systems or tools. It is time to quit sitting on the valuable data and begin turning it into a competitive business tool. BI should be part of everyday workflow processes for everyone, rather than just high-level, expensive, solutions for just a few departments within an organisation.

CI in Action

Virgin Retail has deployed Microstrategy business intelligence software connected to its 15-year-old JDA MMS merchandising system to plan product purchasing at store level. Virgin Retail started using assortment planning for music products six months ago. This is an extension of the company’s Epos-Linked Virgin Information System (Elvis), which uses the information in Microstrategy to produce assortment plans for each store. Assortment planning makes use of a SQL Server datawarehouse and a business intelligence platform from Microstrategy.

Resorts World Bhd is using the SAS Business Intelligence (BI) solution for its Business Analytics Initiative to create an integrated and complete view of its customers. By better understanding customer needs and preference, the resort expects to be able to offer unique products and services to its customer segments that encompass both local and foreign visitors. It should also enable RWB to improve its communications with their customers, enhance RWB's quality of products and services, and to increase its staff's response time to customers' needs for increase productivity.

Carphone Warehouse aims to improve its planning, budgeting and financial using BI technology from Hyperion. The mobile phone firm has purchased Hyperion Planning, Hyperion Financial Management, and Hyperion Master Data Management Server. Carphone Warehouse were already an existing Hyperion Essbase customer, and have now increased the number of users from 32 to nearly
200.

Who's Who?

SAS

One of the most established software firms in the industry, SAS was at the forefront of the BI movement. The privately held firm’s portfolio of produts is expansive and its customer base has global reach. The company is dismissive of the claims of enterprise applications firms such as SAP and Oracle to be able to offer BI and analytics capabilities. It argues that the real value from from BI comes from predictive analytic capabilities whereas most vendors only offer analysis of events in the past.

Microsoft

Microsoft has formidable BI ambitions which it beefed up with the recent launch of PerformancePoint Server (PPS) 2007 which it claims offers large enterprises a complete performance management system. The package features key BI elements such as scorecarding, analytics and forecasting, integrated with Microsoft staples such as SQL Server and Office Excel. Microsoft also plans to use the system to add tools such as financial analytics to its Dynamics apps range.

"Traditional BI systems are made up of around 10 to 12 different products, which offer different views of the organisation and are expensive to maintain," said Renaud Besnard, Microsoft UK’s Office Business Applications product manager.

Microstrategy

MicroStrategy is perhaps the most pureplay BI vendor left on the market. "We do one thing, we believe we do it the best of anyone in the industry—we build a BI platform so that our customers can design and build their own analytical reporting applications," said Tom Villani, vice-president of global alliances with MicroStrategy recently. Last month it expanded its relationship with Microsoft by extending access to multidimensional data sources with support for Microsoft SQL Server 2000 and SQL Server 2005 Analysis Services.

Business Objects

Founded in 1990, Business Objects has become one of the leading BI firms worldwide, expanding significantly in 230 when it bought Crystal Decisions. This gave the French firm entry into the mid-size business market as well as a US presence. In 2005, Business Objects earned $92.6 million on revenue of $1.08 billion compared to a profit of $47.1 million on $925.6 billion in 2004.But the stock price fell sharply in April when its second-quarter financial guidance for 2006 missed expectations. CEO John Schwarz, who was appointed last year, sees the mid market as one of the opportunities for growth, targeting companies with fewer than 2,500 employees. "Business intelligence has been around for a while as an idea and a technology and so most of the large customers have some BI technology installed," he argues. Schwarz also wants to see the firm transform from being a software products company to a "solutions-focused company."

Cognos

Canadian software firm Cognos has recently seen stock decline and is currently having to work with the Securities and Exchange Commission on finalising its financial reporting. But the firm remains a significant presence in the BI space and has recently pitched itself as "the BI solution of choice for leading Software as a Service (SaaS) application providers and their customers. SaaS will be a pervasive application business model over the next four years, and Cognos is already at the forefront of this evolution through its strong relationships and partner deployments," said Jennifer Francis, vice president of market development, Cognos.