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IBM Global Business Services       Business Analytics and Optimization
Executive Report




IBM Institute for Business Value




Business analytics and optimization
for the intelligent enterprise
IBM Institute for Business Value
IBM Global Business Services, through the IBM Institute for Business Value, develops
fact-based strategic insights for senior executives around critical public and private
sector issues. This executive report is based on an in-depth study by the Institute’s
research team. It is part of an ongoing commitment by IBM Global Business Services to
provide analysis and viewpoints that help companies realize business value. You may
contact the authors or send an e-mail to iibv@us.ibm.com for more information.
By Steve LaValle




It’s easy to understand why business leaders regard their
experience and intuition as inadequate tools for optimizing their enterprises. In addition to
all the new information being created every nanosecond, permanent and far-reaching
changes are being shaped by multiple global forces that include a new economic
environment, along with the familiar forces of a shrinking and flattening world. Routines
persist but everything is just so different and very little feels familiar.
Based on our survey of 225 business leaders worldwide, we found that enterprises are
operating with bigger blind spots and that they are making important decisions without
access to the right information. They recognize that new analytics, coupled with advanced
business process management capabilities, signal a major opportunity to close gaps and
create new business advantage. Those who have the vision to apply new approaches are
building intelligent enterprises and will be ready to outperform their peers.

Introduction                                                        In an environment that has little resemblance to the past, old
Like coastal cities seeking shelter from successive onslaughts      ways of decision making and management are breaking down.
of blizzards and floods, today’s enterprises are striving to come   Today’s leaders sense an inflection point, an opportunity to
to terms with their own extreme conditions. Their challenge         revisit their use of information, or analytics, and fundamentally
is information – how it is acquired, managed and interpreted        alter the way in which they conduct business. While advanced
to drive business value. Business leaders considering how they      analytic methods have been available for some time, today’s
will weather the storms are questioning whether traditional         tools and techniques provide superior insight and predictability
techniques will continue                                            to support management decision making and actions. Complex
to work.                                                            algorithms, previously the domain of academics, are now being
                                                                    used to solve formerly intractable business challenges.
2   Business analytics and optimization for the intelligent enterprise




Almost unimaginable just a few years ago is the fact that                                         For the intelligent enterprise, the new reality is this: personal
transistors are now being produced at a rate of one billion for                                   experience and insight are no longer sufficient. New analytics
every individual on earth. In sending signals from both people                                    capabilities are needed to make better decisions, and, over
and objects, these transistor-based “instruments” are able to                                     time, these experiences will even inform and hone our gut, or
provide unprecedented levels of insight – for those organiza-                                     instinctive, responses. Making analytics core to our thinking
tions that can successfully analyze the data. That’s a high bar                                   is the only way we can really get smarter, and doing so is
to pass. How is it possible for organizations to make sense of                                    an imperative not an option. The information explosion
information with virtually quantum-level granularity – and                                        has permanently changed the way we experience the world:
cosmic-level ubiquity?                                                                            everyone – and everything – is leaving real-time data tracks.
                                                                                                  Intelligence is now increasingly embedded in objects, and
                                                                                                  individuals have become market segments of one.




                                                   Traditional approach                            New approach
                                                    Instinct and intuition                          Fact-driven

                                                    Corrective                                      Directive

                                                    Years, months, weeks                            Hours, minutes, seconds

                                                    Human insight                                   Applied semantics

                                                    Decision support                                Action support

                                                    Efficient                                       Optimized


The new approach represents a significant extension of current capabilities, not a replacement.

Figure 1. Intelligent enterprises will adopt new ways of working.
IBM Global Business Services   3




Tackling information complexity                                    Technology and instrumentation for smarter connections are
In our recent past, businesses have leveraged new technologies     abundantly available, and at a relatively low cost. But to turn
such as enterprise resource planning (ERP) and customer            this information into new intelligent action, organizations need
relationship management (CRM) as redefining moments,               extraordinary powers of analysis – applied broadly and consis-
propelling them to greater efficiencies and sales volumes.         tently. With information put into context, and with business
Today, it is the advances in business process and information      process management acumen, leaders can now work on issues
management that drive the new step changes that will               that matter. But that requires a sea change in how leaders make
empower businesses and their people.                               strategic decisions and how they run their organizations.

Our modern information environment is unlike any preceding         The intelligent enterprise will have ready access to precise,
it. Information is voluminous, its velocity is extreme and its     relevant information, from all sources. Information will be
formats are widely varied. It comes structured and unstruc-        analyzed, contextualized and shaped for right-now decision
tured – in GPS logs, blogs, videos, podcasts and tweets.           making – and right-timed action. New levels of intelligence will
Coming from within and from outside the enterprise,                inform and enable organizations to empower all employees,
information arrives on a daily, hourly and real-time basis.        especially those closest to customers and suppliers, to make
Sources include the Internet, automated processes and sensor-      decisions. Considering that today’s largely hierarchical enterprises
equipped objects. This combination of volume, speed and            are accustomed to equating information with control, they will
diversity makes using information well (or even using it at all)   need to get substantially better at sharing information with
an increasingly daunting task.                                     partners across the hall, down the street and around the globe.

As if volume, velocity and variety weren’t enough, greater         New opportunities for intelligent enterprises
granularity makes information even harder to fathom. For           Today’s automobile drivers look over their shoulders for a quick
example, individuals can now be identified by GPS position         traffic check when changing lanes. They use mirrors to avoid
and genotype. And in the world of intelligent objects, it’s not    accidents, but mirrors don’t eliminate blind spots, or find the best
only containers and pallets that are tagged for traceability –     route ahead. Now, flash forward, and imagine a generation of
medicine bottles, poultry, melons and wine bottles are adding      drivers trained on smart automobiles that identify and track every
deeper levels of detail to the information ecosystem.              other vehicle or object in range, calculating velocity and direction,
                                                                   road and weather conditions, all in real time. In terms of guiding
                                                                   and optimizing the enterprise with smarter analytics, we’re already
                                                                   at that inflection point.

One in two business leaders do not have                            Organizations have a great deal of work ahead in addressing the
                                                                   impact of their information gaps. More than one-third of business
sufficient information from across their                           leaders say they have significant challenges in extracting relevant
organization to do their jobs.                                     information and using it to quantify risk and predict possible
                                                                   outcomes (see Figure 2).
4   Business analytics and optimization for the intelligent enterprise




It’s instructive to compare how organizations perceive and                                                  We also found that those who perform on par tend to be
close gaps related to information-based business opportunities.                                             generally satisfied or willing to make do with the information
Comparing early adopters – those with analytic programs well                                                capabilities they already have – except for their notable
underway – to organizations that say information improvement                                                focus on using information to improve sales and marketing.
is not a priority, we find that early adopters are more than three                                          Outperformers, on the other hand, see value in making
times as skilled at using information to understand risk, and                                               improvements across the full range of functional areas – and
twice as skilled in using it to predict outcomes.                                                           they want to do more with information overall (see Figure 3).
                                                                                                            These “information omnivores” are poised to innovate and
Additionally, outperformers are twice as skilled as underper-
                                                            1
                                                                                                            deeply change their industries based on their ever-growing
formers at extracting and prioritizing relevant information.
                                                                                                            insights and ability to see the future more clearly.
They are three times better at applying information for more
predictable outcomes, which gives them the opportunity to                                                   As might be expected, underperformers perceive more gaps
better anticipate, navigate and handle contingencies.                                                       than their on-par peers. Interestingly, the underperforming
                                                                                                            enterprise is more fragmented than either of the other groups,



To what extent do you feel that your organization is operating with major “blind spots” – gaps or lack of trust in information – in regard to the following areas?
                                                                                                         Apply
                                                                            Apply                        information         Apply
                        Extract                   Prioritize                information                  for more            information
                        relevant                  relevant                  to optimize                  predictable         to understand         Bars represent entire
                        information               information               operations                   outcomes            risk                  sample set:
                                  Outperformers             Outperformers                 Services-               Early                Early
                                  exceed Under-             exceed Under-                 based exceed            adopters             adopters       No blind spots
                                  performers                performers                    Goods-based             exceed               exceed         Few blind spots
                                  2 to 1                    2 to 1                        ~2   to 1               Unaware              Unaware
                                                                                                                                                      Some blind spots
                                                                                                                  2 to 1               3+ to 1
                                                                                                                                                      Many blind spots
                                                                                                                                                      Material blind spots

                                                                                                                                                  Circles represent break point
                                                                                                                                                  between “To a Great Extent”
                                                                                                                                                  and “To Some Extent” for
                                                                                                                                                  subsets of the data as follows:
                                                                                                                                                     Early adopters
                                                                                                                                                     Unaware
                                                                                                                                                     Outperformers
                                                                                                                                                     Underperformers
                                                                                                                                                     Services-based organizations
                                                                                                                                                     Goods-based organizations


Notes: Early adopters have programs well underway to take advantage of new analytics for business advantage and Unaware declare having “not thought about the opportunity”; Out- and
underperformance is relative to peers; Services-based industries: financial, professional services, entertainment, media, publishing, telecommunication, education, government, transporta-
tion. Goods-based industries: technology, manufacturing, energy, pharmaceuticals, automotive, consumer goods, retail, agriculture, real estate, chemicals and aerospace/defense.


Figure 2. There is lots of room for improvement across the board with some big differences in the details.
IBM Global Business Services   5




                                                     Organizations performing under and on-par                                                                                    Organizations outperforming relative to their
                                                     relative to their peers                                                                                                      peers
                  HIGH                                                                                                          HIGH




                                                                                                                                  Perceived benefit of information improvements
                     Perceived benefit of information improvements




                                                                                                 More                                                                              Hungry for
                                                                                                 satisfied or                                                                      more value
                                                                                                 making do                                                                         and want to do
                                                                                                 with what                                                                         more overall
                                                                                                 they have
                   LOW                                               Perceived information gap in organizations HIGH             LOW                                                 Perceived information gap in organizations   HIGH
                                                                           Underperformers               Marketing                                                                          Operations and Production
                                                                           On-par performers             General Management                                                                 Finance and Accounting
                                                                           Outperformers                 Sales                                                                              Information Technology
                                                                                                         Product Development and Management                                                 Human Resources
                                                                                                         Customer Service                                                                   Procurement and Vendor Management


Figure 3. Enterprisewide, outperformers recognize the value of information improvements and are hungry for more.



with a strong emphasis on marketing, management and sales,                                                                        Information gaps experienced by services and goods-based
and much less interest in support functions. Of all groups,                                                                       companies provide another point of comparison. Despite
on-par performers appear to be the most at risk of being left                                                                     widespread awareness of supply chain information needs in
behind. Seeing no compelling reason to do things differently,                                                                     goods-based organizations, it is the services-based ones that
they appear to be enjoying a sense of security that may very                                                                      stand out in their ability to access information and apply
well be misplaced. While a few functional leaders may be                                                                          predictive analytics. They even surpass the outperformer
seeking change, these enterprises are failing to perceive                                                                         subset in those categories as well. It may be that service
benefits of an end-to-end analytics strategy. As underper-                                                                        companies enjoy information benefits from products that are
formers begin pulling ahead, mid-level performers may very                                                                        inherently digital. However, as goods become instrumented
well find themselves becoming the new underperformers.                                                                            and connected with electronic tags and sensors, product-based
                                                                                                                                  companies will gain comparable opportunities to optimize and
                                                                                                                                  create advantage through analytics.

With today’s information explosion, everyone
– and everything – is leaving real-time data
tracks.
6    Business analytics and optimization for the intelligent enterprise




Interdependence and optimization                                                                         result of their enhanced ability to predict and identify risk
By embracing advanced analytics across the enterprise,                                                   events, coupled with their ability to prepare and respond
intelligent enterprises will optimize three interdependent                                               to them.
business dimensions:
                                                                                                 Each of these dimensions is a critical part of optimization – the
•	     Intelligent profitable growth: Intelligent enterprises have                               impact of a decision or action along any one of them will have
       more opportunities for growing customers, improving                                       repercussions for the others.
       relationships, identifying new markets and developing new
       products and services.                                                                    The characteristics of the intelligent
•	     Cost take-out and efficiency: Intelligent enterprises optimize                            enterprise
       the allocation and deployment of resources and capital                                    Based on our global research, extensive client project
       to create more efficiency and manage costs in a way that                                  experience and discussions with business leaders, we have
       aligns to their business strategies and objectives.                                       distilled the essential characteristics that describe an enterprise
                                                                                                 ready to exploit advanced analytics and optimized performance.
•	     Proactive risk management: Intelligent enterprises have
       less vulnerability and greater certainty in outcomes as a



                                                       Do you have                Do you share
                                                       sufficient information     critical information
                                                       from across your           with partners and
                                                                                                                      Bars represent entire sample
                                                       organization to do         suppliers for mutual
                                                                                                                      set:
                                                       your job?                  benefit?
                                                                                                                          Not at all
                                                                                                                          To a limited extent

                                                                    1in 2                                                 To some extent
                                                                                                                          To a great extent
                                                                          DON’T
                                                                                                3 in 5                    Completely

                                                                                                  DON’T               Circles represent break point
                                                                                                                      between “To a Great Extent” and “To
                                                                                                                      Some Extent” for subsets of the data
                                                                                                                      as follows:
                                                                                                                         Early adopters
                                                                                                                         Unaware
                                                                                                                         Outperformers
                                                                                                                         Underperformers
                                                                                                                         Services-based organizations
                                                                                                                         Goods-based organizations

Notes: Early adopters have programs well underway to take advantage of new analytics for business advantage and Unaware declare having “not thought about the opportunity”; Out- and
underperformance is self assessment relative to peers; Services-based industries: financial, professional services, entertainment, media, publishing, telecommunication, education, govern-
ment, transportation. Goods-based industries: technology, manufacturing, energy, pharmaceuticals, automotive, consumer goods, retail, agriculture, real estate, chemicals and aerospace/
defense.


Figure 4. One in two organizations neither connect the dots internally nor share much with external partners and suppliers.
IBM Global Business Services   7




The intelligent enterprise is...

            Anticipating                                                                       Aware
            Predicts and prepares for the future, and
                                                                                               Gathers, senses, and uses structured and
            instead of just reacting to or correcting
                                                                                               unstructured information from every node,
            actions, it also steers and evaluates trade-offs
                                                                                               person, and sensor within the environment

                                                                    Intelligent
         Empowering                                                 profitable                            Linked
         Enables and extends employees’                               growth                              Connects internal and external
         memory, insight and reach, as well                    Cost take- Proactive                       functions front to back across
         as the authority to decide and act                     out and      risk                         geographies in a way that aligns to
                                                               efficiency management                      desired business outcomes


                Questioning
                Reserves the right to get smarter by                                          Precise
                challenging its status quo while creating                                     Uses only the most relevant information to
                new opportunities                                                             support timely decisions/actions closer to the
                                                                                              point of impact and consequence




Figure 5. The intelligent enterprise.



               Aware                                                                   Today’s enterprise                        What if the intelligent
                                                                                                                                 enterprise could
               The intelligent enterprise is aware, meaning that
               it gathers, senses and uses structured and unstruc-                     Collects data from its own                Collect and analyze data
                                                                                       transactional systems and                 from anywhere, including
               tured information from every node, person and
                                                                                       internally generated data                 external sources, new
               sensor within the environment.                                                                                    instrument data, and
•	   What if an investor could mine every broker’s e-commu-                                                                      unstructured and societal
                                                                                                                                 data
     nication, each consumer’s public Facebook post, and
     multiple companies’ annual reports at the same instant?                           Processes some large                      Process incredible quantities
                                                                                       databases in batches to                   of data at incredible new
•	   What if your city’s ability to read satellite images, to                          create snapshots of the past              speeds as needed
     capture historic traffic data and to sense moving vehicles                        Interprets information                    Have “one version of the
     meant it could predict and prevent traffic jams in real                           differently by different people           truth” across the enterprise –
     time?                                                                             and different departments –               with appropriate granularity
                                                                                       with limited levels of detail
The intelligent enterprise will stimulate its employees and                            Keeps large just-in-case                  Gain insights from previously
partners to be in very close touch with the world 24/365.                              stores of information that                unquantifiable and unusable
                                                                                       are not interpretable,                    data
                                                                                       not understandable and
                                                                                       ultimately not usable
8   Business analytics and optimization for the intelligent enterprise




                 Linked                                                  Today’s enterprise               What if the intelligent
                                                                                                          enterprise could
             The intelligent enterprise connects internal and
             external functions front to back across geographies,        Collaborates in small            Mobilize federation of
                                                                         local groups, but work is        experts to work together
             departments, business units and teams in a way
                                                                         constantly “thrown over the      both within the enterprise
             that aligns to desired business outcomes. It is             wall” to other departments       as well as collaborate with
able to bring disparate groups together to share and leverage            down the line                    external entities for mutual
information for mutual benefit.                                                                           advantage

•	 What if an oil rig could constantly “speak” to its produc-            Has expertise and accesses       Generate a new type of
                                                                         wisdom based upon who            collective wisdom from larger
   tion supervisors in the control room... which is connected to         people know and who is           and more sophisticated
   the supply chain planning systems... which are connected to           close by                         crowds of experts
   the oil markets... which are connected to the pump? Each              Uses information for the job     Keep information more
   change in the actual petroleum supply could inform the                at hand without attention to     relevant and use it beyond
   entire value chain.                                                   its use for related activities   its spot application, having
                                                                                                          implications both up and
•	 What if retailers used loyalty card information to identify                                            down the value chain (e.g.,
   shoppers while still in the store, and inform them of new                                              the flow from suppliers to
   meat and poultry products that meet their personal require-                                            customers)
   ments for humane husbandry practices?                                 Finds it too difficult to work   Connect people, systems
                                                                         across boundaries                and external entities so they
The intelligent enterprise will link its talent to each other and                                         could “speak” to each other
with the outside world to allow complete access to all available                                          seamlessly
information and ideas.
IBM Global Business Services   9




             Precise                                                Today’s enterprise              What if the intelligent
                                                                                                    enterprise could
              The intelligent enterprise uses only the most
              relevant information to support timely decisions      Uses content and structured     Manage and analyze vast
                                                                    information transactionally,    stores of content, including
              and actions closer to the point of impact and
                                                                    i.e., for its primary purpose   prose, e-mail, voice, SMS,
              consequence. Information is delivered contex-         and then discards or archives   images and video
tually, providing the ability to act swiftly in powerful and        Has users who must seek         Prepare data and automate
meaningful ways.                                                    out information based on the    analysis to ensure the quality
•	 What if repairmen servicing thousands of different types         immediate need                  and timeliness of information
   of intelligent grids had the instrumentation to sense break-     Does not give employees the     Deliver information in ways
                                                                    information they need when      that are useful to the context
   downs and inefficiencies? They would be automatically
                                                                    they need it                    of the situation being
   alerted and deployed based on their skill, location and avail-                                   handled
   ability and fed all the metrics, history and solutions they
                                                                    Delivers volumes of data        Deliver just the right
   need. Schematics are beamed to screens on their wireless         separately and rarely in        amount of quantitative
   devices. Then their actions and data are added to the collec-    context of the situation        data, definitions, knowledge
   tive repair history of the entire grid.                          or parceled together into       bases, unstructured data and
                                                                    actionable packages             expert networks to meet the
•	 What if a large fleet owner could know the exact main-                                           decision-maker’s need at the
   tenance requirements of vehicles based on their unique                                           right moment
   history, thereby keeping them all on the road longer without
   impacting safety? And at the same time, it was able to use
   real-time GPS information, past and present, to consolidate
   maintenance resources, locations and equipment without
   reducing service levels?

The intelligent enterprise will reallocate mental bandwidth
so people can focus on service, innovation and future
improvement.
10   Business analytics and optimization for the intelligent enterprise




                 Questioning                                              Today’s enterprise              What if the intelligent
                                                                                                          enterprise could
             The intelligent enterprise challenges the status
                                                                          Focuses on getting today’s      Get the job done today with
             quo while creating new opportunities. Assignments
                                                                          job done                        enough extra employee
             are rarely taken at face value, but instead reveal                                           bandwidth to think about and
opportunity: How can this be done faster, at a lower cost, and with                                       improve tomorrow
higher quality? How can we make this customer happier? How can            Views innovation as a           Put all knowledge workers
we make this safer?                                                       discrete function of R&D or     on a path to innovate and
                                                                          product managers                improve
•	 What if an auto manufacturer could monitor driving
                                                                          Views questioning and           Include questioning and
   behavior via dashboard-embedded computers – and analyze
                                                                          exploration as a luxury and     exploration as part of
   the patterns it discerned to understand what new features              encourages it only when         people’s jobs and reward
   would be most appreciated?                                             there is time                   them for doing it
•	 What if a procurement specialist could initiate comparative            Makes its decisions and         Evaluate outcomes relative
   audits of suppliers’ environmental practices when sensing              moves on with little interest   to expectations, tracking and
                                                                          in whether expectations are     understanding exceptions
   that their proposals are “too good to be true”... and then,
                                                                          met                             both good and bad
   based on audit results, provide new guidelines for respon-
   sible pricing levels in specific geographic regions?

Mastering the job at hand will no longer be the endpoint, but
the means for informing tomorrow’s work day.
IBM Global Business Services   11




            Empowering                                            Today’s enterprise               What if the intelligent
                                                                                                   enterprise could
             The intelligent enterprise enables and extends
             employees’ memory, insight and reach, as well as     Piles more work on               Automate and orchestrate
                                                                  employees, adding                routine tasks in order to
             the authority to decide and act. As automation
                                                                  headcount to meet demands        focus people on new,
takes care of more and more routine decision making,                                               unsolved issues and
employees are trusted with the authority to make higher-value                                      opportunities
decisions and act on them.                                        Takes decisions “up and          Delegate decision making
•	 What if a service agent knew how to, and was able to, go       down the flagpole” to            to the best agents for the
                                                                  be vetted and approved           situation whether they are
   above and beyond the norm to delight a top customer who        by layers upon layers of         employees, workflows, bots
   had two bad experiences in the last week?                      management                       or customers, requiring
                                                                                                   less managerial and
•	 What if large, multidisciplinary teams of sales people could
                                                                                                   administrative oversight
   close the next big multimillion dollar deal in hours instead                                    as employees solve issues
   of months because they can reconfigure complicated                                              immediately and locally
   schedules of prices and resources over years of contract       Aligns incentives to how         Align incentives to smart
   length?                                                        much someone works or            results while also considering
                                                                  what they produce                how the results were
Empowering employees and automated agents requires a shift                                         achieved
in culture from one of constant oversight to one of trust and     Hunts, searches and              Give people access to user-
enablement.                                                       compiles information, but        friendly, fact-based tools
                                                                  “guestimates” answers when       available over the channels
                                                                  it’s too hard to get the facts   and devices of their own
                                                                                                   choosing
12   Business analytics and optimization for the intelligent enterprise




                 Anticipating                                             Today’s enterprise             What if the intelligent
                                                                                                         enterprise could
             The intelligent enterprise predicts and prepares
             for the future. Instead of just reacting to or               Uses personal experience       Build simulations and
                                                                          and informed guess-work to     models to understand future
             correcting actions, it also steers and evaluates
                                                                          make decisions                 implications for alternatives
trade-offs. The future is modeled and simulated based on a rich                                          based on facts, not just
history of past events and external insights.                                                            instinct
•	 What if an international trade operation could orchestrate             Uses historical data for       See opportunities and threats
   and dynamically reroute shipments based on its ability to              “post-mortem” reporting and    as they are happening and
                                                                          tracking                       even beforehand
   model and predict global weather patterns?
                                                                          Recognizes events based        Track events in real time,
•	 What if human resource managers had the insight and capa-              upon the noise they make       applying sophisticated rules,
   bility to hire and train entire workforces in enough time to           and responds on an ad-hoc      enabling automation and
   meet sudden waves of demand, but not a second earlier?                 basis                          speed of response
                                                                          Manages performance            Be informed about
Because of its ability to anticipate possible paths, the intelligent      and risk separately with all   opportunity and risk, and
enterprise knows what to do when new situations present                   future variance and chance     know what to do tactically
                                                                          managed reactively             about events well before
themselves.                                                                                              action is needed
The six characteristics we found are just the starting point for
building an advanced analytics strategy. Each organization is
unique. Each has its own industry and stakeholder require-
ments. Determining the right mix and the most compelling
vision is the first and most important step for driving organiza-
tions toward optimization.
IBM Global Business Services   13




                                                                        Is your organization taking
                    Would more predictive                               advantage of new analytics to
                    information drive better                            leverage information to your
                    decisions?                                          advantage?

                                                                                    1 in 5
                                                                                     DOESN’T “GET IT”




                                                                                     2 in 3
                                  NEARLY                                             ARE STILL
                                 3 in 4                                              GETTING
                                                                                     STARTED
                                SAID YES
                                               To little or no extent                                   No, we have not even thought about it
                                               To some extent                                           Yes, we recognize the opportunity
                                               To a great extent                                        Yes, we recognize, but we’ve just begun to act
                                               Completely                                               Yes, we do it now and it is well underway



Figure 6. Most organizations recognize the opportunity for analytics, but are still very early in the adoption process.




                                                                                    Enterprise leaders are getting ready to make fundamental
                                                                                    changes in the way they work, which means moving decision
Decision making is moving beyond “gut                                               making beyond “gut checks” to “fact checks.” More than four
checks” to “fact checks.”                                                           out of five outperformers are now pursuing advantage through
                                                                                    new analytics, compared to fewer than three of five on-par
                                                                                    and underperformers (see Figure 7). What few enterprises
                                                                                    understand, however, is the best way to go about optimization.
                                                                                    One in four of the outperformers already have enterprise-
Getting started with advanced analytics                                             wide plans to collect, analyze and empower people to use
and optimization                                                                    information. In contrast, virtually none of the underperformers
Business leaders, having identified significant information gaps,                   have put a plan in place, though one in four say they intend to
are poised for change. Nearly three in four say more predictive                     do so in the future.
information will drive better decision making to a great extent
(see Figure 6).
14   Business analytics and optimization for the intelligent enterprise




                                                    Does your organization have a plan in place to improve all of the following:
                                                    its ability to collect and analyze data, present relevant information, and
                                                    empower people to act on it?
                                                          2%                              7%                                     Don’t recognize
                                                        17%                                                             17%      the value at
                                         81%                                                                                     any level
                                                                                         36%
                                                                                                                    27%
                                                                          58%                         56  %
                                                        56%


                                                                                     42%
                                                                                                                    53%           No, not a priority
                                      Pursuing
                                   the value at                                                                                   No, but we want to do so
                                     enterprise         25%                                                                       Yes, for some units/groups
                                          level                                      16%                                          Yes, enterprisewide
                                                                                                                    3%
                                                   Outperformers                    On-par                    Underperformers

Note: Out-, on-par and underperformance is relative to peers.

Figure 7. Outperformers recognize and pursue the value from business analytics and optimzation much more than on-par and underperformers.



There is still time for all enterprises to optimize and differ-                                    3. Is your information relevant to the task at hand, available
entiate. Two out of three organizations have recognized                                               and complete when you need it and in a form that you can
the opportunity and begun to apply analytics for business                                             readily use?
advantage but only one in eight are well underway in this
                                                                                                   4. Do you consistently use information to look for ways to do
journey. However, given the unrelenting pace of global change
                                                                                                      things better, smarter and for less money, even when existing
and business challenge, we expect adoption rates for new
                                                                                                      ways have worked in the past?
analytics applied to business optimization to quickly accelerate.
                                                                                                   5. Have you equipped your employees with insights and tools
                                                                                                      to make at least twice as many decisions on their own as they
The intelligent enterprise litmus test                                                                did three years ago?
For a quick way to determine whether advanced analytics
can help optimize your enterprise, consider the following                                          6. Are you able to use information to make better predictions
questions:                                                                                            and do you consider alternatives when making decisions and
                                                                                                      setting strategy?
1. Are you able to capitalize on insights from information
                                                                                                   7. Are you able to integrate information about your acquisi-
   sources as diverse as social networks and RFID tags?
                                                                                                     tions to create an efficient, consolidated and action-oriented
2. Is it easy and cost-effective to share timely information                                         view of opportunities?
   across your organization and with your partners for mutual
                                                                                                   A “no” to any of these questions means it is time to think hard
   advantage?
                                                                                                   about business analytics and optimization.
IBM Global Business Services   15




                       How often have you                                   To what extent do you make business decisions based on
                       made major decisions                                 the following factors?
                       with incomplete
                       information or                                       Personal
                       information you don’t                                experience              Analytically            Collective
                       trust?                                               and intuition           derived                 experience
                                                             To a great
                                                                                                                                 9%
                                                                 extent
                                  1in 3                                         25%                     19%

                                      HAVE
                                                                                                                                43%

                                                                                                        43%
                                                                                54%


                                                                                                                                35%
                                       Always
                                                                                                        28%
                                       Frequently
                                       Sometimes                                15%
                                       Rarely                 To a little                                                       13%
                                                                                 6%                     10%
                                       Never                     extent




Figure 8. Lack of information forces decision makers to be most reliant on their intuition.



Conclusion                                                                            different way. They are able to extract the precise information
As we have discussed, information is only getting more                                they need – highly relevant and contextualized – and predict
complex. In addition to its sheer volume, its velocity is                             the most likely outcomes of key decisions and events. Given
accelerating, the variety of its forms are burgeoning, and it                         the nature of today’s business environment, no enterprise can
is approaching quantum levels of granularity. A substantial                           choose to leave benefits like these on the table. Only those
portion of enterprises worldwide understand the challenge                             enterprises that can skillfully adopt, integrate and deploy the
posed by this extreme information environment. More                                   benefits of enterprisewide analytics and optimization will be
importantly, some are seizing the opportunity to use advanced                         prepared to shape their own futures.
information analytics, previously the domain of academic
                                                                                      For more information about this study, you may contact the
research, for business advantage. These leaders are no longer
                                                                                      IBM Institute for Business Value at iibv@us.ibm.com, or visit our
relying on intuition to fill information gaps. Instead they are
                                                                                      Web site:
combining the new analytics techniques with expertise in
business process management to make decisions in an entirely                          ibm.com/gbs/businessanalytics
16   Business analytics and optimization for the intelligent enterprise




Follow-up study available                                                 The right partner for a changing world
Learn more about business analytics and optimization with                 At IBM Global Business Services, we collaborate with our
our newest study, “Breaking away with business analytics and              clients, bringing together business insight, advanced research
optimization: New intelligence meets enterprise operations.”              and technology to give them a distinct advantage in today’s
                                                                          rapidly changing environment. Through our integrated
About the author                                                          approach to business design and execution, we help turn
Steve LaValle, an IBM services partner, is the global leader              strategies into action. And with expertise in 17 industries and
of Strategy services within the IBM Business Analytics and                global capabilities that span 170 countries, we can help clients
Optimization service line. In this role, he leads a global                anticipate change and profit from new opportunities.
team of consultants and practitioners who provide advisory
services across geographies and industries, focused on helping            Business Analytics and Optimization
clients optimize their results through the application of                 Services
insight, analytics and business process improvement. He is                IBM can help your organization transform its use of informa-
the principal author of “Advocacy in the Customer Focused                 tion through the following services:
Enterprise” and “CRM Done Right.”
                                                                          •	   Business	analytics	and	optimization	strategy – Realize
Steve LaValle spent the majority of his career as a business
                                                                               business objectives faster with less risk and at a lower cost by
consultant, initially for PricewaterhouseCoopers Consulting.
                                                                               defining and helping to implement improvements in how
He was one of the founding members of PwCC’s Customer
                                                                               information is identified and acted upon.
Relationship Management services practice and subse-
                                                                          •	   Business	intelligence	and	business	performance	management
quently served as the Global and Americas leader for the IBM
                                                                               – Improve decision making with relevant, actionable and
Customer Focused Strategy practice. He graduated with a
                                                                               timely information.
bachelor of science in Economics from the Wharton School
                                                                          •	   Advanced	analytics	and	optimization – Improve operational
and holds a Masters in Business Administration from Harvard
                                                                               efficiency through the use of analytics, data mining and
Business School.
                                                                               statistical models.
                                                                          •	   Enterprise	information	management – Achieve data integra-
                                                                               tion between disparate systems to improve business processes,
                                                                               decision making and total business performance.
                                                                          •	   Enterprise	content	management – Reduce processing cycle
                                                                               time, improve customer service and compliance, and establish
                                                                               agility and flexibility with the technology and processes to
                                                                               capture, manage, store, preserve and deliver unstructured
                                                                               content.


                                                                          Notes
                                                                          1
                                                                               Respondents classified themselves as outperforming, on par
                                                                               or underperforming their peers.
© Copyright IBM Corporation 2009

IBM Global Services
Route 100
Somers, NY 10589
U.S.A.

Produced in the United States of America
December 2009
All Rights Reserved

IBM, the IBM logo and ibm.com are trademarks or registered trademarks
of International Business Machines Corporation in the United States, other
countries, or both. If these and other IBM trademarked terms are marked
on their first occurrence in this information with a trademark symbol (® or
™), these symbols indicate U.S. registered or common law trademarks
owned by IBM at the time this information was published. Such trademarks
may also be registered or common law trademarks in other countries. A
current list of IBM trademarks is available on the Web at “Copyright and
trademark information” at ibm.com/legal/copytrade.shtml

Other company, product and service names may be trademarks or service
marks of others.

References in this publication to IBM products and services do not
imply that IBM intends to make them available in all countries in which
IBM operates.


         Please Recycle




                                                    GBE03211-USEN-03

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IBM BAO For The Intelligent Enterprise

  • 1. IBM Global Business Services Business Analytics and Optimization Executive Report IBM Institute for Business Value Business analytics and optimization for the intelligent enterprise
  • 2. IBM Institute for Business Value IBM Global Business Services, through the IBM Institute for Business Value, develops fact-based strategic insights for senior executives around critical public and private sector issues. This executive report is based on an in-depth study by the Institute’s research team. It is part of an ongoing commitment by IBM Global Business Services to provide analysis and viewpoints that help companies realize business value. You may contact the authors or send an e-mail to iibv@us.ibm.com for more information.
  • 3. By Steve LaValle It’s easy to understand why business leaders regard their experience and intuition as inadequate tools for optimizing their enterprises. In addition to all the new information being created every nanosecond, permanent and far-reaching changes are being shaped by multiple global forces that include a new economic environment, along with the familiar forces of a shrinking and flattening world. Routines persist but everything is just so different and very little feels familiar. Based on our survey of 225 business leaders worldwide, we found that enterprises are operating with bigger blind spots and that they are making important decisions without access to the right information. They recognize that new analytics, coupled with advanced business process management capabilities, signal a major opportunity to close gaps and create new business advantage. Those who have the vision to apply new approaches are building intelligent enterprises and will be ready to outperform their peers. Introduction In an environment that has little resemblance to the past, old Like coastal cities seeking shelter from successive onslaughts ways of decision making and management are breaking down. of blizzards and floods, today’s enterprises are striving to come Today’s leaders sense an inflection point, an opportunity to to terms with their own extreme conditions. Their challenge revisit their use of information, or analytics, and fundamentally is information – how it is acquired, managed and interpreted alter the way in which they conduct business. While advanced to drive business value. Business leaders considering how they analytic methods have been available for some time, today’s will weather the storms are questioning whether traditional tools and techniques provide superior insight and predictability techniques will continue to support management decision making and actions. Complex to work. algorithms, previously the domain of academics, are now being used to solve formerly intractable business challenges.
  • 4. 2 Business analytics and optimization for the intelligent enterprise Almost unimaginable just a few years ago is the fact that For the intelligent enterprise, the new reality is this: personal transistors are now being produced at a rate of one billion for experience and insight are no longer sufficient. New analytics every individual on earth. In sending signals from both people capabilities are needed to make better decisions, and, over and objects, these transistor-based “instruments” are able to time, these experiences will even inform and hone our gut, or provide unprecedented levels of insight – for those organiza- instinctive, responses. Making analytics core to our thinking tions that can successfully analyze the data. That’s a high bar is the only way we can really get smarter, and doing so is to pass. How is it possible for organizations to make sense of an imperative not an option. The information explosion information with virtually quantum-level granularity – and has permanently changed the way we experience the world: cosmic-level ubiquity? everyone – and everything – is leaving real-time data tracks. Intelligence is now increasingly embedded in objects, and individuals have become market segments of one. Traditional approach New approach Instinct and intuition Fact-driven Corrective Directive Years, months, weeks Hours, minutes, seconds Human insight Applied semantics Decision support Action support Efficient Optimized The new approach represents a significant extension of current capabilities, not a replacement. Figure 1. Intelligent enterprises will adopt new ways of working.
  • 5. IBM Global Business Services 3 Tackling information complexity Technology and instrumentation for smarter connections are In our recent past, businesses have leveraged new technologies abundantly available, and at a relatively low cost. But to turn such as enterprise resource planning (ERP) and customer this information into new intelligent action, organizations need relationship management (CRM) as redefining moments, extraordinary powers of analysis – applied broadly and consis- propelling them to greater efficiencies and sales volumes. tently. With information put into context, and with business Today, it is the advances in business process and information process management acumen, leaders can now work on issues management that drive the new step changes that will that matter. But that requires a sea change in how leaders make empower businesses and their people. strategic decisions and how they run their organizations. Our modern information environment is unlike any preceding The intelligent enterprise will have ready access to precise, it. Information is voluminous, its velocity is extreme and its relevant information, from all sources. Information will be formats are widely varied. It comes structured and unstruc- analyzed, contextualized and shaped for right-now decision tured – in GPS logs, blogs, videos, podcasts and tweets. making – and right-timed action. New levels of intelligence will Coming from within and from outside the enterprise, inform and enable organizations to empower all employees, information arrives on a daily, hourly and real-time basis. especially those closest to customers and suppliers, to make Sources include the Internet, automated processes and sensor- decisions. Considering that today’s largely hierarchical enterprises equipped objects. This combination of volume, speed and are accustomed to equating information with control, they will diversity makes using information well (or even using it at all) need to get substantially better at sharing information with an increasingly daunting task. partners across the hall, down the street and around the globe. As if volume, velocity and variety weren’t enough, greater New opportunities for intelligent enterprises granularity makes information even harder to fathom. For Today’s automobile drivers look over their shoulders for a quick example, individuals can now be identified by GPS position traffic check when changing lanes. They use mirrors to avoid and genotype. And in the world of intelligent objects, it’s not accidents, but mirrors don’t eliminate blind spots, or find the best only containers and pallets that are tagged for traceability – route ahead. Now, flash forward, and imagine a generation of medicine bottles, poultry, melons and wine bottles are adding drivers trained on smart automobiles that identify and track every deeper levels of detail to the information ecosystem. other vehicle or object in range, calculating velocity and direction, road and weather conditions, all in real time. In terms of guiding and optimizing the enterprise with smarter analytics, we’re already at that inflection point. One in two business leaders do not have Organizations have a great deal of work ahead in addressing the impact of their information gaps. More than one-third of business sufficient information from across their leaders say they have significant challenges in extracting relevant organization to do their jobs. information and using it to quantify risk and predict possible outcomes (see Figure 2).
  • 6. 4 Business analytics and optimization for the intelligent enterprise It’s instructive to compare how organizations perceive and We also found that those who perform on par tend to be close gaps related to information-based business opportunities. generally satisfied or willing to make do with the information Comparing early adopters – those with analytic programs well capabilities they already have – except for their notable underway – to organizations that say information improvement focus on using information to improve sales and marketing. is not a priority, we find that early adopters are more than three Outperformers, on the other hand, see value in making times as skilled at using information to understand risk, and improvements across the full range of functional areas – and twice as skilled in using it to predict outcomes. they want to do more with information overall (see Figure 3). These “information omnivores” are poised to innovate and Additionally, outperformers are twice as skilled as underper- 1 deeply change their industries based on their ever-growing formers at extracting and prioritizing relevant information. insights and ability to see the future more clearly. They are three times better at applying information for more predictable outcomes, which gives them the opportunity to As might be expected, underperformers perceive more gaps better anticipate, navigate and handle contingencies. than their on-par peers. Interestingly, the underperforming enterprise is more fragmented than either of the other groups, To what extent do you feel that your organization is operating with major “blind spots” – gaps or lack of trust in information – in regard to the following areas? Apply Apply information Apply Extract Prioritize information for more information relevant relevant to optimize predictable to understand Bars represent entire information information operations outcomes risk sample set: Outperformers Outperformers Services- Early Early exceed Under- exceed Under- based exceed adopters adopters No blind spots performers performers Goods-based exceed exceed Few blind spots 2 to 1 2 to 1 ~2 to 1 Unaware Unaware Some blind spots 2 to 1 3+ to 1 Many blind spots Material blind spots Circles represent break point between “To a Great Extent” and “To Some Extent” for subsets of the data as follows: Early adopters Unaware Outperformers Underperformers Services-based organizations Goods-based organizations Notes: Early adopters have programs well underway to take advantage of new analytics for business advantage and Unaware declare having “not thought about the opportunity”; Out- and underperformance is relative to peers; Services-based industries: financial, professional services, entertainment, media, publishing, telecommunication, education, government, transporta- tion. Goods-based industries: technology, manufacturing, energy, pharmaceuticals, automotive, consumer goods, retail, agriculture, real estate, chemicals and aerospace/defense. Figure 2. There is lots of room for improvement across the board with some big differences in the details.
  • 7. IBM Global Business Services 5 Organizations performing under and on-par Organizations outperforming relative to their relative to their peers peers HIGH HIGH Perceived benefit of information improvements Perceived benefit of information improvements More Hungry for satisfied or more value making do and want to do with what more overall they have LOW Perceived information gap in organizations HIGH LOW Perceived information gap in organizations HIGH Underperformers Marketing Operations and Production On-par performers General Management Finance and Accounting Outperformers Sales Information Technology Product Development and Management Human Resources Customer Service Procurement and Vendor Management Figure 3. Enterprisewide, outperformers recognize the value of information improvements and are hungry for more. with a strong emphasis on marketing, management and sales, Information gaps experienced by services and goods-based and much less interest in support functions. Of all groups, companies provide another point of comparison. Despite on-par performers appear to be the most at risk of being left widespread awareness of supply chain information needs in behind. Seeing no compelling reason to do things differently, goods-based organizations, it is the services-based ones that they appear to be enjoying a sense of security that may very stand out in their ability to access information and apply well be misplaced. While a few functional leaders may be predictive analytics. They even surpass the outperformer seeking change, these enterprises are failing to perceive subset in those categories as well. It may be that service benefits of an end-to-end analytics strategy. As underper- companies enjoy information benefits from products that are formers begin pulling ahead, mid-level performers may very inherently digital. However, as goods become instrumented well find themselves becoming the new underperformers. and connected with electronic tags and sensors, product-based companies will gain comparable opportunities to optimize and create advantage through analytics. With today’s information explosion, everyone – and everything – is leaving real-time data tracks.
  • 8. 6 Business analytics and optimization for the intelligent enterprise Interdependence and optimization result of their enhanced ability to predict and identify risk By embracing advanced analytics across the enterprise, events, coupled with their ability to prepare and respond intelligent enterprises will optimize three interdependent to them. business dimensions: Each of these dimensions is a critical part of optimization – the • Intelligent profitable growth: Intelligent enterprises have impact of a decision or action along any one of them will have more opportunities for growing customers, improving repercussions for the others. relationships, identifying new markets and developing new products and services. The characteristics of the intelligent • Cost take-out and efficiency: Intelligent enterprises optimize enterprise the allocation and deployment of resources and capital Based on our global research, extensive client project to create more efficiency and manage costs in a way that experience and discussions with business leaders, we have aligns to their business strategies and objectives. distilled the essential characteristics that describe an enterprise ready to exploit advanced analytics and optimized performance. • Proactive risk management: Intelligent enterprises have less vulnerability and greater certainty in outcomes as a Do you have Do you share sufficient information critical information from across your with partners and Bars represent entire sample organization to do suppliers for mutual set: your job? benefit? Not at all To a limited extent 1in 2 To some extent To a great extent DON’T 3 in 5 Completely DON’T Circles represent break point between “To a Great Extent” and “To Some Extent” for subsets of the data as follows: Early adopters Unaware Outperformers Underperformers Services-based organizations Goods-based organizations Notes: Early adopters have programs well underway to take advantage of new analytics for business advantage and Unaware declare having “not thought about the opportunity”; Out- and underperformance is self assessment relative to peers; Services-based industries: financial, professional services, entertainment, media, publishing, telecommunication, education, govern- ment, transportation. Goods-based industries: technology, manufacturing, energy, pharmaceuticals, automotive, consumer goods, retail, agriculture, real estate, chemicals and aerospace/ defense. Figure 4. One in two organizations neither connect the dots internally nor share much with external partners and suppliers.
  • 9. IBM Global Business Services 7 The intelligent enterprise is... Anticipating Aware Predicts and prepares for the future, and Gathers, senses, and uses structured and instead of just reacting to or correcting unstructured information from every node, actions, it also steers and evaluates trade-offs person, and sensor within the environment Intelligent Empowering profitable Linked Enables and extends employees’ growth Connects internal and external memory, insight and reach, as well Cost take- Proactive functions front to back across as the authority to decide and act out and risk geographies in a way that aligns to efficiency management desired business outcomes Questioning Reserves the right to get smarter by Precise challenging its status quo while creating Uses only the most relevant information to new opportunities support timely decisions/actions closer to the point of impact and consequence Figure 5. The intelligent enterprise. Aware Today’s enterprise What if the intelligent enterprise could The intelligent enterprise is aware, meaning that it gathers, senses and uses structured and unstruc- Collects data from its own Collect and analyze data transactional systems and from anywhere, including tured information from every node, person and internally generated data external sources, new sensor within the environment. instrument data, and • What if an investor could mine every broker’s e-commu- unstructured and societal data nication, each consumer’s public Facebook post, and multiple companies’ annual reports at the same instant? Processes some large Process incredible quantities databases in batches to of data at incredible new • What if your city’s ability to read satellite images, to create snapshots of the past speeds as needed capture historic traffic data and to sense moving vehicles Interprets information Have “one version of the meant it could predict and prevent traffic jams in real differently by different people truth” across the enterprise – time? and different departments – with appropriate granularity with limited levels of detail The intelligent enterprise will stimulate its employees and Keeps large just-in-case Gain insights from previously partners to be in very close touch with the world 24/365. stores of information that unquantifiable and unusable are not interpretable, data not understandable and ultimately not usable
  • 10. 8 Business analytics and optimization for the intelligent enterprise Linked Today’s enterprise What if the intelligent enterprise could The intelligent enterprise connects internal and external functions front to back across geographies, Collaborates in small Mobilize federation of local groups, but work is experts to work together departments, business units and teams in a way constantly “thrown over the both within the enterprise that aligns to desired business outcomes. It is wall” to other departments as well as collaborate with able to bring disparate groups together to share and leverage down the line external entities for mutual information for mutual benefit. advantage • What if an oil rig could constantly “speak” to its produc- Has expertise and accesses Generate a new type of wisdom based upon who collective wisdom from larger tion supervisors in the control room... which is connected to people know and who is and more sophisticated the supply chain planning systems... which are connected to close by crowds of experts the oil markets... which are connected to the pump? Each Uses information for the job Keep information more change in the actual petroleum supply could inform the at hand without attention to relevant and use it beyond entire value chain. its use for related activities its spot application, having implications both up and • What if retailers used loyalty card information to identify down the value chain (e.g., shoppers while still in the store, and inform them of new the flow from suppliers to meat and poultry products that meet their personal require- customers) ments for humane husbandry practices? Finds it too difficult to work Connect people, systems across boundaries and external entities so they The intelligent enterprise will link its talent to each other and could “speak” to each other with the outside world to allow complete access to all available seamlessly information and ideas.
  • 11. IBM Global Business Services 9 Precise Today’s enterprise What if the intelligent enterprise could The intelligent enterprise uses only the most relevant information to support timely decisions Uses content and structured Manage and analyze vast information transactionally, stores of content, including and actions closer to the point of impact and i.e., for its primary purpose prose, e-mail, voice, SMS, consequence. Information is delivered contex- and then discards or archives images and video tually, providing the ability to act swiftly in powerful and Has users who must seek Prepare data and automate meaningful ways. out information based on the analysis to ensure the quality • What if repairmen servicing thousands of different types immediate need and timeliness of information of intelligent grids had the instrumentation to sense break- Does not give employees the Deliver information in ways information they need when that are useful to the context downs and inefficiencies? They would be automatically they need it of the situation being alerted and deployed based on their skill, location and avail- handled ability and fed all the metrics, history and solutions they Delivers volumes of data Deliver just the right need. Schematics are beamed to screens on their wireless separately and rarely in amount of quantitative devices. Then their actions and data are added to the collec- context of the situation data, definitions, knowledge tive repair history of the entire grid. or parceled together into bases, unstructured data and actionable packages expert networks to meet the • What if a large fleet owner could know the exact main- decision-maker’s need at the tenance requirements of vehicles based on their unique right moment history, thereby keeping them all on the road longer without impacting safety? And at the same time, it was able to use real-time GPS information, past and present, to consolidate maintenance resources, locations and equipment without reducing service levels? The intelligent enterprise will reallocate mental bandwidth so people can focus on service, innovation and future improvement.
  • 12. 10 Business analytics and optimization for the intelligent enterprise Questioning Today’s enterprise What if the intelligent enterprise could The intelligent enterprise challenges the status Focuses on getting today’s Get the job done today with quo while creating new opportunities. Assignments job done enough extra employee are rarely taken at face value, but instead reveal bandwidth to think about and opportunity: How can this be done faster, at a lower cost, and with improve tomorrow higher quality? How can we make this customer happier? How can Views innovation as a Put all knowledge workers we make this safer? discrete function of R&D or on a path to innovate and product managers improve • What if an auto manufacturer could monitor driving Views questioning and Include questioning and behavior via dashboard-embedded computers – and analyze exploration as a luxury and exploration as part of the patterns it discerned to understand what new features encourages it only when people’s jobs and reward would be most appreciated? there is time them for doing it • What if a procurement specialist could initiate comparative Makes its decisions and Evaluate outcomes relative audits of suppliers’ environmental practices when sensing moves on with little interest to expectations, tracking and in whether expectations are understanding exceptions that their proposals are “too good to be true”... and then, met both good and bad based on audit results, provide new guidelines for respon- sible pricing levels in specific geographic regions? Mastering the job at hand will no longer be the endpoint, but the means for informing tomorrow’s work day.
  • 13. IBM Global Business Services 11 Empowering Today’s enterprise What if the intelligent enterprise could The intelligent enterprise enables and extends employees’ memory, insight and reach, as well as Piles more work on Automate and orchestrate employees, adding routine tasks in order to the authority to decide and act. As automation headcount to meet demands focus people on new, takes care of more and more routine decision making, unsolved issues and employees are trusted with the authority to make higher-value opportunities decisions and act on them. Takes decisions “up and Delegate decision making • What if a service agent knew how to, and was able to, go down the flagpole” to to the best agents for the be vetted and approved situation whether they are above and beyond the norm to delight a top customer who by layers upon layers of employees, workflows, bots had two bad experiences in the last week? management or customers, requiring less managerial and • What if large, multidisciplinary teams of sales people could administrative oversight close the next big multimillion dollar deal in hours instead as employees solve issues of months because they can reconfigure complicated immediately and locally schedules of prices and resources over years of contract Aligns incentives to how Align incentives to smart length? much someone works or results while also considering what they produce how the results were Empowering employees and automated agents requires a shift achieved in culture from one of constant oversight to one of trust and Hunts, searches and Give people access to user- enablement. compiles information, but friendly, fact-based tools “guestimates” answers when available over the channels it’s too hard to get the facts and devices of their own choosing
  • 14. 12 Business analytics and optimization for the intelligent enterprise Anticipating Today’s enterprise What if the intelligent enterprise could The intelligent enterprise predicts and prepares for the future. Instead of just reacting to or Uses personal experience Build simulations and and informed guess-work to models to understand future correcting actions, it also steers and evaluates make decisions implications for alternatives trade-offs. The future is modeled and simulated based on a rich based on facts, not just history of past events and external insights. instinct • What if an international trade operation could orchestrate Uses historical data for See opportunities and threats and dynamically reroute shipments based on its ability to “post-mortem” reporting and as they are happening and tracking even beforehand model and predict global weather patterns? Recognizes events based Track events in real time, • What if human resource managers had the insight and capa- upon the noise they make applying sophisticated rules, bility to hire and train entire workforces in enough time to and responds on an ad-hoc enabling automation and meet sudden waves of demand, but not a second earlier? basis speed of response Manages performance Be informed about Because of its ability to anticipate possible paths, the intelligent and risk separately with all opportunity and risk, and enterprise knows what to do when new situations present future variance and chance know what to do tactically managed reactively about events well before themselves. action is needed The six characteristics we found are just the starting point for building an advanced analytics strategy. Each organization is unique. Each has its own industry and stakeholder require- ments. Determining the right mix and the most compelling vision is the first and most important step for driving organiza- tions toward optimization.
  • 15. IBM Global Business Services 13 Is your organization taking Would more predictive advantage of new analytics to information drive better leverage information to your decisions? advantage? 1 in 5 DOESN’T “GET IT” 2 in 3 NEARLY ARE STILL 3 in 4 GETTING STARTED SAID YES To little or no extent No, we have not even thought about it To some extent Yes, we recognize the opportunity To a great extent Yes, we recognize, but we’ve just begun to act Completely Yes, we do it now and it is well underway Figure 6. Most organizations recognize the opportunity for analytics, but are still very early in the adoption process. Enterprise leaders are getting ready to make fundamental changes in the way they work, which means moving decision Decision making is moving beyond “gut making beyond “gut checks” to “fact checks.” More than four checks” to “fact checks.” out of five outperformers are now pursuing advantage through new analytics, compared to fewer than three of five on-par and underperformers (see Figure 7). What few enterprises understand, however, is the best way to go about optimization. One in four of the outperformers already have enterprise- Getting started with advanced analytics wide plans to collect, analyze and empower people to use and optimization information. In contrast, virtually none of the underperformers Business leaders, having identified significant information gaps, have put a plan in place, though one in four say they intend to are poised for change. Nearly three in four say more predictive do so in the future. information will drive better decision making to a great extent (see Figure 6).
  • 16. 14 Business analytics and optimization for the intelligent enterprise Does your organization have a plan in place to improve all of the following: its ability to collect and analyze data, present relevant information, and empower people to act on it? 2% 7% Don’t recognize 17% 17% the value at 81% any level 36% 27% 58% 56 % 56% 42% 53% No, not a priority Pursuing the value at No, but we want to do so enterprise 25% Yes, for some units/groups level 16% Yes, enterprisewide 3% Outperformers On-par Underperformers Note: Out-, on-par and underperformance is relative to peers. Figure 7. Outperformers recognize and pursue the value from business analytics and optimzation much more than on-par and underperformers. There is still time for all enterprises to optimize and differ- 3. Is your information relevant to the task at hand, available entiate. Two out of three organizations have recognized and complete when you need it and in a form that you can the opportunity and begun to apply analytics for business readily use? advantage but only one in eight are well underway in this 4. Do you consistently use information to look for ways to do journey. However, given the unrelenting pace of global change things better, smarter and for less money, even when existing and business challenge, we expect adoption rates for new ways have worked in the past? analytics applied to business optimization to quickly accelerate. 5. Have you equipped your employees with insights and tools to make at least twice as many decisions on their own as they The intelligent enterprise litmus test did three years ago? For a quick way to determine whether advanced analytics can help optimize your enterprise, consider the following 6. Are you able to use information to make better predictions questions: and do you consider alternatives when making decisions and setting strategy? 1. Are you able to capitalize on insights from information 7. Are you able to integrate information about your acquisi- sources as diverse as social networks and RFID tags? tions to create an efficient, consolidated and action-oriented 2. Is it easy and cost-effective to share timely information view of opportunities? across your organization and with your partners for mutual A “no” to any of these questions means it is time to think hard advantage? about business analytics and optimization.
  • 17. IBM Global Business Services 15 How often have you To what extent do you make business decisions based on made major decisions the following factors? with incomplete information or Personal information you don’t experience Analytically Collective trust? and intuition derived experience To a great 9% extent 1in 3 25% 19% HAVE 43% 43% 54% 35% Always 28% Frequently Sometimes 15% Rarely To a little 13% 6% 10% Never extent Figure 8. Lack of information forces decision makers to be most reliant on their intuition. Conclusion different way. They are able to extract the precise information As we have discussed, information is only getting more they need – highly relevant and contextualized – and predict complex. In addition to its sheer volume, its velocity is the most likely outcomes of key decisions and events. Given accelerating, the variety of its forms are burgeoning, and it the nature of today’s business environment, no enterprise can is approaching quantum levels of granularity. A substantial choose to leave benefits like these on the table. Only those portion of enterprises worldwide understand the challenge enterprises that can skillfully adopt, integrate and deploy the posed by this extreme information environment. More benefits of enterprisewide analytics and optimization will be importantly, some are seizing the opportunity to use advanced prepared to shape their own futures. information analytics, previously the domain of academic For more information about this study, you may contact the research, for business advantage. These leaders are no longer IBM Institute for Business Value at iibv@us.ibm.com, or visit our relying on intuition to fill information gaps. Instead they are Web site: combining the new analytics techniques with expertise in business process management to make decisions in an entirely ibm.com/gbs/businessanalytics
  • 18. 16 Business analytics and optimization for the intelligent enterprise Follow-up study available The right partner for a changing world Learn more about business analytics and optimization with At IBM Global Business Services, we collaborate with our our newest study, “Breaking away with business analytics and clients, bringing together business insight, advanced research optimization: New intelligence meets enterprise operations.” and technology to give them a distinct advantage in today’s rapidly changing environment. Through our integrated About the author approach to business design and execution, we help turn Steve LaValle, an IBM services partner, is the global leader strategies into action. And with expertise in 17 industries and of Strategy services within the IBM Business Analytics and global capabilities that span 170 countries, we can help clients Optimization service line. In this role, he leads a global anticipate change and profit from new opportunities. team of consultants and practitioners who provide advisory services across geographies and industries, focused on helping Business Analytics and Optimization clients optimize their results through the application of Services insight, analytics and business process improvement. He is IBM can help your organization transform its use of informa- the principal author of “Advocacy in the Customer Focused tion through the following services: Enterprise” and “CRM Done Right.” • Business analytics and optimization strategy – Realize Steve LaValle spent the majority of his career as a business business objectives faster with less risk and at a lower cost by consultant, initially for PricewaterhouseCoopers Consulting. defining and helping to implement improvements in how He was one of the founding members of PwCC’s Customer information is identified and acted upon. Relationship Management services practice and subse- • Business intelligence and business performance management quently served as the Global and Americas leader for the IBM – Improve decision making with relevant, actionable and Customer Focused Strategy practice. He graduated with a timely information. bachelor of science in Economics from the Wharton School • Advanced analytics and optimization – Improve operational and holds a Masters in Business Administration from Harvard efficiency through the use of analytics, data mining and Business School. statistical models. • Enterprise information management – Achieve data integra- tion between disparate systems to improve business processes, decision making and total business performance. • Enterprise content management – Reduce processing cycle time, improve customer service and compliance, and establish agility and flexibility with the technology and processes to capture, manage, store, preserve and deliver unstructured content. Notes 1 Respondents classified themselves as outperforming, on par or underperforming their peers.
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