OPINION: Analytics at the frontline: Smarter decisions where it matters

By Paul Franks, Director, Financial Services, SAS

 

“Where do I start with predictive analytics?” and “What does good look like?” are questions I am often asked as organisations develop their information management and analytics capabilities as an enabler of their corporate strategies. The inevitable further issues of what business problems are to be solved and how quickly a business outcome and benefits can be produced – particularly relating to cost savings and avoidance – usually follow in quick succession. What is the best way to start or progress with placing analytics at the right spot in your organisation and where should you focus? Let’s explore some topical issues.

Reporting alone is not enough

The easier path often taken in response to these challenges is to improve business intelligence capabilities which, in many cases, translates to visualisation and graphical reports. Unfortunately, whilst many reports are visually appealing and tell you what has happened, they often fall short in guiding business users and, particularly, front-line customer facing staff, on what action should be taken and what the likely business and financial outcomes could be. Such reports require the expertise and experience of a skilled analyst while visualisation, OLAP and other similar techniques are likely to be less relevant and valuable for decisions made at the front-line where the need is for the best answer at a moment of truth with the customer.

Effective and efficient decision making has been a central theme of my regular AB+F column and we have explored a range of issues relating to this theme in past issues. Whilst strategic decisions are important, operational decision making is where business success is either gained or missed. Operational decisions are made at a transactional level for banks, insurers and wealth managers, individually and in volume. Transactions are where value is created, and where predictive analytics capabilities are best placed to achieve business outcomes and generate tangible financial and performance benefits.

Focus on operations and transactions

Operational decisions are the best place to start and are more likely than an executive reporting or dashboard solution to generate business value and positively impact customer experience. A focus on a single customer or transaction is where predictive analytics can have a genuine impact in offering a meaningful action or decision for front-line staff to offer the customer. After all, isn’t this really what customer experience is about: delivering outcomes efficiently at the moment of interaction? Operational processes and decisions made on the front-line generate the largest volumes of data best suited to predictive analytics and offer the greatest opportunity for experimentation and analysis. Merely reporting what has taken place and showing this visually such that interpretation is required by experts or specialists is unlikely to produce the best business outcomes. A more productive option is to put the smarts into your operational systems and have predictive analytics as an enabler for these systems. This is far more likely to produce real and tangible benefits earlier. An added benefit from an investment perspective is that frontline staff see at firsthand how analytics can enable operational processes and produce better customer and business outcomes.

Delivering business outcomes and benefits

Banks and other financial institutions that have taken this approach have driven new business growth beyond initial expectations, significantly enhanced customer experience and satisfaction and retained long-term higher value customers. Analytics has both improved decision making and enabled refinement of business processes for efficiency and productivity. We are not speaking of big bang results but repeated and sustained performance gains over many years. ROI outcomes exceeding 10 times and annual performance gains greater than 50 per cent have been achieved. In our focus on operational decisions, there are three specific elements which can be determined confidently with predictive analytics: risk, behaviour and probability. Such elements are presented in most, if not all customer transactions, to varying degrees and getting this right consistently for each customer transaction and interaction is best enabled and supported by predictive analytics. In having repeatable performance, an organisation’s capacity for effectively managing, pricing and accepting risk can be better determined and controlled. Their capacity for understanding, detecting and preventing fraud, a significant business cost, is also significantly enhanced. These elements and what each can deliver to operational decisions reinforces the validity of focusing analytics on transactional activity.

Operational decisions produce large volumes of data yet opportunity is usually presented one transaction or interaction at a time and any operational decision which optimises the value and quality of the interaction with a customer is critical. Doing this repeatedly and consistently across larger volumes of transactions with predictive analytics for high customer experience and value to both customer and institution is where genuine ROI is derived.

Defining business value

Where do I get the best value from predictive analytics is a familiar and obvious question any organisation should be asking. Organisations often over-analyse what is possible and seek to have refined calculations of all financial and non-financial benefits to justify an investment. Such measures, particularly in the early stages, can become restrictive and inhibit genuine innovation in applying analytics capabilities to operational processes and decisions. The starting point for many organisations given the significance of an investment in developing analytics capabilities often begins with improved business intelligence. Such a beginning will offer better reports but true business benefits and value are unlikely to follow. Instead, placing analytics at the heart of your business within operational processes to enable operational decisions is where the value lies and will continue to be created. Those organisations who have elected to focus on operational decisions powered with predictive analytics are gaining real and significant business benefits today. Are you placing your investment in analytics in the right places?

Categories
Banking
Tags:
Analytics, Reporting, business outcomes, Defining business value
Author:
AB+F Online
Article Posted:
March 01, 2013

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