Analytics & Optimization Customer Segmentation to increase profits

Oct182005

Customer segmentation is often the first kind of analytics attempted by a company. It is not, however, only for "newbies" - even the most sophisticated companies can use better segmentation to drive better results. Take Barclaycard, one of Europe's largest credit card companies and a very sophisticated company when it comes to analytics. They had seen consistently good results from their account management strategies, with “champion” strategies performing solidly. How then to do better? Their approach was to work on developing a better customer segmentation approach and then using more finely defined customer segments to better target the customers in each segment. They used a CART-based tool called Model Builder for Decision Trees from Fair Isaac , a tool that uses historical data to rapidly create new decision trees to segment customers using multiple performance dimensions. This ability to segment first, say, on retention and then on profitability and then on likelyhood to respond (rather than having to use a single perofrmance dimension...

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Analytics & Optimization Rethinking development with SOA and business rules

Oct182005

Saw an interesting blog entry today - Rethinking development - which talked about a report from the Burton Group. A couple of comments in particular caught my eye:Choose development tools and infrastructure products that support SOA design practices. Well that's pretty straightforward. Business rules products like Blaze Advisor with its focus on deploying rules services or decision services clearly meet this criteria. The blog entry goes on to say:[W]ith slow and steady commitment, SOA will decrease duplication of development work, simplify maintenance of service code, and improve overall consistency of business processes." The objective is "business flexibility and adaptability."This seems like a plug for business rules! Business rules management systems can reduce duplication by: Centrally managing business rules in a repository. Simplify maintenance by making it possible for business users to maintain their own business rules using a controlled but flexible interface. Make processes more consistent and simpler by automating previously manual...

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Analytics & Optimization Is a Services Architecture Threatening?

Oct132005

An interesting CIO insight article caught my eye today - Services Software Architecture: Efficient, but Threatening? This article suggested some good questions to ask about SOA and raised a number of great points about the potential for an SOA to be threatening. Let's take the questions first: Are our enterprise architecture efforts providing business users with the business flexibility they require? What is our plan for reducing maintenance costs and speeding up development times? Both of these questions could, and should, be answered by pointing to the development of business rules-based services. Such services not only have all the advantages of a service in an SOA, they also allow: Business users to maintain the rules in these services, giving them flexibility and agility Reduce time to develop complex decisioning services by using a technology designed specifically for that issue while taking advantage of the pluggability of SOA Dramatically reduce maintenance by eliminating the role of IT in changing key business rules in those services (see Gartner,...

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Analytics & Optimization Real-time or Right-Time

Oct122005

This article on real-time v right-time by Jim Ericson made me think about how this topic plays out in an EDM context. The key issue it seems to me is to establish which moves towards real-time offer real business value and which do not. I thought I would start with an old example of improving the time it takes to do something and how only certain improvements make a difference. Let's say I am a bank and it takes my competitor 5 days to make a loan decision (this is an old story, no-one takes 5 days anymore). If I can move my loan decision closer to real-time I should gain a competitive edge, right? Well, perhaps not. If I reduce my time to decide to say three days my customer still has to leave the branch and come back some days later. They probably won't see a gain of a couple of days as critical (unless they have some deadline). What if I can reduce it to one day - just have them come back tomorrow? Well, perhaps.What if I can reduce it to a few hours - come back later today? Still probably not that compelling. But what if I can reduce it to say 10 minutes...

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Analytics & Optimization Real-time, risk-based underwriting

Oct122005

When Unitrin's Kemper Auto and Home Group rolled out real-time, risk-based underwriting the benefits included improved financial performance, consistent decisions across channels and greater operational efficiency. Kemper found that automating this decision worked smoothly “behind the scenes” to enable consistent, real-time decisions and delivered the efficiency they were looking for. Often, the agent can write the policy while the customer is waiting in his or her office. Not only did this improve customer service it led to increased business with customers signing up more readily thanks to the immediacy of the decision. A year after implementation, Kemper’s combined ratio dropped by eight points. Along with other technology improvement initiatives, automating underwriting in this way is credited with helping Kemper become a more efficient underwriting organization. The unit also met itsgoals for reducing underwriting losses. Kemper continues to see improvements. Other gains included efficiency and better use of resources. The old system required a hefty...

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Analytics & Optimization Autonomic Computing – are we there yet?

Oct122005

I saw this article on Autonomic Computing in Information Week - In HAL's footsteps - and it made me think of how business rules are being used to build diagnostic and often self-diagnostic systems. The article talked alot about the need for vendors to integrate hardware, provide common standards etc. It seems to me though that once all the infrastructure is in place, there will still need to be a "smart" layer that can take decisions operationally. This layer would exhibit all the features of an Enterprise Decision Management solution: It would use business rules to record procedures, best practices, rules of thumb from experts as to how to respond to particular failures, how to interpret readings, how to select new routings around failed equipment. It would use predictive analytics to turn historical log data into executable predictive models. These might take temperature data and use it to predict the likelihod of failure of a piece of hardware or traffic data to predict a bottleneck. Other models might use Neural Network technology to...

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Analytics & Optimization Autonomic Telecommunications Networks

Oct122005

This "case study" is an amalgam of a number of Blaze Advisor business rules customers. Each of these is in production and together show the potential for business rules in particular to change the way telecommunications company's deliver services by making their networks more self-repairing. A global internet backbone provider with over 1,000 Points of Presence uses business rules to resolve network faults and alerts. Each PoP embeds a Blaze Advisor services that provides rules-driven expertise on how to handle network errors and alerts without necessitating more staff. Tracking and correlating system-wide network alarm information is a very difficult, time-consuming process. A major cellular network uses Blaze Advisor rules to analyze system-wide alarms and information gathered from the entire network. These rules allow Blaze Advisor to determine the uptime/downtime for all equipment on the network and so route calls through equipment that is running to ensure large revenue customers are content. Not only does this reduce the process time for alarm...

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Analytics & Optimization Operational Business Intelligence means Enterprise Decision Management

Oct122005

Keith Gile wrote an interesting article on operational business intelligence - The Time is Right for Operational Business Intelligence in Business Integration Journal - it is not available online yet, sadly. In it he says that BI solutions have "less of a history with tactical decision-making" and that "The next evolution is toward operational decision-making". "It's at the operational level - where line workers and customer-facing employees have to make individual transaction-level decisions - that BI is often excluded from the discussion"He goes on to use an example of a call center representative trying to decide which promotional product to offer each customer during a typically short conversation. Now it seems to me that what he is discussing here is the difference between "traditional" BI and Enterprise Decision Management, something I discuss at length here. I don't disagree with any of his recommended steps except the one he has omitted - selecting the right technology platform. He identifies four steps: ...

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