Sas sme - analytics for all

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Sas sme - analytics for all

  1. 1. Anticipate adversity Identify opportunity Improve performance Grow your business insights Analytics for all Small and midsize businesses see big benefits in today’s data-rich world Big ideas for your growing business 2 Measure it, manage it, communicate it 21 Four steps to analytic success 3 Stylish and good for you 24 Sunshine, sand and strategy 8 Analytics energizes utility cooperative’s demand forecasts 26 Small business, big data 11 Look beyond your spreadsheets 15 Is risk management a part of your corporate culture? 29 The Wine House discovers $400,000 in ‘lost’ inventory 19 Analytics: An overlooked supply chain opportunity 32
  2. 2. insights Editor-in-Chief Kelly LeVoyer kelly.levoyer@sas.com Managing Editor Alison Bolen alison.bolen@sas.com Copy Editors Amy Dyson Chris Hoerter Trey Whittenton Editorial Contributors Ritu Jain Courtney Peters John Quinn David Rogers Leo Sadovy Cathy Traugot Mark Troester Waynette Tubbs SMB Insights is published quarterly by SAS Institute Inc. Copyright © 2012 SAS Institute Inc., Cary, NC, USA. All rights reserved. Limited copies may be made for internal staff use only. Credit must be given to the publisher. Otherwise, no part of this publication may be reproduced without prior written permission of the publisher. SAS and all other SAS Institute Inc. product or service names are registered trademarks or trademarks of SAS Institute Inc. in the USA and other countries. ® indicates USA registration. Other brand and product names are trademarks of their respective companies. SAS is the leader in business analytics software and services, and the largest independent vendor in the business intelligence market. Through innovative solutions, SAS helps customers at more than 55,000 sites improve performance and deliver value by making better decisions faster. Since 1976 SAS has been giving customers around the world THE POWER TO KNOW. ® Art Direction Patrice Cherry Photography John Fernez Steve Muir SAS Institute Inc. World Headquarters   +1 919 677 8000 To contact your local SAS office, please visit: www.sas.com/offices SAS and all other SAS Institute Inc. product or service names are registered trademarks or trademarks of SAS Institute Inc. in the USA and other countries. ® indicates USA registration. Other brand and product names are trademarks of their respective companies. Copyright © 2012, SAS Institute Inc. All rights reserved. 105630_S84426.0712
  3. 3. SMBinsights P2 Big ideas for your growing business by Carl Farrell, Executive Vice President, SAS Americas Every few months a story surfaces like this one: Small business owner signs up with a deal-of-the-day website like Groupon and practically ends up going out of business because the demand overwhelms resources. You don’t read as frequently about a small or midsize business that does what Oberweis Dairy did: analyze the potential effectiveness of a deal before signing up and then analyze the data to determine whether the deal turned discount shoppers into loyal customers. In this special Insights report, we highlight growing businesses that once thought the only analysis they could do was on a spreadsheet and that analytics was something for large companies. These businesses have gone beyond spreadsheets to thrive and grow by putting their data to good use (see “Look beyond your spreadsheets,” page 15). We explode other myths in this report, as well, namely that “big data” and risk management are issues restricted to big companies (see “Small business, big data,” page 11, and “Is risk management part of your corporate culture?” page 29). ACCION Texas-Louisiana has been able to speed its loan review process while also reducing the delinquency rate by 76 percent. And as for big data: Whether you’re a health care consultancy or a restaurant, you can expect the amount of data you have to deal with to only increase, along with the urgency to have effective, forward-thinking ways to manage it. Strategy expert Vijay Govindarajan, a popular speaker at SAS leadership events, talks about business transformation in three stages, or “boxes”: managing the present, selectively forgetting the past, and creating the future. Together, the latter two constitute the building blocks for the competitive future, as the focus “must be about what a company needs to do to sustain leadership for the next 10 years.” What kind of future will you build for your business? As head of an expanding team of more than 1,200 professionals in over 30 countries, Carl Farrell brings his hands-on direct leadership approach, valuescentered management and dedication to building a winning culture of excellence to SAS and its customers. Farrell oversees all sales functions across seven vertical US business units, in addition to leading all business functions in Canada, Latin America and the Caribbean.
  4. 4. P3 | sas.com/smb-insights Four steps to analytic success Make the case and get started with analytics Moving from gut-feel-based decision making to an analytics-driven approach isn’t easy – especially for small and midsized businesses that often face IT resource constraints, limited analytical talent, tight budgets and technology gaps. But implementing analytical solutions that promote fact-based decision making can be done in a lean organization – and the investment pays off in the end. data goes and is mysteriously transformed into “answers.” Bruce Bedford, VP of Marketing at Oberweis Dairy, recommends gently introducing analytics to decision makers who don’t have a statistical background. “Take them through a few simple examples like a t-test or chi-square,” he says. Then show them how it translates into a business decision. The following steps can help you get started on establishing a strong analytical foundation, but don’t view them as a simple checklist. At every step of the way you’ll need to reiterate the message, point out examples of analytics accomplishments in other organizations, and generate and publicize your early wins to keep the attention of those who make decisions in your organization. The benefits of a trial program can’t be vague. Don’t propose a project that simply cleans data for the sake of cleaning data. Instead, explain how clean data will improve the information you obtain from your customer data to help with a specific goal, like reducing churn. If you associate your data quality initiatives with your business opportunities, you will find support. No. 1: Seek executive buy-in Successful adoption of analytics starts with securing executive support. That means getting senior managers’ buyin from the get-go. If this is a struggle, run a pilot program to demonstrate the benefits. The goal is to win over a key decision maker who can serve as the analytics champion. A good pilot program has the potential not to just show where the company can earn more or reduce costs, but actually does it, even if in a limited scope. The Wine House chose to look at inventory for its first analytics project – leading it to discover $400,000 in lost inventory. Use a “quick win” of this sort to gain the support of an executive champion, who then can pave the path for adoption of analytical solutions throughout your organization. Another quick win idea: Use analytics to create targeted marketing campaigns that improve response rates. One way to earn executive buy-in is to invite them to look under the hood. Those unfamiliar with analytics often view solutions as a “black box” where Culture. This is one area where SMBs have the advantage, as it is certainly easier to make a cultural change in a smaller organization than in a large enterprise.
  5. 5. SMBinsights Golfsmith, a golf retailer, increased direct mail response rates as much as 10 to 60 percent by using analytics to segment customers better. If you are having difficulty settling on the right type of project, look for examples outside your company, maybe even outside your industry. Create an awareness of what other small and midsize businesses are accomplishing with analytics. If you get those with the authority and budget to think about the potential of analytics, the funding will materialize. No. 2: Establish an analytics culture People, processes, technology and culture – which of these four are most important for succeeding with analytics? By far, it is culture. This is one area where SMBs have the advantage, as it is certainly easier to make a cultural change in a smaller organization than in a large enterprise. SAS Chief Researcher Pamela Prentice wrote about how one start-up changed its culture: “I particularly like the notion Jayson Tripp and Brian O’Connor from Redbox had: ‘When someone is in the desert starving,’ Brian said, ‘if you feed them a saltine, it tastes like steak.’ Brian, responsible for the business intelligence function, initially fed Jayson, in charge of strategic planning, ‘saltines’ of information as Jayson worked to gain acceptance of analytics at Redbox. Jayson took this information and boiled it down to three PowerPoint slides showing the financial impact to the company – and made inroads in analytics adoption. Getting quick wins in using analytics is important to winning over decision makers.” Just three slides? Yes, because part of establishing an analytics culture is to be able to tell the story in a way that everyone – from the sales clerk to the CEO – can understand. You can’t do that with a 70-slide presentation that details the minutia of algorithms and data cleansing. To extend the analytics culture across the company, Kelley Blue Book created an analytic center of excellence. The resulting improvements in decision making help the company consistently outperform competitors. Both costs and benefits of analytics projects are highly visible, making the power of analytics clear to all. P4
  6. 6. P5 | sas.com/smb-insights Tie analytical outcomes to the strategic issues of the business. Letting skeptics see the effectiveness of using analytics whets their appetites and gets other people and departments interested. “We improved agility by placing analytic center of excellence and business team members together,” notes Kelley Blue Book’s Vice President of Analytical Insights, Shawn Hushman. “As needs arise, analytic experts contribute ideas and answer questions.” Tie analytical outcomes to the strategic issues of the business. Letting skeptics see the effectiveness of using analytics whets their appetites and gets other people and departments interested. Over time, this can help analytics become pervasive throughout your business. No. 3: Figure out at what stage your organization is If you can do nothing more, transition the conversation from analytics being about a tool or product to analytics being a component of the business process. In the book Competing on Analytics: The New Science of Winning, Thomas Davenport and Jeanne Harris list five stages of analytic maturity: • Stage 1: Analytically Impaired – Lack of analytical skill or executive interest. • Stage 2: Localized Analytics – Uncoordinated activities or silos. • Stage 3: Analytical Aspirations – Good intentions with slow progress. • Stage 4: Analytical Companies – Widely use analytics internally. • Stage 5: Analytical Competitors – Use analytics as a competitive advantage. Understanding where you are helps make it easier to know where you need to go. To move from stage one to stage two, walk decision makers lacking a statistical background through a few simple examples to show how analytics translates into business decisions. Start with tactical decisions, such as key metrics reporting or creating basic segmentation for more targeted marketing. Show how tactical decisions can help drive more strategic decisions – such as entering a new market, introducing a new product category based on that segmentation, or expanding production or opening a new plant based on demand trends. No. 4: Identify your analytical talent SMBs usually have very few statisticians and analysts – if any. Most staff falls in either the “amateurs” category – those who use spreadsheets and run queries – or in the “semiprofessionals” category of those who can use some basic statistical tools and may be able to program in SQL. Only a few SMBs employ “professionals” who can write their own algorithms. Don’t let the fact that you have only limited analytical pros deter you. Know that the employees that tend to lead analytical initiatives aren’t necessarily analytical experts, but ones who understand how to pose analytical questions. The key is to pinpoint that talent in your organization and create processes that enable employees to promote analytic best practices. Why not just craft a job description and hire analytic talent? Because it isn’t easy to hire someone who knows your business and its challenges. While universities are beginning to develop degrees and graduate programs aimed at creating analysts who can quickly get up to speed on an organization’s needs, it’s not the same as hiring from a top engineering or MBA program. Homegrown
  7. 7. SMBinsights really does work best in this situation. Try to identify and nurture talent that is already at your company by looking for individuals with both strong communications skills and technical abilities, or look for a pair of individuals that between them have strong business knowledge, communication skills and technical abilities. Find online training courses and users groups for them to attend. Local SAS users groups, for example, are very welcoming and encouraging for newcomers to the field. ® Growing SMBs might also consider creating the position of chief analytics officer. This person should ideally have both a technical and business background, and be able to tell the story of analytics in order to win over reluctant decision makers. Short of such a position, informally identifying the technical and business users who can pose those analytical questions and encourage them to work together – even if they report up through separate chains in the organization. Even a small company can create a virtual center of analytic excellence, as Kelley Blue Book did, to promote the understanding and adaptation of analytics. At a minimum, you want the analytic talent you do have to get to know and work with each other – even if they are in different departments, or different ends of the country. Conclusion: It’s not all about technology Overall, you cannot ignore the human relationships and the importance of evangelism at every step of the way. You need to be constantly talking about what analytics can do and what you have seen analytics accomplish in other organizations. There has to be a human element tied back to every aspect of your work, from getting wins early on and catching the attention of those who make decisions in your organization. SAS Senior VP and CMO Jim Davis on how to become an analytic organization What is the best way to become an analytic organization? How can you help introduce analytics into your organization? I enjoy discussing these questions with our customers, and these are the tips I hear most often: 1. Look for examples outside your company AND outside your industry. For inspiration, look not only at what you can do but also look at what other organizations have done. Create an awareness of what other industries are accomplishing with analytics. 2. Understand your culture. Assess the personality of your organization to determine whether top-down or bottom-up implementation will work best. Success can happen in either scenario – but you should know before getting started which will work best for your organization. 3. Determine your baseline. While you’re assessing the culture, you should also assess the level of analytic understanding within the organization. A tool like the Information Evolution Model can help you determine where your organization falls on the adoption spectrum, so you know where to start and what to aim for next. 4. Find a starting point. Once you’ve provided examples, you need to explain how you will apply those same methods in your organization – and what the results will be. Cross-sell and up-sell is a natural starting point for many businesses. 5. Give them something tangible. Especially when it comes to data quality, tangible reasons for the project are essential. You can’t propose a project for clean data for the sake of clean data, and expect it to get funded. Instead, you need to explain how clean data will improve the results of your customer data and help reduce churn. If you associate your initiatives with your business opportunities, you will find support. ONLINE Four steps for your first analytics project: sas.com/smb-firstproject Getting started with analytics webinar: sas.com/smb-getstarted P6
  8. 8. P7 | sas.com/smb-insights Tap into the right tools Implementing the right technology is essential to building and promoting an analytical culture in small and midsized companies. Remember, a bad experience has longer-lasting effects than a good one. So, when selecting a business analytics solution, look for the following capabilities: Robust visualization Look for strong visualization capabilities that empower business users with even limited technical skills to: interactively explore large amounts of data to spot anomalies and hidden trends; build analytical models in a point-and-click environment to eliminate the need for manual coding; and share and present these results via easy-to-understand, dynamic graphics. Support for advanced analytics Seek to go beyond simple query and reporting and OLAP drill-down capabilities. The solution should support a comprehensive set of advanced analytical techniques, including data mining, forecasting, scenario modeling and optimization. This puts your organization on an equal analytical footing with larger competitors. Prebuilt analytical models and associated task support Look for prebuilt analytical models to address common business issues of varying degrees of complexity. A solution offering model assessment tools enables users to evaluate various models and choose the best for the task at hand, and to deploy and monitor the models. Suited to a range of users Find a solution that recognizes the talent constraints facing SMBs and supports basic or intermediate-level modelers and business users. Yet don’t skimp on features for more advanced users (such as the option to embed a home-built algorithm). Skill sets change rapidly, and you want to purchase the product with the most flexibility. Ease of use Seek a solution that includes data management, analytics and reporting capabilities via familiar interfaces such as Microsoft Office. This ensures that users won’t be intimidated by complex, technical-looking interfaces that hinder users from fully using the solution’s capabilities. Balanced user autonomy and IT control Choose a solution that allows business users to work on their own, but within a well-defined IT environment. This helps ensure that your already-limited IT resources are not pressured to manage metadata, security and data integrity requirements at multiple locations. Modular solutions Choose solutions that allow your organization to purchase the functionality or capability you need the most right now, while making it easy to add more as you go – without incurring expensive integration costs. Training and technical support Select solutions that include appropriate training and technical support. Look for resources to ensure your business users get quickly up to speed on functionality and can access additional support as needed. Low total cost of ownership Don’t choose a solution just because it has the lowest per-user costs. Consider additional costs you may have to pay for that are associated with implementation, integration, training and technical support.
  9. 9. SMBinsights P8 Sunshine, sand and strategy Twiddy & Co. delivers good old-fashioned hospitality using SAS Providing exceptional customer service has always been – and always will be – an essential ingredient of business success. No one knows this better than owners of small to medium businesses, for whom exceptional customer service is integral to building customer loyalty and driving business growth. Adding to its own unique brand of customer service in the vacation home property management industry, one North Carolina company is using analytics to enhance its clients’ experience by combining good old-fashioned hospitality with deep business and customer insight. For more than 33 years, Twiddy & Company has specialized in managing a portfolio of exceptional rental vacation properties on the northern Outer Banks of North Carolina. Its formula for success over the years has remained the same: local ownership, beautiful vacation homes and a dedicated, experienced staff that is 100 percent committed to old-fashioned hospitality and a personalized approach to property management. Commitment to customer service To help deliver on this commitment, Twiddy uses SAS Business Analytics to ® “What we deliver is hospitality – that’s our passion and our business – and SAS has helped us through the logistics to deliver it with a higher degree of confidence.” Ross Twiddy, Marketing Director
  10. 10. P9 | sas.com/smb-insights provide exceptional home management and maintenance on behalf of owners while ensuring repeat visits from rental guests. With a portfolio of more than 900 managed properties, Twiddy has implemented SAS to support the operations side of its business, which is helping the family-run company better manage budgets and expenditures related to property maintenance. “Over time, we captured a lot of cost data via Excel,” explains Operations Manager Clark Twiddy. “We decided there had to be a way to make our data more intelligent, and to automate the cost analysis process so that we wouldn’t have to rely as much on manual processes to better understand what is and isn’t working in terms of our business strategy, and where we needed to focus our efforts. We can now track expenditures month-to-month and year-to-year without doing a massive data pull into Excel, which used to take one person a couple of days to perform.” Reducing errors and financial losses For example, Twiddy is using SAS to make better decisions about which vendors to use for what maintenance projects, based on cost-effectiveness, efficiency and quality of work. And it has reduced financial losses – due to human processing errors of contractor invoices – by 15 percent. “We work with about 1,200 vendors, and we want to assign the work to these vendors in the most effective way possible,” Clark Twiddy says. “SAS gives us a sense of what’s working and not working on a dynamic basis, and that’s something we didn’t have before. We’ve been able to reduce our invoice processing error rate and catch costs that are far outside the average, for any given service, before a homeowner sees the bill. Manually looking for these things in the past was too resource-prohibitive. Now we have a really good sense of cost and quality by service provider and apply a professional approach to resource allocation and management. If you’re a homeowner with Twiddy and Company, imagine the confidence you’d have knowing that when we coordinate service to your home, we’re doing it in the most cost-effective and efficient way possible, which gives your guests the best experience to keep them happy and coming back to vacation at your home.” Dynamic access to information “Another benefit for homeowners is transparency in terms of costs,” Twiddy continues. “When an owner calls now to inquire about their service costs, we can show them their expenditures and that they are in line with market averages. The accurate, timely and transparent information provided by SAS delivers tangible value to our clients. Dynamic access to information is a real competitive advantage that we can hang our hat on.” Using analytics, the company is also able to forecast and streamline the management of routine services, such as cleaning hot tubs and pools, before guests arrive for their vacation.
  11. 11. SMBinsights “One of our first projects was to automate the scheduling of pool and hot tub service,” says Chief Technology Officer Laura Carver. “We can now pull the scheduling information and automatically email vendors on a weekly basis. Before, one person would be faxing work orders on a daily basis. This has invented time for us that we didn’t have before – it’s providing real savings that we can measure on the bottom line.” Delivering hospitality “What we deliver is hospitality – that’s our passion and our business – and SAS has helped us through the logistics to deliver it with a higher degree of confidence,” says Marketing Director Ross Twiddy. “We could have the best website and the best smiles at the front counter, but if you get to your house and the pool and hot tub hasn’t been cleaned, we’ve failed to provide hospitality. SAS was instrumental in making that process better.” According to Carver, who retained Pinnacle Consulting to help with the SAS implementation, Twiddy & Company plans to give homeowners online access to the system in the future, which will allow them to look at account information – such as revenue generated and expenses – to support decisions about their investment properties. Client and employee satisfaction Not only is SAS helping Twiddy increase client satisfaction, it’s also having a positive impact on staff. “Smart and motivated people want to be measured and held accountable,” says Ross Twiddy. “Employees have bought into the system and like it because they can track and see the impact they’re having on the business. If we can work smarter, the company and our homeowners will benefit.” P10 How to become best-in-class with analytics According to recent research from Aberdeen Group, small- to mediumsized businesses that are best-in-class with analytics realize significant benefits, including: • 24 percent year-over-year increase in new customer accounts (compared to a 12 percent industry average). • 16 percent year-over-year reduction in total operating costs (compared to a 12 percent industry average). • 18 percent year-over-year increase in operating cash flow (compared to a 6 percent industry average). How can you become best in class? Start by following these three tips from Aberdeen: • Treat data as a strategic asset. • Expand the reach of business analytics. ONLINE Learn more about SAS Business Analytics. sas.com/businessanalytics • Accelerate the delivery of actionable information. See what SAS offers the hospitality industry. sas.com/industry/hospitality Check out the Business Analytics Knowledge Exchange. sas.com/smb-baexchange Learn more about Twiddy & Company. twiddy.com Learn more about Pinnacle Consulting. psiconsultants.com ONLINE Read The Analytical SMB: More Data, More Users, Less Time from Aberdeen Group. sas.com/smb-analyticalsmb
  12. 12. P11 | sas.com/smb-insights Small business, big data Surprisingly not an oxymoron, many small and midsize businesses also deal with big data issues by Mark Troester, Global Product Marketing Manager, SAS Is your business too small to worry about “big data?” Have you heard the volume, variety, velocity descriptors about big data and thought, “Nah, that doesn’t apply to me”? Think again – and consider this simple and accurate definition for big data: When volume, velocity and variety of data exceed an organization’s storage or compute capacity for accurate and timely decision making (See figure 1). Clearly, big data is a relative term. Every organization has a tipping point, and most organizations – regardless of size – will eventually reach a point where they will have to address the volume, variety and velocity of their data. goals. When you tackle big data with big analytics, you quickly realize that big data presents an opportunity for every organization. Big data is not just for multinationals. And it’s definitely not one-size-fits-all. More importantly, every organization has an opportunity to use big data to its advantage – to drive accurate and timely decisions that can materially affect its business and organizational Whether your revenues are $1 million or $100 billion, knowing how to manage and analyze data is critical to success, as the Economist Intelligence Unit research illustrates well in its recent study
  13. 13. SMBinsights Big Data: Harnessing a Game-Changing Asset. Nearly half the survey respondents who listed big data as a major issue facing their organization reported revenues of $500 million or less. Among the report’s findings: • Over the last year, 73 percent of survey respondents say their collection of data has increased “somewhat” or “significantly.” • Companies self-identified as “strategic data managers” – those with a welldefined data management strategy that focuses resources on collecting and analyzing the most valuable data – tend to financially outperform their competition more than others – 53 percent, compared with 36 percent. • Thirty-two percent of self-identified “data wasters” say they lag behind their peers on financial performance. Only 1 percent of strategic data users report that. smart meter, a utility goes from collecting one data point a month per customer to receiving 3,000 data points for each customer each month, while smart meters send usage information up to four times an hour. One small Midwestern utility is using smart meter data to structure conservation programs that analyze existing usage to forecast future use, price usage based on demand and share that information with customers who might decide to forestall doing that load of wash until they can pay for it at the nonpeak price. A regional trucking company provides another example. Global position satellite technology now allows firms to track the trucks, the merchandise – practically anything you can attach an RFID tag to. How a company uses that information – to reroute trucks to create efficient routes, alert customers to deliveries, and forecast and price services – depends on the ability to manage and analyze data effectively. • More than half of companies report that they expect the increased volume of data to improve operations. The second most popular answer (respondents could choose two): 36 percent expect it to inform strategic decisions. How is your industry affected? It’s easy to think that only certain industries generate a lot of data or deal with new data types. For instance, retailers get a lot of SKU data and information from their supply chains. Financial institutions are constantly monitoring the inflow and outflow of money. But would you think a small, regional utility company might have big data concerns? As utility companies of all sizes start to use smart meters, they can better forecast load and reduce the need to build additional plants. But what are the data implications of smart meters? With a P12 The bottom line for organizations of all sizes: You should not be doing less sophisticated analysis just because you have more data. Volume Terabytes Records • Transactions • Tables, files • • Batch • Near time • Real time • Streams • 3 Vs of Big Data Velocity Structured Unstructured • Semistructured • All the above • • Variety Figure 1: haracteristics of big data (source; Big Data Analytics, C TDWI Best Practices Report)
  14. 14. P13 | sas.com/smb-insights Fast-growing, regional restaurant chains are also affected by big data. If you own one of these restaurants, what can you do about an onslaught of negative online reviews? Do you have the capacity to analyze the comments made about your restaurants on Facebook or Yelp? As the Economist Intelligence Unit report notes, “Each time new kinds of data are born, so too are opportunities to learn from them, combine them with existing data and create new insights.” ONLINE Download the report Big Data: Harnessing a Game-Changing Asset: sas.com/smb-bigdata Read big data blog posts: sas.com/smb-bigdatablogs running your business better with big data – it is about surviving against competition. In another example, a health care consultancy has made the data coming out of medical practices the focus of its thriving business. The company collects billing and diagnostic code data from 10,000 doctors on a daily, weekly and monthly basis to create a virtual clinical integration model. The physician practices whose data is being collected have agreed to be measured against 90 standards of care guidelines. This allows the independent practices to meet Federal Trade Commission guidelines for negotiating with health plans. The consulting company analyzes the data to help the groups understand how well they are meeting the guidelines and whether they qualify for enhanced reimbursement based on offering a more cost-effective standard of care. It also sends them automated information to better take care of patients, like creating an automated outbound calling system for pediatric patients who were up to date on their vaccinations. • It’s not size that matters. While it’s interesting for the technical discussion to focus on size, the focus should be on business value first. Identify your business challenge or goal. Do you need to use blog and social media data to analyze customer churn? Do you need to strengthen your fraud analysis approach by mining clickstream and other forms of content? Do you need to analyze many data points at the customer transaction level? Focus on the business value so you can align your goals with your technical and solution approach. More and more companies like this one are building their business models on the analysis of data. So it’s not just about IT considerations – big and small Whether you’re in health care or the service industry, you need to start thinking about the requirements and design for your analytics projects. As your data grows, so do your IT requirements and – oftentimes – the gap between the business need and the IT infrastructure. To overcome these challenges, consider these points: • Think about a different kind of big. From a design perspective, think about the big picture. You certainly don’t need to take a big bang approach in terms of implementation, but apply standard architecture principles to ensure that you don’t box yourself in. • Look beyond the hype. If you do much research on big data, you’re bound to run across a lot of articles on Hadoop. This new software framework for big
  15. 15. SMBinsights data is getting a lot of attention, and it’s a great technology, but it is not a realistic solution for small and midsize companies. However, just because Hadoop isn’t for you doesn’t mean big data is irrelevant altogether. Consider what is best for your organizational growth before you invest purely based on price or hype. • Analytics is the key. In most cases, we think about using information management technologies like data integration and data quality to prepare data for analytics. Although this is certainly an important step, the biggest differentiator will be how you can apply analytics to determine what to do with your organizational data, determine which data is relevant, and how or whether data should be stored. • Resources are scarce. Lack of resources, especially the right resources to analyze big data, is critical. In the Economist Intelligence Unit research, lack of the right skills to manage data effectively is among the top two challenges cited by survey respondents (30 percent), followed closely by “We can’t get the data to the right people in the organization” (23 percent) and “We don’t have the analytic skills to know how to use the data effectively” (22 percent). But using data doesn’t require hiring a team. In fact, many successful companies start by looking internally for the people who are always asking questions that everyone wishes they had an answer to and pairing them with a statistician who can help them learn to dig into the data. In “How to Get Started with Analytics” on page 3, we offer suggestions on how to deploy your company’s internal assets to take advantage of big data. Solving your big data problems with robust analytics The bottom line for organizations of all sizes: You should not be doing less sophisticated analysis just because you have more data. If the size of the data is choking your analytics, the problem is not that you have too much data. The problem is that you don’t have the right analytics environment. This new big data world is not only about running problems faster, but about solving problems that were not solvable before. As data volumes grow and new data sources continue to multiply as well, what new big data problems do you have? When you put the right analytics to work on your big data problems, you can stop thinking of big data as only a challenge and start seeing big data as an opportunity. Mark Troester oversees SAS’ market strategy efforts for information management and for the overall CIO and IT vision. He began his career in IT and has worked in product management and product marketing for a number of Silicon Valley start-ups and established software companies. P14
  16. 16. P15 | sas.com/smb-insights Look beyond your spreadsheets See the big picture instead with analytics by Ritu Jain, Global Marketing Manager, SAS When you talk to small and midsize businesses about analytics, you often hear some variation of a common response: “Oh, we do analytics. We just do it with spreadsheets.’’ Companies use spreadsheets for many reasons: They are easy to use, come free bundled with productivity software, and most people are familiar with them, so they require no training. But spreadsheets also have several weaknesses that can put a midsize company at a serious disadvantage compared with not only larger companies, but also other companies its size. A research report from the Aberdeen Group notes that, while spreadsheets can be useful, they can also lead to serious errors when used inappropriately. “Spreadsheets, a widely available and familiar tool at midsized companies, are a poor choice for strategic activities,” said David Hatch, Aberdeen Vice President and Principal Analyst. “Our research shows midsize businesses that rely more 1 on spreadsheets for key analysis tend to perform poorly across a broad range of financial and operational metrics, as compared to top performers who have left spreadsheets behind in favor of analytic applications. The danger of overreliance on spreadsheets is clear.” One major problem with spreadsheets is their tendency to become error-ridden. Raymond Panko’s work at the University of Hawaii estimates that 88 percent of audited spreadsheets have errors.1 Some issues with spreadsheets relate to their original design – they were what Panko refers to as a “scratch pad(s)” meant for simple calculations by an individual.2 Carefully designing spreadsheets for large-scale applications (and multiple users) didn’t occur until after the spreadsheets were already being used – some would say abused – in that way. The European Spreadsheet Risks Interest Group has collected public report of companies who have endured costly spreadsheet errors, many of which are R aymond R. Panko, “What We Know About Spreadsheet Errors.” Journal of End User Computing’s special issue on Scaling Up End User Development, Volume 10, No. 2. Spring 1998, pp. 15-21. panko.shidler.hawaii.edu/My%20Publications/Whatknow.htm 2 ibid.
  17. 17. SMBinsights P16 “ preadsheets, a widely available and familiar tool S at midsized companies, are a poor choice for strategic activities.” David Hatch, Aberdeen Vice President and Principal Analyst SMBs, including a European spirits maker whose stock fell 15 percent in one day after it discovered its revenues had gone down, not up, and a US online retailer whose publicly traded shares fell by more than a quarter after a spreadsheet error was discovered and reported. It’s not just about errors though. Spreadsheets just don’t provide the robust data management and analysis capabilities midsize businesses need to drive evidence-based decision making. In the Aberdeen report, Hatch says that the most successful midsized businesses are much more likely to be using powerful and relevant technologies – technologies that can provide automation, allow for advanced analytics capabilities (such as data mining, forecasting and scenario modeling), and streamline the disbursal of business intelligence. Some of the primary reasons why spreadsheets should not be the answer to your analytics needs are: • Data Integrity and Consistency – Have you ever gone into an important meeting where everyone pulled out a spreadsheet with “data” and their interpretation of it, only to find no one was working off quite the same batch of data? Data can be compromised inadvertently – sometimes just the simple process of pulling data from different systems, different formats into one spreadsheet can cause data modification. And if this data is saved, you may have lost the original values forever. Having reliable data that represents “one version of the truth” is important to creating an analytical data-driven culture. • Data Volume – Even small companies are generating much larger data volumes than ever before. Can a spreadsheet handle millions or even billions of cells of data? There is also the data aggregation problem. Unless all your data is stored in a spreadsheet format, just the simple task of integrating all the relevant data stored in different formats in different data sources into one spreadsheet can cause data errors. Even if all your data is in spreadsheets, how long does it take your staff to gather spreadsheets from different users and attempt to create one master file? What about manual errors that occur when copying and pasting data from multiple spreadsheets? • Manual Errors – Spreadsheets are notorious for their susceptibility to trivial human errors. Errors in copying and pasting data from one spreadsheet to another, data entry errors, omissions of negative signs (especially in financial reporting) or demand calculations, macro errors, accidental deletion or modification of a cell, a row or a column. What if your user mistakenly sorts just a few columns of the spreadsheet, rather than whole sheet? Can you imagine the time and cost of working off incorrect, meaningless data? The constant effort to keep errors from being introduced leaves users with little time to analyze and plan, as SMBs told CFO magazine. • Security – One reason there is no one version of the truth is that spreadsheets are so easy to disseminate. While that makes them widely used, especially when different departments or individuals need to provide their input, it is not necessarily a good practice, especially if people change information, enter erroneous data before passing it along (without renaming the file) or if it gets into the hands of unauthorized individuals. Despite the drawbacks, it isn’t easy to get everyone from IT to business unit leaders to agree to transition away from
  18. 18. P17 | sas.com/smb-insights spreadsheet-based analysis. Organizations often think spreadsheet alternatives are too costly, or will be difficult for users to adapt to. A UMB TechWeb survey of SMBs captured that hesitancy in the comment of one company president: “We need something affordable from a cost standpoint, but also from a personnel and resource standpoint.” As the TechWeb survey author points out, companies and their managers know that they need business analytics, they just struggle to get there. One of the best ways to get the conversation started about moving away from spreadsheets to more robust analytic applications is by helping leaders and business users see the benefits of change: ONLINE Watch this Beyond Spreadsheets Webcast sas.com/smb-spreadsheets • Emphasize productivity increases. Are staffers struggling to get critical projects done on time? Look to case studies that show what other SMBs have achieved in productivity by embracing analytics. This midsize utility sliced in half the time it took to produce accurate reliable forecasts. • Focus on the ability to eliminate “hunch”-based decision making. A small manufacturer used analytics to create an early-warning system for quality issues that is employed by business users at four separate locations. The company tried doing this with a spreadsheet, but it took too long. • Discuss what doesn’t have to change. A European publisher eliminated a tremendous amount of data manipulation work by choosing an analytical approach, but business users can work with the finished product in Excel. • Talk about the bottom line. A midsize property management firm reduced losses 15 percent after its analytics program helped it see contractor-related invoice errors that its spreadsheet approach didn’t catch. Once interest is established, engage IT and business leaders in seeking out new analytics solutions. Share some of the key capabilities that more robust solutions in the market offer to make the transition from spreadsheets easier – capabilities such as strong visualization, prebuilt models and predictive analytics. Highlight integration options such as Microsoft add-ins that make advanced analytical capabilities available within a spreadsheet environment seamlessly for easier user acceptance and adoption. For more information, check out what to look for in a business analytics solution. Ritu Jain is the Global Marketing Manager for Small and Midsize Business Solutions at SAS. She is responsible for driving the company’s marketing strategy in the SMB space. Prior to joining SAS, Jain held a number of leadership positions in retail supply chain management, driving strategic planning, global sourcing, operations and production management.
  19. 19. SMBinsights P18 Researchers at the Tuck School of Business at Dartmouth College spreadsheets in an organization created a spreadsheet risk diag- is directly linked to the degree nostic tool as part of its Spread- of risk that spreadsheets pose for sheet Engineering Project (SERP). Assess your spreadsheet risk “We’ve found that the role of that organization.’’ 1. ow important are spreadsheets in H your organization? 4. ow often is a spreadsheet used H after it is developed? _____ Not at all important (1) _____ Annually (1) _____ Somewhat important (2) _____ Quarterly (2) _____ Important (3) _____ Monthly (3) _____ Very important (4) _____ Once or twice per week (4) _____ Daily (5) 2. hat is the size of the spreadsheet W models generally created? _____ under 100 cells (1) _____ 101 to 1,000 cells (2) _____ 1,001 to 10,000 cells (3) _____ 10,001 to 100,000 cells (4) _____ over 100,000 cells (5) 5. hat are spreadsheets used for W in your organization? (Check all that apply) _____ Analyzing data (e.g., financial, operational) (1) _____ Determining trends and making projections (1) _____ None (1) _____ 1 other person (2) _____ 2 – 5 other people (4) _____ More than 10 other people (5) _____ Optimization (e.g. Solver, What’s Best) (1) (1) (3) _____ 6 – 10 other people (1) _____ Simulation (e.g. Crystal Ball, @Risk) 3. ow many other users are there for a H typical spreadsheet? _____ Statistical analysis Quiz results: Categories of risk 12 or below = Low Risk. Congratulations! Your organization is likely using spreadsheets in the way that they were intended, but you might be able to do more with your data if you used analytics. Total Score: _____________ ONLINE Learn more about SERP: mba.tuck.dartmouth.edu/spreadsheet 13-16 = Medium Risk. Like looking down the precipice? Your organization is on the edge. If more people use the same spreadsheet, if more cells are added or if you depend on them for a greater range of tasks, you’ll move into the high-risk zone. Instead of starting another project on a spreadsheet, look at an analytic solution. 17 or above = High Risk. Your organization needs to immediately re-evaluate its dependence on spreadsheets. With the size of the spreadsheets, the number of cells and the number of people working on them, you are at high risk for introducing serious mistakes that could damage your reputation.
  20. 20. P19 | sas.com/smb-insights The Wine House discovers $400,000 in ‘lost’ inventory See the big picture instead with analytics Economic times may be tough, but Bill Knight, owner and President of The Wine House, is toasting a 100 percent return on his investment in SAS Business Intelligence for Midsize Business. The first day the SAS application was live, the brick-and-mortar and Internet retailer discovered 1,000 items that hadn’t moved in more than a year. “That’s significant cash tied up in inventory,” says Knight. “We had a huge sale to blow it out, generating $400,000 in capital in one weekend, and just in time, because in today’s economy, we’d be choking on that inventory.” Midsize solution, rapid implementation With annual sales of $20 million, the 30-year-old firm is the largest wine merchant in Southern California, but with no IT department and a point-of-sale system that could not provide inventory aging, Knight had no way to track the age of his extensive inventory. Knight attended a retail technology conference and spoke with several vendors, but SAS was the only one with solutions scaled for midsize businesses. Working with a channel partner, The Wine House had SAS up and running within four weeks. Aged inventory reduced by 40 percent “The biggest benefit of SAS has been the ability to drill down into the specifics of our inventory,” Knight told Information Management magazine for a SAS product review. With SAS, Knight now has a real-time view into his inventory and is able to drill down by department, supplier, margins, price points, age – all the way down to pinpointing slow-moving bottles on the shelf so that he can promote them and move them out. “This is a tremendous benefit for a retailer, especially in this economy, to know exactly what’s going on in the business in a timely way with as much detail as needed,” says Knight. Using SAS, The Wine House has reduced its aged inventory by 40 percent. “Managing inventory is a crucial balancing act, and SAS allows us to know exactly what’s going on so that we can move quickly,” says Knight.
  21. 21. SMBinsights P20 “ Now we’re using SAS to know who our individual customers are, what regions of the country our business is coming from, and to focus on generating more international business.” Bill Knight, Owner and President of The Wine House Better buying decisions SAS also allows The Wine House to offer customers more of what they would like to buy. “Our reports showed us early on that people were still buying wine. They were just buying $20 bottles instead of $100 bottles, so we took action to shift our inventory to lower-priced merchandise,” says Knight. A story from Internet Retailer further demonstrates how The Wine House is using SAS to fine-tune buying strategy: During the holidays, the retailer pulled back from a planned $30,000 wine purchase because analytics revealed how much of the supplier’s product was already in stock and hadn’t moved in a year. “I told him we couldn’t take any more of his inventory until we worked through what we had,” says Knight. “We knew we had a problem, but other than walking the floor and recalling, we couldn’t identify this kind of information before.” $60,000 savings in one simple step Now that The Wine House has a handle on inventory, Knight is focusing on his customers. Using SAS to clean up the customer database and purge the mailing list, The Wine House saved $60,000 in printing and postage alone, said Knight. “Now we’re using SAS to know who our individual customers are, what regions of the country our business is coming from, and to focus on generating more international business,” says Knight. “The next thing we’re going to do is build a dashboard that shows us current customers, new customers and retention rates so that if our new customer or retention count is going down, we’ll know right away and can do something about it,” says Knight. Clean customer data = outstanding customer service Knight’s goal is to set The Wine House apart by providing a “wow” experience for customers that keeps them coming back – for example, hosting special wine-tasting dinners for a well-segmented group of customers, or using buying history to reach out to customers with a special offer on their favorite wine before offering it to the general public. Why should you implement an affordable, easy-to-use business intelligence solution? We’ll give you 10 reasons: 1. Integrate data from across your organization. 2. Provide self-service reporting and analysis for users of all skill levels. 3. Explore data in many ways with a simple point-and-click interface. 4. Deliver insights with business visualization. 5. Present data in charts, graphics and maps with an easy-to-access, Web-based interface. 6. Get personalized information via customized portals. 7. Monitor performance using dashboards. 8. Reduce decision makers’ time looking for answers and give them more time for making strategic decisions. 9. Easily integrate with Microsoft Office. ONLINE Learn more about SAS Business Intelligence for Midsize Business: Watch this Beyond Spreadsheets webcast sas.com/smb-spreadsheets Check out SAS for retail : sas.com/smb-retail 10 reasons why you need BI 10. xpand BI capabilities at your E own pace and budget.
  22. 22. P21 | sas.com/smb-insights Measure it, manage it, communicate it Improve performance by understanding your strengths and weaknesses By Leo Sadovy, Product Marketing Manager for Performance Management, SAS Do you know what your strengths are? What about your weaknesses? Here’s a typical SWOT (strengths, weaknesses, opportunities and threats) analysis you will find for most small and midsize businesses. External Origin Internal Origin Helpful Harmful S W O T Strengths Focus Innovative Agile Opportunities Target marketing Service and quality Customer loyalty Weaknesses Order-to-cash cycle Risk management Market presence Threats Price war Social media Suppliers and channels Does most of that look familiar? Do you see your own business in this analysis? • Your strengths are your inventiveness, your focus on a single organizing idea and your ability to move quickly compared with the big players. • Your weaknesses start with cash, extend into the area of risk where you are probably not diversified enough to take a big hit, and also include a limited market presence. • Your opportunities are the opposite side of that coin, where being small means that there are still billions of potential customers out there if you can effectively target them with the right mix of product, service and quality. • On the downside, your threats are very real: You cannot survive a price war with the big boys; you are most likely heavily dependent on the Internet and social media, where your reputation is surprisingly vulnerable; and, not being vertically integrated, you are dependent on supplier and channel partners.
  23. 23. SMBinsights P22 Performance improvement comes from taking responsive action based on the data, the analysis and the insight. Let’s take another look at the SWOT diagram. It represents the concept of performance management: managing your entire portfolio of processes, investments, functions, goals, risks and objectives. But that’s only the top-down perspective. Measuring, managing and improving also have to occur from the inside out. Are you a breakthrough company? Looking at the 12 specific elements of the SWOT matrix, three themes emerge: The tools you need to manage from this holistic perspective would include: • Market presence, target marketing, customer loyalty and social media seem to create an integrated marketing management cluster – what we call customer intelligence at SAS – and make it the No. 1 area to apply analytics for insight. Only 0.1 percent of businesses exceed $250 million in annual sales. Are you ready to join this elite crowd? • A strategy-driven approach, to capitalize on your strengths, mitigate your risks and align with your single organizing idea. • One version of the truth: information management and reporting that is timely and accurate. • Planning and forecasting capabilities, for efficient execution of strategy and rapid reaction to threats and opportunities. • Metrics, measures, scorecards, dashboards, reports, alerts and communication all derived from the trusted data mentioned above. If you can’t measure it, you can’t manage it. If you can’t manage it, you can’t improve it. Finally, if you can’t communicate it, it doesn’t exist. • The order-to-cash cycle begs for attention to working capital management, in conjunction with inventory, billing and receivables. • The dependency on third parties, vendors and outsourcers puts a premium on supply chain management. Taken together, improvement in these three functional focal points within the performance management circle depends on data-driven business decisions. They depend on analytics for insight and action. In Keith McFarland’s best-selling book, The Breakthrough Company, he reveals strategies and skills that have enabled certain companies to flourish into established and highly profitable organizations. While these qualities can be emulated by any organization, they seem to be particularly relevant to SMBs, which face many distinct challenges as they attempt to grow, including: • Effectively managing IT spending and responsibilities. • Sustaining revenue during growth. • Anticipating customers’ needs. ONLINE Learn more from McFarland through our free video series of his talks: sas.com/smb-breakthrough
  24. 24. P23 | sas.com/smb-insights Spreadsheets serve solely to collect data and organize and report on it, and are often ineffective even at that limited task as complexity increases the chance of errors from time-consuming manual input. Spreadsheets do not provide real analysis or insight. Real insight comes from data discovery, from connecting the dots, and from segmentation and correlation by common attributes. Taking action on these insights, in turn, depends on promptly communicating accurate, trusted information to decision makers in an understandable format and context, along with visual displays that shout out “Here I am!” rather than hiding on row 147, column AA. Performance improvement comes from consistently better, data-driven business decisions. Performance improvement comes from analysis and insight. Performance improvement comes from taking responsive action based on the data, the analysis and the insight. grow and thrive in a globally competitive market dominated by behemoths that are targeting you in their own SWOT analysis. Ask yourself how you can be more analytical in just one of the key areas mentioned above. Make that your goal for 2012, and start basing decisions on those analytics. Each year after that, bring more analytics to bear on these priority areas in your business. Before you know it, as your threats and weaknesses become more manageable, you can become guided more by your strategy, strengths and opportunities. ONLINE Driven by Data: The Importance of Building a Culture of Fact-Based Decision-Making sas.com/smb-datadriven This holds no matter what size your business, but is especially essential for a small or medium-sized business trying to Leo Sadovy handles marketing for performance management at SAS. Before joining SAS, he spent seven years as Vice-President of Finance for Business Operations for a North American division of Fujitsu. During his 13-year tenure at Fujitsu, Leo developed and implemented the ROI model and processes used in all internal investment decisions. Leo has an MBA in finance and a bachelor’s degree in marketing.
  25. 25. SMBinsights P24 “mplementing analytics is a great way for a small company I to become a large company. One of the most valuable assets of any company, large or small, is its data, but you have to analyze it.” Bruce Bedford, Vice President of Marketing Analytics and Consumer Insight, Oberweis Stylish and good for you From fashion to dairy, timely customer touch points help companies grow Most people would be hard-pressed to find similarities between an online luxury fashion retailer and a milk delivery business in the suburban Midwest. While Gilt Groupe has made a name for itself selling fashion-forward merchandise to budget-conscious trendsetters, Oberweis Dairy focuses on people with a yen for getting their dairy products the old-fashioned way – delivered right to their front doors. However, when it comes to customer service and optimizing marketing programs, these two companies have more in common than you might think. Targeting the right customers with the right offers will effectively lead to higher response rates, improved channel effectiveness and reduced marketing spending. It also means fewer deleted emails and fewer unwanted direct mail solicitations. Both are focused on satisfying customers so they will remain loyal. And both use analytics to plan, prioritize and optimize customer communications. Tapping into the market for thrifty lovers of luxury Gilt Groupe has grown its membership mailing list by 90 times in just four years. As the company added more members and new merchandise to its mix, managing all the customer data in disparate systems and formats became a huge challenge for marketing analysts, who still relied on manual SQL (Structured Query Language) queries. It took them a long time to produce reports, and the company couldn’t easily segment its customers. Gilt Groupe recognized that it needed a better way to gather, analyze and report data so it could know customers more intimately and be able to customize How do they do it? They use marketing optimization, which applies mathematical techniques to maximize economic outcomes, making the most of each individual customer communication. For example, marketers can increase campaign ROI by determining the right offers for the right customers by using what-if analysis and taking into account things such as customer preferences, propensity to buy, profitability, costs and contact policies. Gilt Groupe and Oberweis are optimizing their marketing with many of these techniques, and their successes provide insight into what small to medium businesses can do without hiring a team of analysts and programmers.
  26. 26. P25 | sas.com/smb-insights marketing more effectively. “We were able to get a deep understanding of our customer base through the profiling, segmentation [and] predictive analysis that we conduct with SAS Analytics,” said Tamara Gruzbarg, Senior Director of Analytics and Research. With analytics the company can now “dig deep into all of the behavioral patterns and understand the preferences of different customer segments.” Among its successes: • A 10 to 20 percent lift for customers browsing in new merchandise categories who had not purchased in those categories. • A 100 percent lift (for the first three deciles) for women who shopped at the men’s site but had not yet purchased. • A 20 percent increase in new member conversion rates (customers who join but haven’t purchased). Gruzbarg’s counsel to other SMBs: “It is never too early to start with analytics, even if you don’t have full-blown capabilities right away. Simple segmentation based on one or two key variables, implemented at the right time, could go a long way in helping to move the business forward.” Reinventing home milk delivery for a 21st century world In Illinois, Oberweis Dairy is growing as a regional food manufacturer and retailer with home delivery, dairy stores and a wholesale business. Each business model has different customer databases and information systems, but with analytics the company can look at customers across all channels. For instance, Oberweis linked its “Moola” customer loyalty card, representing in-store sales, with the home delivery customer database. The company found that it could easily mine dairy store receipt data, match it against loyalty card information and select the best candidates for home delivery sales campaigns. It also learned that running specials on milk sold through grocery store chains doesn’t cannibalize from dairy store or home delivery sales. In fact, a sevenfold increase in sales at grocery stores during a recent promotion helped introduce many new customers to the Oberweis brand. And one of the side benefits of switching to analytics is more productivity. Top benefits of marketing analytics 1. ncrease response rates, customer I loyalty and ultimately ROI by contacting the right customers with highly relevant offers at the right time through the right channel. The company was able to automate reports that previously took its analysts 20 hours a week using Excel spreadsheets. “I think implementing analytics is a great way for a small company to become a large company,” says Bruce Bedford, Vice President of Marketing Analytics and Consumer Insight. “One of the most valuable assets of any company, large or small, is its data, but you have to analyze it.” ONLINE Discover how Oberweis ramped up its marketing effectiveness with analytics. sas.com/smb-oberweiswebcast Learn more about Gilt Groupe’s exploration of the behavioral patterns of its shoppers. sas.com/smb-giltwebcast Learn how to fuel marketing effectiveness. sas.com/smb-gilttips 2. Reduce campaign costs by targeting customers most likely to respond. 3. Decrease attrition by accurately predicting customers most likely to leave and developing the right proactive campaigns to retain them. 4. Deliver the right message by segmenting customers more effectively and better understanding target populations. ONLINE Learn more: sas.com/smb-mktanalytics
  27. 27. SMBinsights P26 Analytics energizes utility cooperative’s demand forecasts Customers save millions thanks to more accurate forecasting The Old Dominion Electric Cooperative (ODEC) saved utility customers millions in its first year of using SAS Analytics to forecast energy demand. The savings helped the not-for-profit lower rates four times. With better forecasts, the cooperative hopes to continue keeping costs low and service levels high. ODEC provides wholesale power to 11 not-for-profit distribution cooperatives in Virginia, Maryland and Delaware that serve 1 million member customers in the rural and suburban portions of those states. “Each cooperative has unique characteristics, its own weather and economic drivers that affect growth,” explains David Hamilton, Manager of Load Forecasting. ODEC owns power plant assets and also seeks to purchase power. For energy purchases, the cooperative must contract months in advance. Bet wrong about the weather or energy needs, and ODEC is at the mercy of the spot market. “If I don’t buy enough, I have to pay whatever the market price is at the time I need to buy. If you have excess, you have to sell it for whatever price you can get,” Hamilton says. “The electric utility field is fairly unique. But the problems we face each day are the same as those in energy, gas or oil.” SAS allows Hamilton to forecast more efficiently. This provides ODEC with nimbleness when it comes to buying and selling power and planning for the future. “When you’re investing up to $3 billion in a power plant, you need to be sure you’re going to use it when you build it,” Hamilton says. SAS Forecast Server allows Hamilton’s department to use the most sophisticated forecasting models and techniques available, including exponential smoothing models, ARIMAX models, unobserved components models,
  28. 28. P27 | sas.com/smb-insights intermittent demand models and dynamic regression – plus user-defined models. SAS models are used to support system analysis, hedging models, financial forecasts, and future resources for energy and demand. With SAS, ODEC can: • Quickly adjust for changing conditions. Forecasts take half the time to build. Unforeseen changes – a cooler summer or colder winter – can be quickly worked into a forecast. • Manage effectively despite the volatility that smaller energy providers are more prone to experience. “Utilities with large loads can stand a lot of variants and still have a pretty good forecast. We’re much smaller and our variability has a propensity to be higher,” Hamilton says. • Understand each cooperative’s individual market while also aggregating data for a big-picture look. Individual market snapshots help ODEC choose where to buy power from. An aggregate look helps plan for power needs five, 10 or 20 years down the road. “We couldn’t do what we do without SAS,” Hamilton says. “There is no other software I know of that has that amount of flexibility and power.” And it pays enormous dividends to ODEC’s member customers. “We actually lowered the rate we charge for wholesale power. The cooperative can pass that benefit directly along to the members who have been struggling.” • Factor in multiple data sources from retail sales to population trends along with daily weather information that goes into such detail as wind speed and cloud cover. SAS allows ODEC to understand every variable in a model and how it contributes to a model’s results. The cooperative can run competing models against each other to choose the best one. It can also screen outlier factors – like a hurricane – to avoid skewing the model. Streamlining the forecasting process In the past, ODEC used SAS for some reporting but used another forecasting tool and Excel spreadsheets to cobble together forecasts. “It was labor-intensive, but people understood the spreadsheets so that’s how it was done.” Hamilton found other forecasting products lacking in capabilities and believed from his prior use of SAS that SAS Forecast Server would provide a more robust solution. Hamilton also uses SAS to answer analytics requests from other ODEC staff members and to look at data that comes in from meter readings. “SAS came in really handy for the AMI (meter) data because the sheer volume would outstrip any Excel application or basic desktop application,” says John Robinson, Business Systems Analyst. “Our organization is not one to add people. If we need to do another project, then I need to wear another hat. We couldn’t answer these questions for the organization if we didn’t have SAS,” Hamilton adds. Working with SAS to implement SAS Forecast Server made the process smooth, says Hamilton. ODEC uses SAS partner Zencos to administer the solution. A SAS Gold Partner, Zencos provides SAS clients with services required for installing, optimizing and managing the SAS Business Analytics Framework. “The whole team at SAS has been so helpful,” Hamilton says. Ultimately, Hamilton says, SAS takes the guesswork out of interpreting forecasts. Other solutions can tell him that power usage is down and trending toward staying that way, but only
  29. 29. SMBinsights “ ur organization is not one to add people. If we need to O do another project, then I need to wear another hat. We couldn’t answer these questions for the organization if we didn’t have SAS.” David Hamilton, Manager of Load Forecasting SAS helps him understand if that is related to weather or the economy or both. “If I didn’t have SAS, I probably wouldn’t know how to do this. It’s nice to be able to get a feel for how much variability is in each component that drives our sales. I know SAS has a lot of different customers with a lot of data that use SAS in different ways. It’s the same for an electric utility. We have a lot of data. We have to have a system that can crunch large data sets, and you can’t do any kind of analysis on these large sets without SAS.” Four tips for understanding the future It has never been easy to forecast – whether it’s the customer demand for a new product or a service, or the profit potential of a sales promotion. But in recent years, economic uncertainty and changing customer behaviors have made the job of forecasting even more complex. It’s not enough to just look at past trends. Today’s customer is more price-sensitive, brand loyalty is declining, and competitive activity is fiercer. Keep these tips in mind when starting a forecasting project: 1. Spreadsheets can’t do the job. They lack a forecasting algorithm, require custom coding to develop forecast models (which makes them error-prone and user-biased); and are incapable of handling large volumes of data. 2. Shaping demand is a critical component. To do that, you need to ONLINE Read regular updates and avoid forecasting pitfalls by subscribing to the blog, The Big Forecasting Deal blogs.sas.com/forecasting Let’s talk forecasting sas.com/smb-forecasting Watch this SAS Forecasting demo in 5 minutes: sas.com/smb-demo Scan the QR code* with your mobile device to view the video “The Hype and Hyperbole Around Forecasting.” Generated by BeQRious.com *Requires reader app to be installed on your mobile device. perform “what if” analyses to assess the impact of changes in your strategies on your demand, so that you can optimize your decisions. 3. For more accurate forecasting, you have to take into account not only the impact of market trends and seasonality, but also the impact of competitive activity, sales promotions, new product introductions, pricing and other causal factors on your demand. 4. In most situations, a solution that doesn’t allow for the impact of multiple variables is of limited use. Not being able to model the impact of multiple variables at the same time on demand or perform “what if” analysis can result in stockouts, overages, poor order fulfillment rate, and customer dissatisfaction. P28
  30. 30. P29 | sas.com/smb-insights Is risk management a part of your corporate culture? The profitable results of anticipating adversity and capitalizing on opportunity by David Rogers, SAS Global Product Marketing Manager for Risk Can analytics help drive cultural change? Yes, especially as it relates to managing risk. Corporate culture is the foundation for any business. It dictates how employees will treat customers and one another, and it molds the kind of image and brand reputation that management desires. Large companies have the resources to manage risk in a holistic fashion – through both personnel and technology. Small and midsized companies, on the other hand, have the same compliance and risk issues – but without the same resources. These companies are often forced to use “one size fits all” solutions that limit their capabilities or slow their efficiency. Or they turn to consultants who encourage an expensive dependency. What financial SMBs need is the ability to drive their risk culture with solutions that assist them in keeping the process in-house and efficient. They need the option to tackle one issue (risk or compliance) with the flexibility to manage growth and the addition of additional solutions – with the personnel they already have. In the insurance world, “it’s expensive for small and midsized carriers to hire full-time actuaries and statisticians, and it can be difficult to find employees with detailed knowledge about the spectrum of distribution channels and customer segments – there’s no substitute for experience,” explains Brian Scott, Managing Partner of Triad Analytic Solutions. “It’s also hard to attract employees to certain locations.” Triad works at getting SMBs to the stage where they can take over and do advanced analytics – without scores of statisticians and actuaries. For that, Triad sets up customers with flexible tools that can manage large data sets and allow staff to see the information in easy-to-use formats. “In one engagement, the client was in the midst of a multiyear, seven-figure project with an IT vendor, which was designed to deliver critical data access,” recounts Chris Hardin, also a Managing Partner with Triad. “In a matter of months, we were able to use [a solution] to build and query an interim database that yielded similar, actionable analytic pricing information. We also trained the employees to maintain and use the database we created.” Credit risk assessment at the desktop ACCION Texas-Louisiana is a nonprofit microloan provider that isn’t large enough to support a team of credit risk analysts. Its loan portfolio is just $26 million. ACCION provides loans to small business owners who don’t qualify for traditional loans. With a desktop analytics solution, the organization was able to speed the loan review process while also reducing the delinquency rate by 76 percent and loan restructuring rate by 64 percent. With help from a consultant, the nonprofit was able to create a scorecard that halved the number of loan applications requiring underwriter review – the remainder are automatically approved or denied. Also, loan officers can now prepare an application in only 30 minutes compared to four hours, and loan approval times have plunged from two weeks to three days. “The scorecard gives us the information needed to manage risk, increase our efficiency and provide faster turnaround
  31. 31. SMBinsights P30 “ e’d been looking for suspicious, fraud-related activity using W manual reports and it was very labor intensive; we were very interested in an alternative to enhance and streamline the process.” Nancy Huntoon, Security and Fraud Manager and Bank Secrecy Act (BSA) Compliance Officer, Northwest Federal Credit Union times for our customers,” said Janie Barrera, ACCION Texas-Louisiana President and CEO. To minimize default rates, ACCION Texas-Louisiana evaluates 35 separate criteria to find individuals capable of repaying small loans. The ability to quickly score applicants on its unique criteria keeps its underwriting staff lean and frees up loan officers to seek good candidates. The organization needed a solution that could be developed and maintained by management and staff with no programming experience. The scorecard, managed in-house by ACCION Texas-Louisiana, was so successful that it helped the nonprofit win the business of underwriting loans for 14 additional microfinance organizations nationwide. Citigroup Inc. partnered with ACCION Texas-Louisiana, purchasing up to $30 million worth of microloans, because of its successful scorecard-based prequalification tool and loan management capabilities. Forecasting capabilities for the SMB Many financial institutions need to look beyond individual risk. For SMB organizations factoring in broader economic variables, such as high unemployment rates, it has been difficult. One issue in looking at risk is the ability to go beyond just looking at individual risk to get a bigger picture. In California, Wescom Credit Union is able to forecast possible losses and enable mitigation activities, from declining loan applications to improving collections. “We still want to provide members with credit and at the same time ensure the ongoing safety and soundness of the credit union,’’ says David GumpertHersh, Wescom’s Vice President of Credit Risk. “Now we are able to measure risk more effectively than we would by using a single attribute, such as FICO (Fair Isaac Corporation), in making credit decisions.” The credit union estimates that it can work with at least 50 percent greater accuracy when deciding whether a loan will “perform” or “not perform.” “Thanks to forecasting, mitigation and strategic planning, we’ve saved millions of dollars and been able to improve forecast accuracy.” Managing compliance risk on a small budget Risk doesn’t just exist in a loan portfolio. It also takes the form of complying with government regulation related to anti-money laundering. Although this is thought of as more of an issue for international banks, credit unions, regional and community banks are facing similar regulatory scrutiny. In the Washington, DC metropolitan area, Northwest Federal Credit Union (NWFCU) was trying to meet its antimoney laundering obligations with a highly manual system. The five-branch credit union used a system that generated a number of transactional reports that contained a large volume of detail each day and then manually combed through each transaction to identify possible fraudulent activity. “We’d been looking for suspicious, fraud-related activity using manual reports, and it was very labor intensive; we were very interested in an alternative to enhance and streamline the process,” says Nancy Huntoon, Security and Fraud Manager and Bank Secrecy Act (BSA) Compliance Officer at NWFCU. “Our internal system did not generate alerts and we had daily, weekly and monthly raw data reports – basically, 50 to 100 pages of transactions to look over. It was very difficult to get through them each day.” The credit union now uses a solution that crunches all the data and provides the fraud and money laundering scenarios and risk factors up front. “It’s helped us with our time management by identifying possible fraudulent activity or transactions, which allows us to focus more accurately on suspicious alerts. Now, our BSA specialist can effectively review
  32. 32. P31 | sas.com/smb-insights A catalogue of risk With potentially hundreds of risks that can be identified, dealing with them may seem daunting. Let’s break it down into more manageable chunks and start by categorizing various risks. Risks could be grouped in any of a number of ways: external and internal; controllable and uncontrollable; or insurable and uninsurable. Four alternative types include: 1. Market and price risk. There is a risk that an increase in product or service offering supply or an aggressive price reduction from competitors will force lower prices and consequently reduce profits. 2. Credit risk. The threat that customers will fail to pay for their purchases. 3. Operational risk. The potential for loss resulting from inadequate or failed internal strategy, processes, people and technology, or from external events. 4. Legal risk. The financial risk from insufficient net positive cash flow or from exhausted capital-equity raising or cash-borrowing capability. The risk from litigation or regulatory authority penalties. Read how to develop a risk assessment map sas.com/smb-riskmap “ hanks to forecasting, mitigation and T strategic planning, we’ve saved millions of dollars and been able to improve forecast accuracy.” David Gumpert-Hersh, Vice President of Credit Risk, Wescom Credit Union the new alerts and move on to monitoring case activities on a daily basis. In the past, it might have taken the specialist more than a day to just work through the large volume of transactional data.” According to Huntoon, her team monitors a wide variety of fraud scenarios and risk factors – such as large cash withdrawals and deposits, wire transfers, the velocity of debit card activity and money structuring – and says the predefined scenarios and factors in the solution helped the credit union adapt to the new system very quickly. To build upon the credit union’s financial crimes capacity, Huntoon and her team are also building a householding process to analyze the relationships between member accounts, and the money that moves between them, to identify suspicious activity. “The flexibility [of the solution] allows you to synthesize your analysis of transactions and prevent potential fraud,” concludes Huntoon. Whether the issue is credit risk, forecasting where the loan portfolio is going, pricing insurance policies to mitigate risk or efficiently meeting compliance regulators, SMBs do have analytical options that are not only cost-effective but also give companies a competitive edge. ONLINE Learn more about how business analytics can help financial institutions. sas.com/smb-financialwp Gain insights on critical risk related issues through the Risk Knowledge Exchange. sas.com/smb-riskexchange David Rogers is Global Product Marketing Manager in Risk at SAS. He works closely with global SAS strategists, product and program managers, and liaises with customers, partners and industry analysts to ensure that SAS understands the developing risk management market. His areas of expertise include delivery of enterprise risk management solutions and architectures, and financial services data integration and reporting.
  33. 33. SMBinsights Analytics: An overlooked supply chain opportunity From product quality to customer delivery, smarter really does mean better by Ritu Jain, Global Marketing Manager, SAS Every time I talk to supply chain professionals – whether in procurement, demand planning, manufacturing or delivery – one common theme keeps surfacing: the need for better analytics. But what can business analytics do to enhance a supply chain? Supply chain managers face tough questions every day. Questions such as: • Who are my best suppliers? • How much do we as an organization spend on various commodities and materials? • Can we consolidate our supply base without increasing risks to our supply chain? • What would be the impact of adding another sales promotion on product profitability? • Which of the various marketing strategies and sales tactics are most profitable? • What will be the impact of changes in fuel prices, weather or a competitive promotion on product demand? • How can we minimize our inventory carrying costs without affecting customer service? • How can we identify product quality issues earlier to minimize our warranty claims? • How much should we reserve for warranty costs? Business analytics helps supply chain professionals answer these questions by providing them with data-driven insights into demand, supply network vulnerabilities, operations and customer service requirements. Leading companies have repeatedly shown that by accessing and analyzing supply chain data from all pertinent sources, forecast accuracy can be improved, inventory can be optimized, emerging issues can be detected early enough to be addressed at the product-design level (rather than in the field), and fraudulent service claims can be identified and eliminated. With analytics, businesses get a complete picture of their operations that enables them to align their supply chain goals P32
  34. 34. P33 | sas.com/smb-insights Measuring what really matters The success of your supply chain analytics depends on many factors, but this is of utmost importance: Don’t get caught measuring just for the sake of measurement. The performance of each objective can be measured in multiple ways: by cost, effectiveness, time dimension and so on. If you measure everything, the result is many meaningless and conflicting metrics that don’t directly relate to the end objective. The key to choosing appropriate metrics lies in understanding which metrics really matter – and knowing your key objectives. To ensure overall improvement in supply chain performance, it is important to balance departmental and geographic goals with strategic, enterprisewide goals. However, it is easier said than done. When it comes to supply chains, most managers aspire to achieve too many objectives simultaneously without accounting for inherent trade-offs. For example, the goal of reducing supply costs may have a negative impact on desired product quality, lead time or the proximity of the supply base. We suggest getting everyone together to align these cross-departmental goals and ensure that operational KPIs map to the company’s strategic goals. Make sure you’re not measuring and rewarding against conflicting metrics. This can cause inefficiencies and counterproductive decisions, including those that lead to recalls. with the organization’s strategic business goals of improved profitability and increased customer satisfaction. Take the example of BGF Industries. A manufacturer of high-end specialty woven and nonwoven materials made from glass, carbon and other strong, heat-resistant fibers, BGF was seeing its business change in front of its eyes. At one time, 70 percent of the company’s materials were used in electronics manufacturing, such as printer circuit boards. Today, many other industries use the materials in products as diverse as hot-air filtration systems, aircraft and automotive parts, and bullet-proof vests. As the company transitioned to more quality-sensitive industries (aerospace, defense), pressure intensified on product quality initiatives, which resulted in unforeseen issues. Though the company collected millions of data points, it just wasn’t equipped to analyze that data in a timely manner to resolve production and quality issues. Just moving the data out of its business systems into Excel took more than 30 minutes. Manually reviewing the data to identify root causes was just not feasible or time-effective. Moving to a new system that included robust analytical capabilities helped resolve production and quality issues quickly. BGF was able to track and highlight issues as material batches were run, thus fixing the problem during the production – not afterward. As a result, BGF got a higher yield, less scrap and – best of all – confidence in its data and decision making. So when the bottom- and top-line benefits are so significant, why aren’t more companies taking advantage of analytics? I would say it’s a combination of many factors, ranging from limited analytical talent, and siloed and incomplete data, to the limitations of current technological infrastructures. But, that is not the complete story. Industry studies show that while companies recognize the need for analytics, only a few are harnessing the benefits of the available technology even to a moderate extent. In fact, a recent survey of more than 200 supply chain professionals shows that manufacturing companies with clearer visibility into operations and market activity through supply chain analytics can better foresee challenges and thus respond to them proactively, increasing both efficiency and profitability. One of the biggest barriers to a wider adoption of analytics in the marketplace is the lack of education and misconceptions about the subject. A lot of users, industry analysts and consultants have not fully grasped the difference between business intelligence (BI) and analytics. They continue to consider simplistic query and reporting and OLAP drill-down capabilities to be analytics, thus limiting themselves to traditional BI systems that provide simple alert, monitoring and dashboard capabilities. While BI tools are very important for answering questions such as what, when and where an event happened, they do not provide predictive insights that allow future business decisions to be optimized. And that is where true analytics come into play. True analytical capabilities such as forecasting, data mining, predictive modeling and optimization provide businesses with an understanding of why something is happening, when it can occur again, and what will
  35. 35. SMBinsights P34 Delivering analytics through a variety of channels means that users in organizations of all sizes can improve forecast accuracy, perform what-if analysis and optimize resources – all without ever leaving the comfort of familiar planning modules. be the future impact of decisions, so that outcomes can be optimized. To succeed in the current economic environment, businesses can no longer rely on traditional BI tools that only give you a view of the past. They must use advanced analytics to get better insights into the future to be proactive rather than reactive. Another popular misconception about analytics is that only companies that employ doctoral-level statisticians can take advantage of advanced science. The reality is that solutions today are packaged in such a manner that even novice and intermediate-level modelers now can take advantage of advanced modeling techniques via point-and-click interfaces. Earlier roadblocks of user resistance and cost of integration with existing technology are also no longer valid. Advanced analytical capabilities are now available via cost-effective channels such as software as a service (SaaS), on demand, and from existing ERP and SCM systems using serviceoriented architectures (SOA). Delivering analytics through a variety of channels means that users in organizations of all sizes can improve forecast accuracy, perform what-if analysis and optimize resources – all without ever leaving the comfort of familiar planning modules. So what is stopping organizations? Something that many of you can probably relate to: the sunk costs. Companies have expended so many resources in customizing and configuring existing SCM systems that they do not want to commit any further resources to new, better technology – even if the benefits over the existing system are substantial. ONLINE Download the full report, Supply-Chain Analytics: Beyond ERP SCM sas.com/smb-beyonderp Watch this webcast about adding analytics to your supply chain: sas.com/smb-supplychainwebcast Before you resign yourself to the status quo, ask what makes better sense in the long run: continuing to sink more money into maintaining an existing system that is already behind the times – or updating it with new, advanced technology that requires an initial outlay but provides the robust functionality required to survive in the new economy? Ritu Jain is the Global Marketing Manager for Small and Midsize Business Solutions at SAS. She is responsible for driving the company’s marketing strategy in the SMB space. Prior to joining SAS, Jain held a number of leadership positions in retail supply chain management, driving strategic planning, global sourcing, operations and production management.
  36. 36. SAS INSTITUTE INC.  WORLD HEADQUARTERS SAS CAMPUS DRIVE CARY, NC 27513 USA ANALYTICS Know what’s hot. The topic of analytics is on fire right now. With SAS, you can discover innovative ways to increase profits, reduce risk, predict trends and turn data assets into competitive advantage. Decide with confidence. ® Scan the QR code* with your mobile device to view a video or visit sas.com/know for a free Harvard Business Review report. *Requires reader app to be installed on your mobile device SAS and all other SAS Institute Inc. product or service names are registered trademarks or trademarks of SAS Institute Inc. in the USA and other countries. ® indicates USA registration. Other brand and product names are trademarks of their respective companies. © 2012 SAS Institute Inc. All rights reserved. S74630US.0212

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