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How important is it for chief information officers (CIOs) to harness the power of analytics to understand what will happen in the future, rather than just look at what happened in the past?
It’s critically important, according to one analyst.
“A CIO can get by without predictive analytics, but it’s like getting into a car for a long drive in a rainstorm with no windshield wipers,” said David O’Connell, principal analyst, Nucleus Research. “A CIO wouldn’t put her family in that situation and she shouldn’t put her company in that situation.”
Using predictive analytics, CIOs can extract data generated from IT operations, interpret it and create reports that executives can use to make better business decisions.
Companies accumulate tons of transactional data every day and it’s easy to build reports, dashboards and financial statements so they know what has already happened, O’Connell said. But there are trends in the data that — when observed — can help companies do things like cut costs, win new relationships, cross sell, upsell and prevent fraud.
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The value in the form of trends is just sitting there in the data — the problem is people aren’t intuitively skilled enough to spot these trends, so they need software to do it, he said.
“We have all this transactional data and many different types of data. We have ERP (enterprise resource planning) data, call center data, customer data about why people called in or walked into our branch office and did a typical type of business with us,” O’Connell said. “All that data is out there and it’s really crazy not to invest in software that can look at that data, spot trends in the past, so we can refine how we do things in the future.”
Larry Bonfante, CIO of the United States Tennis Association (USTA), agreed that CIOs must use predictive analytics to provide meaningful data to their key stakeholders — each business unit and each program initiative. But too much data is not necessarily a good thing.
“We have to be sure we don’t overwhelm them with data,” he said. “So the analytics issues is about providing just the right data at just the right time, not just giving them so much data and so many reports that we’re just drowning them in data.”
Bonfante said IT and business executives should sit down as a team and look at what the business is trying to track, determine what data would help the business develop its strategy, then work with users to come up with a small list — three to five things — that would make a difference for them.
O’Connell said insurance companies could use predictive analytics to identify potentially fraudulent insurance claims.
“The insurance company understands the warning signs of fraudulent behaviors so it can set up predictive models,” he said. “Then when a call comes into a call center, the call center rep starts checking off certain things in a software program. And that program, aided by predictive analytics, can determine if there are red flags that [means] the call should be directed to an experienced fraud investigator rather than a regular claims adjuster.”
Hospitals can use predictive analysis to identify which incoming patients are most likely to fall during their hospital stays — inpatient falls cost hospitals a lot of money — so administrators can take corrective measures, he said. And even the U.S. Border Patrol can use predictive analytics at the borders to determine which cars are most likely to be involved in illegal activities.
“You can’t afford not to do this,” O’Connell said. “The value is already sitting there in all your transactional data. The potential revenue increases are too large not to try to use that data.”
Bonfante said it’s important for companies to understand what they’re strategically trying to accomplish. While looking in the past is beneficial, organizations have to determine how that data correlates with their future goals and how they’re trying to drive outcomes as they move forward.
“At USTA, we look at analytics such as who is playing in our programs, who our target audience is and what other facilities are offering opportunities to play because we need to know where to reach out to our target audience, what things interest them, what programs we’re competing against and what the value proposition is that we can articulate to them to get them interested in our programs,” said Bonfante. “We would look to the business units to see what [data] we would have to provide them to accomplish those things.”
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