bMighty: What is it about the current business climate that makes mining data for BI about a company’s customers so vital?
Linoff: Once upon a time–and this is a rosy view of the ancient world–the hardware store owner knew you. If you went to the grocery store, someone there knew what items you needed. If a woman walked into a bank to make a deposit and she was pregnant, [the bank manager] knew and offered her a car loan. We traded all that for lower interest rates and lower prices, we traded all that for more efficiency, but we lost the intimacy with our customers. How can we get to know our customers again? That’s one component of business intelligence.
Where do small and midsize companies fit into this BI picture?
Well, it depends upon their relationship with their customers. If they only have a handful of larger clients, they know them. But one of our clients, The Vermont Country Store, is a cataloger that sends to several million people. The company has about 400 employees. How are 400 people going to know about several million people? They need to use the information they collect in order to better serve their customers and increase revenu.
But there’s not an overall approach, because businesses are different, and there are several different levels that businesses operate on. Some are campaign-driven, to encourage customers to buy, and [business intelligence helps] them optimize each campaign and [some use] traditional predictive models associated with data mining, tailoring aspects of their Web sites to their customers or sending e-mails to their customers to return to their site.
For example, on Amazon.com, which is not a small company, if I bought Harry Potter IV, [they know] I will buy Harry Potter V, VI, and VII, [because they're asking] what’s the next type of thing that I’ll buy? You can get associations or market basket analysis. For companies in retail, association rules are something they’re interested in. What things sell together?
How can a company’s IT managers maximize the benefits of business intelligence?
The IT manager needs to enable communication–it’s the most important thing. In most companies, when [management] asks questions, [the IT manager] says it can’t be done, because people get trained not to make decisions off of data. For instance, if the marketing department of a company wants to plan a promotion, and needs to know what other items sold last year when soup was on sale, the IT manager might say, “we’ll know in three months.” So the question stops being asked and opportunities are lost. Then people start making decisions based on intuition and they [lose] the ability to make more informed decisions.
How can they get that ability to make more informed decisions?
It’s the people on the front line–the worst-paid people–who know the customers. You need a mechanism to get that information out. I have another great example. There was a guy who owned a chain of drugstores that sold chocolates on Valentine’s Day. It was big business for them. Using their BI system, the SAS OLAP server, they sliced and diced their data to discover that two of the stores had higher sales in chocolate. Both were managed by the same person.
They discovered that instead of placing the lower-priced chocolates on a lower shelf and the more expensive chocolates higher up he was mixing them together. It turns out, guys were coming in and reaching for the cheaper stuff and then saying, “she’s worth it.” This demonstrates that people on the front line know what’s going on, so you need to have systems to detect what they know. You need systems in place to communicate the best practices.
Source: Forbes
