Business Insight

« October 2009 | Main

November 4, 2009

Getting Business and IT on the Same Page

The Business Intelligence blogosphere is abuzz with questions about how IT and BI personnel can become more effective in serving their internal customers. In fact, a recent study by the Society for Information Management shows that even in today's tough economic times "IT/Business Alignment" is right near the top of CIOs' business concerns.

In the process of providing tools that help CIOs do their jobs and playing a consultative role in helping to bridge the gap between IT and business, PBBI often faces the issue of alignment as well. Over and over, we've found that the key lies in asking the right questions upfront.

Too often IT asks (or is told the answer to) the question: "What information do you need?" Armed with the answer, IT then goes off to ensure that they find a way to get that information back to the business as quickly and efficiently as possible.

However, if IT is to be truly business-aligned, the question that really needs to be understood before "What information do you need," is this one:

What problems are you trying to solve?

This is the place we always try to start with our clients, for three key reasons:

Reason #1: The information the business needs is invariably an outgrowth of the problems it is trying to solve. Questions - and the answers to them - evolve and beget more questions. The CIO and IT team that is actively participating in the process of defining and solving problems and questions rather than just taking orders for information is in the best position to provide true insight - and that has the greatest long-term value.

Reason #2: Information provided in a vacuum often has severe limitations. I'll give you a good example: quite a number of factors, if not addressed up front, can limit the accuracy of any predictive analytics. This point is illustrated in this recent PBBI white paper developed by our crime-mapping expert, which provides an insightful listing of the types of limitations that need to be considered.

You'll see that there are quite a variety of factors, ranging from underreporting of certain crimes to seasonality to data compatibility issues and more. Crime maps provided without acknowledgement of these limitations is just order-filling. And an IT team that fills these orders runs risks of running afoul of any or all of these issues. However, crime maps produced with an understanding the problem(s) the business is trying to solve, and the nature of the impact these limitations could have, can be adjusted for a more accurate reflection of circumstances.

Reason #3: Working collaboratively with the business also provides IT with a much greater opportunity to make its case for investing in necessary improvements in data quality. I blogged a bit about this back in August, citing a Information Difference Research Study, The State of Data Quality Today that reported that a full 63% of organizations had no idea what poor data quality may be costing them. By taking on a collaborative role, IT is likely to have better access to both the business' ear, and its purse strings. When you’re just taking orders, you're less likely to be able to sell the importance of data-quality investments across the business.

The bottom line: Information can be valuable. But Insight can be priceless.

In our experience, the best road to insight is collaboration between the business and IT, starting all the way back at the point of problem definition - do you agree?

Cross-posted at http://ebs.pbbiblogs.com/

Posted by PBBI at 12:45 PM | Comments (0)

November 3, 2009

What's next for the USPS?

By David Robinson

Cross-posted at the http://postalupdates.pbbiblogs.com/blog.

On September 30th, Congress approved legislation that gave the United States Postal Service a one-year reprieve on its obligations to pre-fund retiree healthcare benefits - averting a potential crisis as the USPS did not have the cash on hand to make this payment. (As noted previously, no other federal agency is subject to this requirement.)

With fiscal year 2009 in the books, the USPS now turns its attention to 2010 - and the outlook for postal profits remains bleak. Addressing the National Press Club last month, Postmaster General John Potter remarked:

Without a big change in the way we're required to do business, we're likely looking at a deficit of more than $5 billion dollars - for years to come. This is a critical public policy issue.

We've commented earlier on the various efforts the USPS has taken in light of their current budget challenge. And you have to give them a lot of credit. This past year, like a lot of companies, they stepped up their cost cutting, trimming $6 billion from their expenses and cutting almost 115 million work hours. All while service and customer satisfaction reached record highs.

One also has to agree that mail still ranks as a critical communication vehicle that connects businesses with their customers. Even with the recession, the USPS delivered 176 billion pieces of mail last year and generated over $68 billion in revenue - sales figures that most companies would envy.

The problem, according to Potter, is that the business model created to support the mail simply doesn't work anymore and changes are necessary. We agree.

So as we ask "what’s next" for the USPS, it is likely that you can expect changes to fall into a few categories: operational, legislative, marketing and innovation.

Operational. We expect postal officials to continue their work to create a more effective, more streamlined organization. Technology and process re-engineering will continue to play an important in role in cost reduction.

Legislative. The Mailers Council - a coalition of corporations, nonprofit organizations and mailing associations - has a vested interest in effective, low-cost postal service. So it's not surprising that they've published a white paper calling for new laws that would allow the USPS to compete more effectively. Among their recommendations: making it easier for the Postal Service to reduce its head count, close unneeded facilities and consolidate its retail network. They also propose changing the pre-funding schedule for retiree health benefits. Plus, they would also like to see a study on whether five-day-a-week delivery makes sense.

Some would argue that these are the same benefits enjoyed by other companies - the freedom to make well-informed business decisions - and clearly the USPS would welcome these legislative changes.

Marketing. In recent months, we have seen the USPS employ marketing tactics that are common for most businesses, but new for postal officials. The 'Summer Sale' and the current First-Class Mail incentive program provided mailers with good reason to mail more - a concept that may be continued if talk about a 'Winter Sale' holds true. The USPS is also looking to maximize the value of the 37,000 retail outlets known as "Post Offices" by expanding the breadth of products and services offered at these locations.

Innovation. From its roots in ancient Persia where relay messengers delivered mail on horseback, to today's barcodes, priority services and e-notifications, the postal industry has demonstrated an ability to reinvent itself over its 4,000-year history. So it was refreshing that PMG Potter did not conclude his speech at the National Press Club by discussing how to get through another year. Instead, he talked about taking a fresh look at the future of the Postal Service and its role in serving America - examining what the Postal Service will look like 7, 10 and 15 years from now.

Potter spoke of establishing a public dialogue about the future of the Postal Service - and we invite you to be a part of it. What do you want the USPS to do next? When you think ten years down the road, how might the Postal Service add value to your business? We welcome your thoughts.

Posted by PBBI at 12:45 PM | Comments (0)

Customer segmentation: Canadian Style

By Sebastien Rancourt

Cross-posted at the Strategy & Analytics Blog.

Canadian privacy laws set ground rules on how organizations may collect, use and disclose personal information. Under the Personal Information Protection and Electronic Documents Act, for example, personal information can only be collected when it is gathered with the knowledge and consent of the consumer - and only used for the reasons for which it was gathered.

Despite these data challenges, marketers and strategic planners have found effective ways to understand customer needs and create actionable customer segments. These insights and best practices - while particularly germane in Canada - are relevant to anyone looking to improve results by targeting more effectively.

Today's leading solutions begin with geo-demographic clusters. While cluster segmentation strategies have existed for decades, contemporary clustering methods use robust statistical data and advanced analytical power to capture, create and measure more precise customer segments based on geography, demographics and lifestyles. With the right data and analytical tools, organizations can characterize the behavior of every clustered customer - from their favorite movies and foods to their preferred attire and avocations - enabling users to more accurately predict customers' responses to every campaign.

Professionals in retail, financial services, media planning, real estate and restaurants, among others, rely on cluster segmentation to improve decision making and business results. Yet with the enhancements made in recent years, some marketers have yet to incorporate the latest advances which can boost overall performance. In speaking with experts across Canada, we've identified a series of best practices to help guide your next steps.

Segment by neighborhood, not postal codes. Some segmentation strategies rely on postal codes, which can lead to problems down the road. Each month, as many as 5% of the roughly 850,000 six-digit Canadian postal codes change, as Canada Post updates this system solely on the basis of their mail delivery needs. Not only does this taint campaigns in the short-term, it makes it nearly impossible to manage year-over-year modeling and analysis.

The best neighborhood segmentation clusters begin with census data at the dissemination area levels - which are the lowest levels for which reliable census data are published - providing hundreds of reliable data variables. In addition to data accuracy, these neighborhood-based models offer year-over-year consistency, so marketers can build on past success over time.

Incorporate household-level insights. This past year, leading cluster models have found ways to use more comprehensive household level data, incorporating consumer information that goes far beyond census findings. These inputs, which conform to Canadian privacy laws, represent an unprecedented level of detail and behavior-based data - and create a more high-definition view of customers and prospects.

Maximize data points. Not all household level data is the same. Some cluster models are built extrapolating data from as few as 8,000 surveys across the full population of 33 million Canadians. More reliable cluster models will analyze self-reported data from as many as 10 million individuals - providing for more accurate targeting and a lot less guesswork.

Overall, organizations that employ these best practices will benefit from a multidimensional framework that makes it possible to sort through the complexity of Canadian consumer culture without having to manipulate literally hundreds of census and survey variables.

One such solution is PSTYE HD, the Pitney Bowes Business Insight segmentation system created using an innovative two-step clustering process. The 59 clusters identified, including Canadian Elite, Joie de Vivre, Urban Verve and Next Gen Rising, leverage the largest and most robust repository of Canadian consumer intelligence to date - making it easier for organizations to locate new opportunities, connect with customers and communicate more efficiently. We invite you to learn more and look forward to your feedback.

Posted by PBBI at 12:30 PM | Comments (3)