Forward thinking

Combining predictive analytics with business intelligence applications takes business decision-making to the next level, resulting in significant financial and efficiency gains. CXO caught up with Jack Noonan, President & CEO of SPSS, to uncover the facts behind the headlines.

CXO. Does the implementation of predictive analytics really help to make a difference in an increasingly competitive market?
JN. Absolutely. In fact, the median ROI of projects that incorporate predictive technologies is 145 percent versus 89 percent ROI from just business intelligence (BI), according to a study conducted by industry analysts IDC.  Results are measured by the specific business problem a customer is trying to solve, such as lowering customer churn or improving loyalty, reducing risk or fraud or improving cross-sell and up-sell opportunities.

CXO. What does predictive analytics bring to the traditional BI process and how does it work?
JN. Traditional business intelligence software reports on past business outcomes. Predictive analytics has the ability to change business processes to make them more effective.

Predictive analytics works by incorporating customer attitudes gained through enterprise feedback management, transactional data, interaction data and geo-demographic data. This gives organisations a much clearer view about not just their customers’ past behaviour, but what they’re likely to do in the future. In other words it is a shift from the purely tactical, where managers request reports on events that happened in the past, to a strategic approach. Adding a predictive analytic component helps to determine what might happen in the future, so that business processes can be aligned accordingly. And that’s really the key difference.

CXO. What key advice would you offer to help ensure organisations see a return-on-investment from predictive analytics?
JN. First and foremost, management leadership needs to understand and support the importance of using predictive analytics to drive revenue and decrease costs.  We are seeing more and more of our sales driven by an executive level interest in seeking greater returns on IT investments.

In fact, an independent assessment of SPSS customers conducted by Nucleus Research in 2005 found that 94 percent of SPSS customers achieved a positive ROI with an average payback period of just 10.7 months. Those returns were achieved through reduced costs, increased productivity, increased customer satisfaction and greater visibility. One of the key takeaways from the report was the importance of focusing on business results. Nucleus found the organisations which achieved the greatest ROI were those that focused on the business benefits they expected predictive analytics to deliver and then clearly articulated those results to a broader population. The report concluded that helping end users of the information understand how it can enable them to be more effective is the key to gaining broader support of the use of analytics to solve business problems.

CXO. Can you give examples of SPSS customers that have successfully integrated predictive analytics with traditional business intelligence?
JN. Take the example of Volkswagen AG’s market research group. Predictive analytic technologies from SPSS are helping VW integrate all of its survey research data with its CRM data to predict which car designs and features are most desirable to specific markets or customer groups.

Center Parcs, a leisure services company in the Netherlands, is another great example. The most important challenge for Center Parcs is to achieve maximum occupancy for the vacation parks. Using SPSS, Center Parcs now accurately predicts individual customer needs, contacting only those customers that are likely to respond to a campaign. As a result, it has reduced the costs associated with direct marketing campaigns by 46 percent in the course of a single year, the equivalent of approximately $1.5 million in savings. These campaigns are now followed by several small, but highly targeted campaigns that are used to sell remaining accommodation or to cross-sell additional facilities.

CXO. Does SPSS partner with any Business Intelligence vendors and what is the strategy behind such partnerships?
JN. SPSS does indeed partner with BI vendors, such as Oracle, IBM and MicroStrategy, for example. The strategy behind our partnerships is simple: to ensure customer success. Predictive analytics doesn’t replace BI or traditional CRM, it makes them better by greatly increasing ROI.

CXO. How is SPSS bringing its solutions to market?
JN. Globally, all businesses are faced with the need to find new competitive advantages by better understanding their customers’ wants and needs.  Organisations also need to manage their constantly growing mountain of data, as well as unleashing the real power of that stored information. Our Predictive Deployment Solutions, incorporating data mining, text mining and enterprise feedback management with the SPSS deployment infrastructure, are really customised to the customers’ specific industry, and more importantly, to their specific business issue.

CXO. Which industry sectors demonstrate the highest demand for SPSS solutions?
JN. Our customers are typically large organisations with large customer bases that either have, or want to have, a direct relationship with their customers. That’s why industries such as financial services, telecommunications, travel and leisure, consumer products and insurance providers are readily adopting predictive analytics to provide better customer relationship management and strengthen customer loyalty. In today’s world of multiple avenues to reach and understand customers, predictive analytics clearly provides a core competitive advantage for every industry worldwide.

CXO. SPSS was founded almost 40 years ago in 1968. How has the company evolved to meet the needs of today’s businesses for analytics?
JN. SPSS began as a statistical tools company, then leveraged that expertise into data mining and now predictive analytics. Our recent focus has been on creating deployment technologies to make predictive analytics a highly-usable competitive advantage for a vast audience. I joined the company in 1992 and have been motivated by the vision and mission to make SPSS technology the cornerstone in dramatically improving the productivity of businesses worldwide. SPSS seeks to make data useable and valuable. We don’t manage business processes. Rather, we help companies understand what to change about their processes to make them more effective. Now we have the ability to almost hide the analytics, so that the focus is on the output or key data, such as providing meaningful and useful customer information in text to a call centre operator. 

CXO. Predictive analytics sounds like a very technical application, but we are starting to hear about it in mainstream business conversations, why is this?
JN. We believe there are three societal forces coming together that are accelerating growth in the predictive analytics market and grabbing the attention of C-level executives. Data are growing exponentially, analytics are becoming mainstream and ROI is now part of the IT vocabulary.

On the data front, over 60 billion emails are sent each day, instant messaging creates over 270 terabytes of data each year and the archiving of data is being legislated. In healthcare, the Enterprise Research Group projects compliance records will exceed 1,600 petabytes in 2006.

Analytics have made it to prime time TV with shows like CSI and Numb3rs. Also, recent authors like Steven Levitt with Freakonomics, Michael Lewis with Money Ball and the 6 MIT students with Bringing Down the House are all showing how our kind of analytics change the game.

And last but not least ROI. The dotcom bust and many other socioeconomic factors have made ROI the watchword for many executives around the world.  

SPSS is at the confluence point of these three trends. We thrive on large complex data and create value from it. We also have deep expertise in the science of predictive analytics. Predictive analytics produces ROI on technology investments and aligns IT with other parts of the organisation to drive process improvement.

Crucially, SPSS designs its products so that business users can access the data they need to make decisions, rather than having to run every request via the IT department.  The result is that predictive analytics has a key role in everyday decision-making at some of the world’s most competitive companies, such as BT, Credit Suisse, Lloyds TSB and Virgin Mobile.

SPSS is a leading global provider of predictive analytics software and solutions. The company’s predictive analytics technology improves business processes by giving organisations forward visibility for decisions made every day. By incorporating predictive analytics into their daily operations, organisations become Predictive Enterprises—able to direct and automate decisions to meet business goals and achieve a measurable competitive advantage. 
Visit www.spss.com/uk

SPSS president and CEO, Jack Noonan, joined the company in 2002.  Since then, Noonan’s technological vision and direction have taken SPSS from a small, start-up entrepreneurial organization with a single product offering to a business-minded public company with a diverse product offering and leading position within the emerging market of predictive analytics.

Noonan recently received a regional Ernst & Young Entrepreneur of the Year Award.  This award recognises outstanding entrepreneurs who are building and leading dynamic and growing businesses.