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WHY ANALYTICS
PROJECTS
FAIL
ALSO INSIDE:
Dark side of digital world
Real-time text analytics
Data scientists time to shine
The future of forecasting
Key considerations
for deep analytics
on big data,
learning and
insights
Executive Edge
Hewlett-Packard
V. P. Rohit Tandon:
Six ways of
value creation via
E-commerce analytics
WWW. I NF OR MS . OR G 2 | A NA LY T I CS - MAGA Z I NE . OR G
What I learned today
I NSI DE STORY
One of the advantages of editing
Analytics (as well as OR/MS Today, the
membership magazine of INFORMS) is I
learn something new every day, thanks to
the wide array of contributed articles we
receive. For example, just in preparing
this issue, I learned:
Nearly 20 years ago, Amazon found-
er Jeff Bezos said that Amazon intended
to sell books at or near cost as a way
of gathering data on affuent, educated
shoppers, as reported by George Packer
in The New Yorker. The implication: The
data, once analyzed, had more value
than the loss-leader books, which proved
absolutely correct when Amazon began
selling everything under the sun to well-
targeted consumers.
Drawing on Packers article, as well
as a couple of books (Who Owns the
Future? and The Ethics of Big Data),
Vijay Mehrotra explores the dark side
of technology, big data and analytics
and the perceived and/or potential threat
it poses in his Analyze This! column.
Dont miss it.
A Formula 1 pit crew, working in an
optimized, well-coordinated fashion, can
change a set of four tires in less than two
seconds. That means that unless youre
Evelyn Wood, that crew can change
12 tires in the time it takes you to read
this sentence. For the story behind the
motorsports magic, check out Andy
Boyds Forum column. Seeing is be-
lieving, so dont miss the amazing videos
referenced at the end of the article.
We all know the digital/technical
world will come to a wordy end without
acronyms, but do you know what MOOC
stands for? I do (massively open online
course), thanks to an interview I did with
executive search honcho Linda Burtch
regarding the red-hot analytics job market.
Finally, I also learned from Linda
that in todays dynamic world, young
people should plan on three or four ca-
reers during their lifetime. Its not good
to specialize in one thing and try to stick
with one company or one industry or one
vertical application for your entire ca-
reer, she says in the Q&A. Its incredibly
dangerous, and it likely wont carry you
through a 35-year career. You need to be
continuously learning something new.
I got that last part going for me,
every day.
PETER HORNER, EDITOR
peter.horner
@
mail.informs.org
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DRIVING BETTER BUSINESS DECISIONS
C O N T E N T S
FEATURES
REAL-TIME TEXT ANALYTICS
By Aveek Mukhopadhyay and Roger Barga
How a cloud-based analytical engine yields instant insight using
unstructured social media data.
WHY DO ANALYTICS PROJECTS FAIL?
By Haluk Demirkan and Bulent Dal
Not just another IT project: Key considerations for deep analytics
on big data, learning and insights.
ITS THEIR TIME TO SHINE
By Peter Horner
Job prospects for data scientists and elite analytics professionals
have never been better and the future is even brighter.
ANALYTICS TRANSFORMS A DINOSAUR
By Brenda Dietrich, Emily Plachy and Maureen Norton
The story of how industry giant IBM not only survived but
thrived by realizing business value from big data.
THE FUTURE OF FORECASTING
By Jack Yurkiewicz
Making predictions from hard and fast data: Biennial survey
of popular software for analytics professionals.
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JULY/ AUGUST 2014
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DRIVING BETTER BUSINESS DECISIONS
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Vice President-Marketing,
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DEPARTMENTS
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14 Analyze This!
24 Healthcare Analytics
28 INFORMS Initiatives
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Increasing popularity and access to the Internet
has changed the way marketers are interacting with
customers. These customers are smart, well informed
and empowered, as Internet connectivity is available
to them at their fngertips and on the go. It has there-
fore become imperative for organizations to be on the
customers online radar with respect to new products or
services and to be able to infuence their choices.
Not surprisingly, according to one study, 34 percent
of marketers are generating leads through Twitter. In-
dias online retail market grew at a staggering 88 per-
cent in 2013 to $16 billion and continues to grow. These
examples are a testimony to the growth of e-commerce.
The Internet deluge has opened an assortment of op-
portunities. Customers are able to buy high-end fashion
and designer shoes, book hotels, buy movie tickets and
you-name-it.
Therefore, an opportunity exists for business re-
search to capture, compile, churn and store colos-
sal bytes of information about customers, suppliers
and operations. This is what we call the age of big
data. We believe that this age is a natural progres-
sion in online business and is here to stay. We are al-
ready seeing a surge in adoption of digital channels
such as social media, e-mail marketing and display
ads in e-commerce. Imagine the amount of data this
It has become imperative
for organizations to be
on the customers online
radar with respect to
new products or services
and to be able to
influence their choices.
BY ROHIT TANDON
AND SHRUTI UPADHYAY
Six ways of value-creation
through analytics in
E-commerce
EXECUTI VE EDGE
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EXECUTI VE EDGE
has created for marketers to lay their hands on for
analysis. Despite that, in the race to utilize the on-
line space, marketers may be focusing more on ad-
vertising and less on analysis of the data that could
potentially increase sales.
In our opinion, understanding the customer
behavior becomes more complex in business-to-
consumer companies and more so in a 24/7 e-com-
merce business that sells technology products in an
increasingly commoditized industry. A strong analyt-
ics foundation may make e-commerce a thriving and
successful channel of sales. Businesses, therefore,
are increasingly creating customizable campaigns
for their installed base customers and improving
sales effectiveness through e-commerce.
For example, pricing and merchandising deci-
sions need to be taken in real time, and the need to
have real-time insights is ever-increasing. To make
these decisions faster and better, marketers would
need to quickly analyze their digital marketing strate-
gies by mining data exhaustively and cost effectively
through advanced analytics.
KEY DRIVERS OF INCREASED REVENUES
An organizations ability to achieve its goal of
increased revenues and margins would depend
heavily on its ability to improve three key drivers: 1)
volume of customer traffc to the online store (num-
ber of visits); 2) customer conversion (percentage of
conversion); and 3) basket size (revenue per aver-
age order size). Analytics has a very important role
to play in this value chain. So while organizations
may have the best talent with an analytical mindset
and eagerness to apply it, we need to equip data
In the race to utilize
the online space,
marketers may be focusing
more on advertising
and less on analysis
of the data
that could potentially
increase sales.
A NA L Y T I C S J U LY / AU GU S T 2014 | 11
scientists in organizations with the right
tools and insights.
Conversations with analytics profes-
sionals reiterate our belief in some of the
following must-haves that will elevate an
organizations e-commerce agenda to the
next level:
1. Development of best-in-class
tools and techniques are a must to
build scalable solutions and tackle the
optimization of key drivers.
Over the years various products such
as SAS have provided excellent devel-
opment environments, but every data
scientist had to start from scratch and
depend on their personal techniques to
tackle new problems. However, in recent
years, data scientists and organizations
are now moving toward using templates
and building packaged models and solu-
tions to reuse and replicate technologies
with ease.
One of the frst such pilot solutions with-
in HP was developed for HPDirect.coms
demand generation function, where global
analytics developed V.1 of a series of de-
mand generation models. These models
also paved the way for the development of
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customer targeting models. In most organizations,
such initiatives if implemented have the potential to
lay the foundation for similar opportunities with other
business functions such as planning, store opera-
tions and category management. When an organi-
zation reaches such a stage of maturity, thats when
true return on data (ROD) is possible.
2. The three Ws whom, what, when. Tradi-
tionally, marketers have used a uni-dimensional ap-
proach to target customers. However, results show
that these can be sub-optimal and might have an
adverse effect on customer loyalty and brand image.
Answering questions such as whom to target, what
to offer and when to offer bring a paradigm shift in
garnering customer interest and loyalty. These help
rank customers on their propensity to re-purchase,
and lead to preferential treatment of the right cus-
tomers with the right product portfolio or allow mar-
keters to understand when to offer discounts.
Effective tools and modeling will also note clues
on probability of customers picking one product over
another or repeat customer behaviors. This brings
us back to the importance of using effective, proven
analytics tools and techniques.
3. Automate and innovate. Creating and
applying big data algorithms will help organizations
in taking appropriate actions. Many of them are
programmed automatically, save time and allow
better decisions faster. Creating a robust tool-based
ecosystem that allows creation of funnels that track
visitors, bounce rates, conversations, etc., is vital to
a successful Web analytics initiative.
Answering questions
such as whom to target,
what to offer and
when to offer bring
a paradigm shift in
garnering customer
interest and loyalty.
EXECUTI VE EDGE
J U LY / AU GU S T 2014 | 13 A NA L Y T I C S
4. Site search analytics. Tracking
site search is a very useful resource that
allows you to know what your visitors are
looking for in your website. Is the search
engine directing the customer to your web-
site or redirecting them to the next best op-
tion in absence of the product? Keeping
tabs on this will help companies increase
customer loyalty and sales.
Another application of site search an-
alytics allows you to understand what is
being searched on your website. By under-
standing this, marketers can infuence the
site layout and design so that visitors are
able to easily locate answers to common
queries or the most searched products.
5. Marketing spend optimization.
HPs online store uses a mix of marketing
vehicles to reach different customer seg-
ments with different communication and
buying preferences. Optimizing spend on
various marketing vehicles is critical to
optimizing demand generation efforts as
well. However, determining which market-
ing mix is most benefcial to the business
is not an easy process, requiring not only
a scientifc approach to analyzing spend
and revenue, but also a test-learn-opti-
mize culture. For example, ongoing anal-
ysis of the response to different types of
marketing vehicles helps in identifying the
best ft for a particular type of message.
Based on such analysis, one can decide
if a banner would work best vis--vis a
customized landing page, or would an
e-mail campaign be the best option.
6. Connect marketing with ware-
housing. In large supply chain environ-
ments, an accurate forecast of orders
that get shipped out of the warehouse on
a daily basis can be tracked using pre-
dictive analytics methodologies to en-
able accurate warehouse space/staffng
allocation in order to meet the aggressive
shipping timeline.
In conclusion, marketers can apply
data mining and advanced analytical skills
to derive key insights to better understand
drivers of Web traffc and reasonably ac-
curate traffc forecast for use in business
planning. We sense that if companies use
data accurately, they can easily exhibit
a three to fve times growth of the online
business and will make analytics easily
replicable across different functions of the
organization.
Rohit Tandon is vice president of corporate strategy
and worldwide head of Global Analytics at Hewlett-
Packard. As part of HPs corporate strategy team, he
helps drive the analytics ecosystem to support HPs
vision and priorities through delivery of cutting-edge
analytical capabilities across sales, marketing, supply
chain, fnance and HR domains. He was recently
named one of the top-10 most infuential analytics
leaders in India for 2014 by Analytics India Magazine.
Shruti Upadhyay is a manager with HP Global
Analytics.
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BY VIJAY MEHROTRA
ANALYZE THI S!
Given my love of books, it is perhaps not surpris-
ing that Amazon.com where, thanks to the digital
technologies of today, a plethora of books can imme-
diately be found about nearly any idea that pops into
my head and be delivered (free with Amazon Prime
membership!) to my doorstep with remarkable speed
is a website that I love deeply. Like many avid read-
ers, I purport to do my best to support my local inde-
pendent booksellers, but too often there is simply no
denying the powerful pull of the super convenient,
instantly gratifying, highly personalized Amazon.com
experience.
Thanks to my bi-monthly book club, I recently read
Who Owns the Future? by Jaron Lanier, a celebrat-
ed technologist and MacArthur genius award winner
best known for his contributions to the feld of virtual
reality. Lanier is known as a big thinker, and in this
book at once rambling, provocative and thoughtful
he once again shows why.
WOTF begins with a bleak assessment of where
digital technology is leading us all. The main thrust of
Laniers argument is as follows:
Technology makes it very easy to give away for
free a lot of things that people fnd valuable just
Dark side of the
digital world
In the book business
the prospect of a single
owner of both the means
of production and the
modes of distribution is
especially worrisome ...
George Packer
Big data, unintended consequences: What Amazons domination of the
book publishing industry could portend.
J U LY / AU GU S T 2014 | 15 A NA L Y T I C S
think about the search engine. Being
human, we are conditioned to love the
chance to get something for nothing,
and we have gratefully grabbed at it with
both hands.
However, the value that technology
grants us is not actually free. In
exchange, we tacitly give up information
about ourselves, which is then stored
as data.
Thanks largely to analytics
professionals, this data is then pooled
and analyzed to create a variety of
commercial opportunities that would not
otherwise exist.
This commercial wealth confers
extraordinary power upon those who
own the technologies that capture and
analyze this data (Lanier calls them
Siren Servers).
This power in turn enables the
owners of the Siren Servers to have a
huge impact on the society that we live
in, including employment, government,
culture and ideas.
Taken to their logical conclusions,
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ANALYZE THI S!
all of this ultimately dooms the human
species to a very sad and cataclysmic
ending.
Along the way, Lanier also wanders
off into pleasantly intense digressions on
a broad variety of somewhat related top-
ics, including Aristotle, the tenure system,
biodiversity and the concept of local op-
tima. He too clearly loves to read.
IMPACT ON PUBLISHING
While still digesting this thought-
provoking book, I came across George
Packers recent article entitled Is
Amazon good for books? Taking a long
hard look at Amazon.com, the website
that perhaps most fully embodies Laniers
concept of a Siren Server, Packer fnds
that many of Laniers more dire predic-
tions are already playing out there.
Packers particular focus is Amazons
impact on the publishing industry, and he
believes that the stakes here are incred-
ibly high: In the book business the pros-
pect of a single owner of both the means
of production and the modes of distribu-
tion is especially worrisome; it would give
Amazon more control over the exchange
of ideas than any company in U.S. histo-
ry. Even in the iPhone age, books remain
central to American intellectual life, and
perhaps to democracy.
I wholeheartedly agree.
Just as Lanier predicts, suppliers
and consumers alike had originally both
rushed to embrace Amazon, for like so
many technologies it seemed to magical-
ly (that is, without cost) provide all parties
with something for which they hungered.
As Packer writes, When Amazon
emerged, publishers in New York sud-
denly had a new buyer that paid quickly,
sold their backlist as well as new titles,
and, unlike traditional bookstores, made
very few returns generating fresh rev-
enues for publishers with little incremen-
tal investment. Meanwhile, we readers
focked to Amazon in droves for its con-
venience, its variety, and its low prices.
Amazon.com today accounts for
more than 40 percent of all printed books
purchased as well as 65 percent of all
eBooks, so it is probably fair to say that
book buyers by and large still love Ama-
zon. For us as readers, this is fortuitous,
since the number of independent book-
stores in business has declined by more
than 50 percent since Amazons found-
ing. However, as its share of overall book
sales has ballooned, Amazon has taken
advantage of its market power to aggres-
sively push the terms of its agreements
with book publishers dramatically in its
own favor, often through tactics refect-
ing Amazons famously secretive and
opaque corporate culture. Meanwhile,
Packer reports, the many publishers large
and small whose businesses are now
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