One of the 2 companies which have applied BA is Hewlett-Packard (HP), American multinational IT Corporation which provides software, hardware and services to people. In 2005, HP created an online shopping site (www.hpdirect.com) to satisfy the needs of consumers through online sales. HP vision is to enable a more holistic buying experience for customers across many places. Through HP direct, HP will be able to fulfil their vision.
One of the challenges that HP faced during this period of time was having the capability to sell to consumers directly because before they use HP direct, they only deal with consumers who are from large organizations and retailers. HP also have to deal with problems from the website. There were many problems which includes insufficient volume and quality of online traffic, inadequate supplies as there was an increased amount of orders, and many other problems which affect the profits.
HP have a group of analysts called the HP Global Analytics. They developed a few solutions to help solve these problems using mathematical programming, Bayesian and regression modelling, and time series forecasting. Firstly, they used the demand generation models to help evaluate the impact of the web traffic have on consumers who visits HPDirect.com. By evaluating, HP will be able to know how to enhance the marketing plan and budget allocation. Next, by using the Bayesian modelling and Marcov Chain methods, they were able to predict which customers will buy which kind of product, when will they buy it and also which marketing channel they will opt for. Lastly, they used a hybrid forecasting approach which consists of the regression model and time series forecasting. In this approach, they were able to predict customer orders which have helped HPDirect.com to enhance warehouse inventory holding and ensure the fulfilment of customers’ orders.
With business analytics, HP were able to earn more profits than before. The above solutions mentioned have made customers received the right offer at the right timing, which leads to increased conversion rates and order sizes. This led to an average incremental conversion rate of 1.5% on an average base conversion rate of 2.5% across a series of marketing campaigns. There was also a 20% improvement in average order size. Not only the problems of insufficient supplies was solved, HP was able to generate $117 million in incremental business impact due to the reduction in warehouse inventory costs and increased online customer traffic.
The second company that apply the use of business analytics is LabelSneak. LabelSneak started out as a small online retailer of men’s apparels and they made use of IBM smarter commerce technologies to understand their consumers’ needs, online consumer behaviour and also the men’s wear market. The need for LabelSneak for using big data is to better understand their consumers so as to allow their company to grow and also to allow them to better compete with more established retailer brands.
LabelSneak made use of Business Analytics to gather feedbacks about what their consumers feel about their latest promotions and also to find out items that are more popular and also the period where sales were most effective. Also, the use of business Analytics have enable LabelSneak to greater understand consumer’s preference and decide on which brand to carry.
The use of Business Analytics have also helped LabelSneak determine which social media is more effective in connecting to their consumers. LabelSneak also made use of business Analytics to keep track and study their transactions. This enables them to determine when to offer sales discounts. As of today, LabelSneak is well-known for selling their products at huge discounts up to 75%.
Through analysis, LabelSneak have even discovered the connection between consumer’s preference and their favourite music or sports
Currently, IBM have also helped LabelSneak come up with marketing strategies and sales method such as to alert their consumers on upcoming promotions and when their favourite sales item goes on sale through email and also their own social media platform.
Ever since the use of Business Analytics, their company’s revenue increased by 148% in less than a year. By understanding patterns and data they have collected, LabelSneak is able to provide the right product and promotions at the right time. Hence it can be concluded that the use of business analytics have actually made a huge difference on LabelSneak. The company has been growing rapidly ever since the use of Business Analytics and they believe that their company will continue to grow with the use of Business Analytics.
The use of business analytics has allowed a discovery of details that the company is unaware of and opening them up to new ideas and insights of how their consumers respond to their products.
2. Explain how an established company could leverage on BA to gain competitive advantage. You may wish to explain from the initial collection of data to reporting, prediction and optimisation. Explain the software that could be adopted in the various phases of the BA cycle. (Tip: explain using Analytics Maturity Curve).
About Rindy’s Cupcakes Pte Ltd:
Rindy’s Cupcakes Pte Ltd is established in 1982, founded by Rindy Tan. Rindy’s family had a scrumptious secret recipe for cupcakes. They began a company called Rindy’s Cupcakes. It is now owned by the grandson, Derrindy Tan. They are well known shop in Singapore and have 15 outlets all over Singapore and are planning to expand overseas. It has been mentioned in straits times a few times. Even the President has come to their stall to try their mouth-watering cupcakes. It has very good reviews in the hungrygowhere website and their slogan is ‘Have a life! Have a cupcake!’ Their mission in life is to share their love for cupcakes around the world. They also have been mentioned by the prime minister in his national day speech as they recruit the mentally challenged people to run the shops. The company started using business analytics in 2008, when Derrindy took over the company. As he graduated from NUS school of Computing, he had learnt many things about business analytics which includes the systems that helped analyse raw data to find different trends in the market.
In the Analytics Maturity Curve, there are 6 stages. The first stage is Static Reports. Static report is report that has collected data for a fixed timeframe. This data focuses on understanding what has happened in the company in the specified timeframe. It could help to see all the profits and loss for Rindy’s cupcakes in the past year.
The second stage is the drill down stage. This stage is a further elaboration of the static report. In this stage, Rindy’s cupcakes go into greater detail to find out what the problems were for a particular product and when it had occurred. This is advantageous as the company now knows where they had gone wrong.
The third stage is the Ad Hoc Report stage. The stage is a business intelligence process that would help to answer single, specific business question. Using software known as OLAP dashboards, Rindy’s cupcake’s manager can get quick access to data from the previous reports and get the specific answer to a question that would help the company better improve.
The fourth stage is Forecasting. In this stage, Rindy’s cupcakes would look at their previous trends and patterns and using software would begin to predict future forecasts. There are multiple techniques to forecasting. Some of them are Box-Jenkins models, Delphi method, exponential smoothing and moving average.
Box-Jenkins is a complex model and would need specialised software to use and forecast. The Delphi method is a collaborative forecasting technique. This is where experts interact anonymously and it would continue until a certain degree of agreement is attained. The exponential smoothing is where the older data is given less importance compared to the newer data. This method does short-term forecasting. Moving average is also similar to exponential smoothing, however older data has the same importance as newer ones. The way this technique works is that it continually calculates the average between the start and end of the timeframe. This would make it clearer to see the trends.
Rindy’s cupcakes can gain an advantage as they can now see how their company would look like in the future. This would give them a better understanding as to where they should focus their resources or improve.
The fifth stage is Predictive modeling is a process used in predictive analytics to create a statistical model of future behaviour. In this stage, predictors (random customers) are picked based on different factors such as gender, age and purchase history. Predictions are made and the company gets a better understanding of the customers.
By using predictive modelling for customer relationship management, Rindy’s cupcakes can understand better what their customer wants and better meet their demands. By doing this, the company can have more loyal customers which is better for the company.
The final stage is Optimisation. This final stage is about using all the information that has been gathered and to come out with the best possible and most cost effective solution to improve the company. This solution would come from computer simulation of business problems. Software that could be used for this stage is LINGO.
By going through the last stage, Rindy’s cupcake has a greater advantage compared to its competitors as the company has managed to find all the problems that is slowing down the progress, what the customer likes and dislikes and can come out with a best possible solution that would place the company in a more efficient position.
3. Explain 5 challenges faced by a company (refer to the selected company in point b) when they are implementing BA solution and how they could resolve the various issues. One of the issues could be collecting quality data. You could discuss problems such as inconsistent, duplicate and missing values and also discuss how to resolve the issues.
Rindy’s cupcakes have faced many challenges while implementing BA solution. One of the challenges is having to analyse the huge amount of data from 1982 to 2008. As they only started using business analysis in 2008, it is important to analyse all the data from 1982 to 2008 so that they will be able to know the pattern of sales over the years. There are many data from 1982 onwards, so it can lead to having data that are messy and inconsistent. Therefore, it will be difficult to analyse it. To solve this problem of inconsistent data, it is essential that the numbers that are recorded over the years are accurate by correcting this numbers in the company’s analysis database.
Rindy’s cupcakes have also faced problems like having insufficient manpower to collect the data. Before we can analyse and correct the numbers in the analysis database, we have to make sure that the data are all in and not one is missing. Although Rindy’s cupcakes is an established company since 1982, there have still been difficulties in collecting data due to lack of data during busy hours. One person’s negligence in collecting data can cause the data set to be inaccurate. Inaccuracy of data can affect the quality of data. Duplicate entries and misspelling can also affect the quality of data. Hence, staffs have to be extremely careful in entering the data and they should undergo training so that this mistake can be minimised. To solve the problem of having duplicate entries and misspelling, we can use some tools and data mining techniques to find these duplicated data and correct those misspelling in the database.
There is also a problem of having incomplete data. After collecting the data, we realise that there are data missing from 1985 to 1989, and also from 1996 till 1999. Without these data, the company is unable to analyse the pattern of sales over the years. Missing values can be a hassle for the company. To solve this problem, it is important to analyse the data before and after the missing values using the business point of view. By doing that, we will be able to know how to estimate the values and input the missing values.
Then, Rindy’s cupcakes also faced data management issues due to the overwhelming number of outlets they have. Overtime, the different outlets have many different ways of managing their data and sales. Therefore, it is very difficult to compare and entering the data into the database which made the statistics scattered and separated. To compare the data, the charts or diagrams are used from different outlets. When collecting these charts, we found out that there are all different and it is difficult for other senior management staffs or other outlets to view it. In order to have consistent data format, we recommend the company to implement a common database or a dashboard such SAS, so that information can be retrieved and displayed in the same way.
Also, there have been a few occasions where Rindy’s cupcakes came up with projects wanting to gather particular information. However, most of the time, they do not receive the information they need. We believe it is due to the lack of clarity in the scope of the project function or that the stakeholders are not very cooperative in providing information. Hence we feel that the company should build strong relationships between their customers first then it would be easier to receive information from them. Since Rindy’s cupcakes still have yet to use social media to promote their company, they should consider setting up a Facebook or a twitter account so as to connect with their customers. This will greatly improve the gap between customers and the company and we believe receiving feedbacks and information will then be much easier. The staffs should also be briefed clearly about the project objective so as to prevent miscommunication regarding the project.
Lastly, Rindy’s cupcakes mentioned that the time taken to gather information is much more than the value of the information is to the company. They feel that it is too time consuming for the company. Usually, coming up with an analytics intelligence plan is what a company would do before jumping into the collection of data. Hence we feel that Rindy’s cupcakes should come up with a plan which will greatly save time to focus on the other aspects of their business. Also, they could weigh the importance of the information is to the company. If the information is not really important, maybe they should consider whether they still wants to put in the effort to collect that particular information.