Use of Analytics in Indian Enterprises : An Exploratory Study

Prof. M.J.Xavier M. Tech. (REC Warangal), Fellow (IIM Calcutta) Director Indian Institute of Management Ranchi Prof. Anil Srinivasan MBA (Univ of Southern California), M Phil (Columbia) Adjunct Faculty, Kotler-Srinivasan Center for Research in Marketing Great Lakes Institute of Management, Chennai

Arun Thamizhvanan B.E., M.Sc Int.Biz (UK) Faculty Associate, Great Lakes Institute of Management, Chennai

Contact details: xavier_mj@yahoo.co.in

ABSTRACT In 2007, India accounted for one-third of the total $17-billion global market for analytics. However, the rate of adoption of analytics for decision making and enhancing the customer experience has been slow on the uptake. While the term analytics has found universal usage in almost all business platforms, what it refers to and the specific contexts in which it ought to be used is still ambiguous among senior managers in the Indian corporate milieu. To uncover the antecedents of these observations, at least in part, we conducted a survey among 84 senior managers across domains, company profiles and regions across the country. We find that an effective understanding of analytics as a decision craft tool grows with time and experience for most individuals, and the prevalence of more heuristic-based decisionmaking is still in vogue. Further, only companies of a certain size (turnover of Rs 500 Crore or more) make a concerted effort to maintain and update data necessary for efficacious use of analytics, and place this high on their priorities. Further, many ambiguities regarding the definition and scope of analytics were observed. The paper discusses these findings in detail and concludes with a brief discussion on the steps ahead. Keywords : Rate of Adoption, Corporate Milieu, Ambiguities, Analytics, India

Introduction

From a gut instinct decision paradigm that was data-insufficient, Indias progress in business intelligence has seen it accounting for nearly a third of the $17 billion global market for analytics (Kumar 2008). According to IDCs India Business Intelligence Solutions Market Analysis October 2008 Update, for the period 2009-2013, the advanced analytics software market in India is slated to grow at a CAGR of 22%. Already, the number of niche players and advanced analytics players has grown rapidly. However, the rate of adoption of analytics for marketing functions is still relatively slow (Murthy, 2006). This seems to be a phenomenon that applies to the more advanced economies as well (Hauser, 2007). Part of this problem lies in the perception of business intelligence, specifically marketing analytics, but a bigger part of this problem lies in the perception of the marketing problem itself (Hauser 2007). Held for a very long time to be the softer side of business, marketing departments have managed to achieve some truth to the fallacy that marketing does not need math by strict adherence to decisions based on little more than an Excel spreadsheet (Stodder 2007). A slightly deeper analysis of these issues leads us to questions of attitude and selfperception. While self-fulfilling role definitions (gut instinct, I can manage anything based on my experience and intelligence) are influential, cultural antecedents also play a role. For instance, the market research industry itself in India is small compared to similar industries in more advanced economies (ESOMAR, 2007) Psychologists, notably Rotter (1954, 1975) have studied the notion of locus of control, which refers to the extent to which individuals believe that they can control events that affect them. Further, they identified those with typical expectancy shifts to refer to those individuals with a greater belief in their own ability who expect an outcome to be followed by a similar outcome while those with atypical expectancy shifts to refer to those with a belief in chance, who expected outcomes to follow dissimilar patterns. In prior discussions of marketing managers in the country, it would appear that the former would be less likely to engage in a more serious undertaking of business analytics,

attributing marketing success or failure to gut instinct or even their own abilities to alter events, while the latter would be more likely to perceive the field of analytics to be of greater value, wanting to reduce chance failures in the context of business decisions. Following the arguments of Hauser (2007) would lead us to believe that the practice of organizations to train their managers towards stronger feelings of internal loci of control (and consequently, typical expectancy shifts) could perhaps be responsible for the slower rates of adoption of analytics as a decision tool. Further, self efficacy (Bandura 1997) could also point to the slower rates of adoption. For instance, a number of managers could be under the belief that they are incapable of understanding and utilizing analytical tools and data. Interestingly, analytics in the business context have also been thought to belong to the IT domain as opposed to being businesswide, a notion that is grounded on the fact that the applications are developed by software engineers, leading some credence to this self-belief. Further, Hauser (2007) makes the observation that the industry notion has long been that students weaker in the mathematical skills will end up in marketing functions. While this notion is easily combated, the academic-industry dialogue in India probably needs to open up a lot more to instill a greater appreciation of mathematical models and their use in marketing. It also remains to be seen if the more experienced players in the market i.e. companies that have been operational for a longer time are less open to new tools and techniques due to either business policy or habituation, and are holding up the market for analytics. The same holds for those companies that have made considerable investments in IT and ITrelated products. With this in mind, the approach of this paper is two-fold. One, it provides an overview of the analytics in the business context across organizations in India. Two, it seeks to validate the actual use and application of analytics by business managers, in an attempt to identify future areas for growth and learning. Using an industry-wide survey conducted among business managers, we use our findings to shed light on some of the arguments posed in the earlier sections of this essay.

Understanding Business Analytics The term Business Analytics refers to the extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive decisions and actions (Davenport and Harris, 2007). Many organizations across the globe in as many diverse industries have been using analytics as a competitive differentiator in their operations. Given these, a closer understanding of analytics as suited to different industry domains is perhaps pertinent. According to the Hitachi Consulting Group (2005), marketing analytics is a focus on coordinating every marketing touch point to maximize the customer experience as customers move from awareness, to interested, to qualified, to making the purchase. This particular definition leads to many perspectives. First, it defines analytics as a focus. This refers most directly to an outlook on business problems and objectives. Typically, it involves understanding analytics from the perspectives of the companys marketing plans, policies, short-term and long-term goals, and developing a calendar for data collection, mining, interpretation and analysis. It does not, and cannot, restrict itself to a post-hoc tabulation and summarization of sales/marketing results. This in turn implies that analytics is forward looking, a notion supported by consulting majors such as Accenture (2007). In their article on analytics, they define this focus to mean the ability to draw inferences from the current situation and provide means to control the data in a forward-looking perspective of its business impact. The second part of this definition addresses the idea of coordinating information from every touch point i.e. data. Typically, the marketing process is a series of steps from awareness to actual purchase of a product or service (models such as the famous AIDA model substantiate this). In data terms, this means a series of decisions that a consumer

makes along the awareness-action continuum, each of which can be represented by data. This can be understood by taking the analogy of a decision tree. Decision trees used in these scenarios would have a branching effect, consisting of a series of decision trees and business rules to support real-time decision making as the business scenario changes. This will create additional challenges and metadata management and in-memory data storage will be key. Now, looking at this in context, India offers plentiful opportunities for nearly every intelligence-based domain and application. Indeed, much has been discussed about the scope and potential scalability of business intelligence, including a thorough discussion of the need gaps in the industry in forums elsewere(Murthy 2006). Specifically, it has been widely acknowledged that the lack of standardization in the data available is one key weakness area. Typically, the ability to calibrate, standardize and manage vast amounts of business data vests with major corporations and those with bigger marketing/data budgets. However, smaller companies also face the same marketing and/or business challenges and have the same, if not more acute, need for analytics. However, it remains to be seen if this indeed translates to reality. Specifically, is analytics the domain only of the majors, i.e. companies that typically have a turnover of more than,say, Rs 500 Crores? Do managers in smaller companies (say, having a turnover of less than Rs 50 Crores) see the value of investing in analytics? The other important hurdle to the greater use of business intelligence is the attitude of managers and industry leaders alike, akin to the discussion on the psychological underpinnings expressed in the opening passages of this paper. While the need for datadriven decision making is keenly felt, not every company realizes the criticality of this or the need for institutional investment in analytical tools and infrastructure. Once again, it remains to be seen empirically, if each organization (or manager therein) that requires analytics actually sees this as being critical to their decision making, in the Indian context.

Having thrown up the first set of (a series of) questions on the role of analytics in the Indian business context, it is interesting to note that the same paper by Accenture also mentions the following characteristics of business analytics : This means the data, the event and the business context all need to be observed together and to be context sensitive. So the data attribute and the value it is carrying should be both intelligent and automatically aligned to changing business contexts and strategies. In order to achieve operational capability, data cannot be outside this process, but has to be at the core of the events and hence inside the process. This further accentuates the need to look at models that optimize the use of analytics. Typical models in the past have relied on past data, standardized and categorized in order that predictive models can be used. This naturally requires a company to track and store data over a period of time, implying that analytics becomes useful to the company and its decision making subsequently, rather than being immediately effective. The discussion (Murthy 2006) produces the model for such decision making : Exhibit 1 Value Creation in the Experience Economy ( Adapted fromMurthy 2006)

The obvious question for empirical testing, therefore of causality between the number of years of business investment in analytics and the stated criticality of its usage by managers. The emerging models for analytics looks at this process slightly differently which presumes the need for data capture and interpretative analytics from Year 1 of a companys operation, informing decision making at various stages of criticality independent of the companys tenure in the industry (Murthy 2006, Jones 2006, Stodder 2007). An interesting question, therefore, is to ascertain if companies within year 1 or 2 of their operation find the investment in business analytics equally important, in the Indian context. However, the effective use of a tool or application is directly proportionate to a more consummate understanding of it, as almost all arguments in logic would hold (James, 1890). Further, there arises the question of knowledge about what analytics is, and more pertinently, what it is not. Similarly, it would stand to reason that an increased familiarity of the terminology and concepts involved in analytics and its applications would increase perceptions of its criticality, and consequently the quantum of investment in it. In accordance with the observations made in the initial sections of this paper, it would stand to reason that habitual use of analytical tools in the organization would proportionately increase its perceived efficacy. Given the context, it would be relevant to question the influence of the term familiarity of Business Analytics on its perceived criticality. Marketing analytics, however, is still not considered to be an integral component to the process of improving customer service (Nada Nasr and Eshgi, 2005). These researchers, and more recently, Hauser (2007) posited that managers expect information technology divisions to take care of these applications for them. Therefore, it stands to reason that companies that view this as primarily an IT function would not perceive its true importance. Related to this issue becomes the perceived beneficiary of analytics applications. Unless managers are able to perceive these applications as being of critical importance to customers and ultimately, issues of customer retention (not restricted to CRM applications

but analytics in general), it is likely that they see analytics as an artifact of a specific division or utility within the company. Hypotheses: The administered survey instrument was designed for the purpose of eliciting the answers to the questions raised earlier in the form of hypotheses list below: H1a: Size of the company affects perceived criticality of analytics H1b: Size of the company affects Investment level in analytics H2a: Term familiarity of analytics affects its perceived criticality H2b: Term familiarity of analytics affects the Investment level in analytics H3a: Number of years of investment in business analytics affects its perceived criticality H3b: Number of years of investment in business analytics affects its Investment level And also the Research Questions Q1: Is analytics related to specific domain of IT or overall business function Q2: Is analytics benefiting customers or employees? Data Collection A well designed survey instrument was administered to 200 middle and senior-level managers of companies of different sizes (in terms of turnover) across the country. These include both listed companies of considerable size (Cognizant, TCS, Wipro etc.) as well as private limited companies that deal with specific consulting solutions (such as Irevna, Marketics or Genpact). These managers were spread across departments and function, in order to capture various facets and applications of analytics within the company. The sample was restricted to middle and senior-level managers as they were believed to reflect the prevailing scenario inside their organizations. Out of these managers, 84 of them (Response rate of 42%) filled out the surveys online and duly returned over a fortnight after repeated requests.

The survey comprised of various questions capturing the relevant information to test the hypotheses listed. The key dependent variables for the analyses were the answers to the questions how critical is business analytics for your company in the next 12 months (Critical, High, Moderate, Low, Not a priority) and what is the level of investment for your organization in analytics (Very High, High, Medium, Low, Very Low) The independent variables captured in the survey were the companys size in terms of turnover (less than 100 crores, 100-500 crores, 500-1000 crores, above 1000 crores), term familiarity (Not at all familiar, Not very familiar, somewhat familiar, very familiar, extremely familiar) and years of investment ( Not at all, 1-2 years,2-4 years, 5 years, 5-10 years). Other descriptive variables like Domain ( General Business, IT only, Both IT and Business) and Beneficiary ( Customers, Employees, Government, Unsure) are captured too. The survey contained a couple of open-ended questions asking respondents to fill out the name of the analytics tool that his/her company used, and a success story/narrative due to the usage of analytics in their organization. Research Findings The results were then tabulated and analyzed using SPSS. The collected data while tested, the absence of multicollinearity was established with acceptable tolerance values. Table 1 shows the split of surveyed respondents in terms of the companys size (turnover in rupees) Company Turnover (Rs) Less than 100 Crores 100-500 Crores 500-1000 Crores 1000 Crores+ % 26% 20% 13% 41% Base : 84

Table 1 : Company Size A multinomial logistic regression run using size of the company as an independent variable and perceived criticality of analytics yields a Pseudo R Square of 0.318 (Cox and Snell, best of the measures), and a 2 (12, 84) = 32.154, p < 0.001. Running the same regression

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on investment size as a dependent variable yields a Pseudo R Square of 0.234 (Cox and Snell, best of the measures), and a 2 (12, 84) = 22.36, p < 0.05., showing model fit. Clearly, the size of the company does play a major role in determining both the quantum and perceived criticality of business analytics. Indeed, a frequency tabulation of perceived criticality across company sizes revealed the following data (Table 2):

Perceived Criticality Not at all Priority Low Priority Medium Priority High Priority Critical

% 6.0 11.9 27.4 31.0 23.8 Base : 84

Table 2 : Perceived Criticality While more than half the surveyed managers found business analytics to be of critical priority in their companys growth chart in the near future, the pendulum swings equally in the other direction as well. In investigating the level of familiarity with the term business analytics, we found that more than half the surveyed respondents express great familiarity with the term ( Table 3). Regressing criticality using familiarity as the independent variable, we find once again that it yields a Pseudo R Square of 0.288 (Cox and Snell, best of the measures), and a 2 (12, 84) = 28.51, p < 0.05, once again showing model fit. Once again, using size of investment in analytics as a dependent measure yields identical results (Pseudo R Square = 0.353, 2 (12, 84) = 36.6, p < 0.001).

Familiarity Not at all familiar Not very familiar Somewhat Familiar Very Familiar Extremely Familiar

% 3.6 10.7 29.8 40.5 15.5 11

Base : 84 Table 3 : Term Familiarity Going back to initial discussions on the topic, the higher the familiarity/habituation to the idea of analytics for the individual, the greater its perceived criticality. Clearly, those in companies which expose managerial talent to analytics more stand to gain. Relatedly, the number of years that a firm has invested in analytics has a great effect on its perceived criticality and the level of investment in the immediate future. Table 4 shows the proportion of the companies surveyed across the number of years each of them invested in business analytics in some form (Pseudo R Square = 0.38, 2 (12, 84) = 35.6, p < 0.05). Years of Investment Not at all 1-2 years 2-4 years 5 years 5-10 years % 21.3 10.7 10.7 28 29.3 Base : 84 Table 4 : Years of Investment

The number of years while regressed on level of investment in analytics yielded a Pseudo R-Square value of 0.480 and ((Cox and Snell, best of the measures), and a 2 (16, 84) = 82.54, p < 0.001., showing model fit. At this stage, there seems to be some basis for the notion that companies with a greater number of years familiarizing their employees with the use and application of analytics naturally perceive the function as critical and are willing to invest more in the near future. Clearly, the model that has permeated the Indian firmament is past-data based predictive analytics that works better over time and that too for companies that are willing to go the extra mile and manage their data carefully. Analytics is not seen as a critical function by companies that are new and smaller sized. In investigating the idea that analytics is seen exclusively as the domain of an IT Department (vs. General Business or Both), the following data were obtained : 12

Domain % General Business 13.1 IT only 32.1 Both IT and Business 54.8 Table 5 : Domain of Ownership/Expertise Interestingly, analytics is seen more as an IT-domain speciality and not as something that would be applicable or useful to other business divisions. Once again, this sheds some credence to initial observations made (similar to those by Hauser (2007)) that perceived self-efficacy or the lack of it could cause individuals to classify the idea of analytics as software oriented or IT domain speciality. In pursuing this topic further, we find that the term analytics is used to refer to IT related applications (CRM, Advanced Data Management, Data Warehousing) by about 60% of those surveyed, while a significantly lesser number (40%) refer to tools used for other functions such as financial management, strategy and marketing intelligence. Table 6, summarizes the results of analytics applications. Base : 84 Table 6: Analytics Applications An open-ended query on those who relate it to a general business function reveals that a significant proportion are fairly vague about what the term could really mean (MS Excel by about 12 respondents, Google Analytics by about 8 respondents, SPSS by about 6 respondents) and confuse it for a specific type of software or some data base (see Table 7). It is equally surprising that very few of those who expressed great familiarity with the term analytics attempted the open-ended question.

Analytics Tools Cognos ERP tools SAS

No. of Respondents 7 7 5 13

Oracle Hyperion MS Excel Business Objects OBIEE MS Access Microstrategy "R" Mintab Siebel Analytics SPSS Bloomberg Factiva Informatica Teradata Google Analytics Sugar CRM Tally

4 12 3 2 1 1 1 1 1 6 1 1 1 1 8 1 1

Table 7: Analytics Tools An analysis of who our respondents thought benefited the most by the usage of analytics revealed the following data : (Table 8). Respondents are equally divided between the company employees and to customers. On further analysis, it becomes clearer that a significant proportion of those who feel that employees benefit the most have equated analytics with performance management applications while those who feel customers benefit the most spontaneously mention CRM packages.

Beneficiary Customers Employees Government Unsure

% 46.2 44.9 1.3 7.6

Base : 84 Table 8 : Key Beneficiary of Using Analytics

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When asked about the benefits of analytics to their organizations, 70 percent of the respondents indicated that it helped them improve the decision making process, 61% felt that it helped speed up the decision process, 56% felt that it helped align resources with strategies and so on. The detailed list of benefits and the percentage responses are presented in Table 9.

Benefits to Organizations Improving the decision making process Speeding up the decision making process Better align resources with strategies Realizing cost efficiencies Responding to user needs for availability of data ona timely basis Improving organization's competitiveness Producing a single, unified view of enterprise information Increasing revenues Sharing information with internal customers Maintaining regulatory compliance Sharing information with external users Others Table 9: Key benefits from Analytics

Percentage Respondents 70% 61% 56% 57% 32% 51% 29% 44% 23% 21% 27% 2% Base 84

Additionally, the challenges experienced, with regard to implementation of analytics are summarized in Table 10. Data integration from multiple sources and data quality were serious concerns of close to 50% of respondents. Integration with other enterprise applications and user skills are the problems experienced by a quarter of the respondents surveyed.

Implementation challenges Data Integration with multiple source systems Data quality

Percentage Respondents 48% 48%

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Integration with the rest of the enterprise applications Ability to handle complex queries Administration and security Embedding business analytics functionality into operational applications Metadata management Difficulty in learning to use Lack of well defined metrics to manage processes based on analytics Lack of necessary skills on the part of users Lack of companywide vision on analytics projects Keeping pace with increased demand from end users Length of time to deliver relevant information Others Don't know Table 10: Implementation Challenges

32% 31% 18% 17% 25% 19% 20% 25% 12% 20% 15% 8% 15% Base: 84

Finally, we asked respondents to share their success stories. The responses covered the entire-gamut of business applications including reduction in transportation cost, productivity improvement, increased cross-sell and up-sell, enhanced profitability in trading to increased traffic to on-line store. Discussion From the above analysis, it seems fairly clear that analytics is very much a part of the managerial lexicon, except it is shrouded by ambiguity. Senior managers of even the larger corporations surveyed are aware of analytics, and express great familiarity with analytics solutions, but are limited in their view of what the term could potentially constitute. Further, many view analytics as specific software packages with narrow applicability. More worrisome is the fact that nearly one half of those surveyed are unsure about whether analytics is within their jurisdiction or an exclusive domain of the software specialists or IT

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divisions within their organizations. That analytics refers to a focus as defined earlier, and an approach towards decision making has eluded the understanding of many. Where it is being applied and used to great efficacy (again, 43% feel their organizations extract optimal use out of analytics solutions, but 57% are unsure that their companies are utilizing these to the fullest), analytics are at best used as a predictive modeling tool that validates an existing strategic decision (which could be scientifically or unscientifically derived), or marketing research data. To continuously use analytics to monitor, interpret, analyze and predict data (the MIAP system recommended by Hauser) is an initiative taken by fewer companies, and that too only by those which have the wherewithal to invest in data capturing and maintenance devices. The lack of clarity about what the term could mean (even for those who express great familiarity) is an exercise that can be corrected by opening up the academia-industry bridge and creating course content in MBA/Advanced Masters programs on analytics and their applications or even as course modules for corporate employees. Despite the slightly unfavourable prognosis of the preceding paragraphs, there exists a great opportunity space for growth and learning in the analytics domains, and some of the bigger companies have begun the process of transformation, setting the pace for their younger and smaller counterparts to follow.

Limitations of the study & future research directions The findings of the study could not be generalized because of its limited sample size. Bigger sample size would have been apt for the study of this nature. As the companies view of analytics vary largely with respect to its size (in terms of revenue) it would be more relevant to do research in the companies in various segments to gain deeper insights. This study being exploratory in nature covered limited only variables and didnt cover the possible interaction effects between level of investment, term familiarity and size. Further research could be done with additional relevant variables and the interaction effects among

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them. The characteristics of firms perceiving analytics as a critical function might be elicited considering more variable in future studies to draw valuable inferences for firms who want to go into analytics.

Managerial Implications As the study established that exposure of managerial talent to analytics has a significant effect on its perceived criticality of analytics. Both big as well as small companies planning for investment in analytics could do so by familiarizing their managers to Analytics prior to the investment either with training programs or advanced courses on the same as they stand to benefit. This would also dispel the cloud of ambiguity over analytics and motivate them to give analytics the due attention and focus. REFERENCES Accenture (2007), The Intelligent Bottomline, Economic Times, July 26 Bandura, Albert (1997), Self-Efficacy: The Exercise Of Control, New York: Freeman, pp. 604 V. Kumar (2008), Analyzing Analytics , Business Today, September 18 Davenport, Thomas H. and Jeanne G. Harris (2007), Competing on Analytics: The New Science of Winning. Harvard Business School Press ESOMAR Review (2007) available at www.esomar.org

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Hauser, William J. (2007), Marketing analytics: The Evolution of Marketing Research in the Twenty-First Century, Direct Marketing: An International Journal, Vol. 1 No. 1, pp 38-54. Hitachi Consulting Group (2005), Customer and Channel Analytics, available at: www.hitachiconsulting.com/page.cfm?ID customer_channelAnalyt Jones, S.K. (2006), Creative Strategy in Direct & Interactive Marketing, 3rd ed., Racom Communications, New York, NY. Murthy, Iswar. (2006), Business Analytics in India : Opportunities and Challenges A Discussion, IIMB Management Review, June Nada Nasr, B. and Eshgi, A. (2005), Customer Lifetime Value Analysis: Challenges And Words Of Caution, Marketing Management Journal, Vol. 15 No. 2, pp. 87-97. Rotter, J. B. (1954), Social learning and clinical psychology. New York: Prentice-Hall --------------- (1975), Some Problems And Misconceptions Related To The Construct Of Internal Versus External Control Of Reinforcement, Journal of Consulting and Clinical Psychology, 43, 56-67 Stodder, David M. (2007), Good BI, Cruel World?, Intelligent Enterprise CMP Media LLC.

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