Knowledge-based computing: next generation of business intelligence?

Pablo Picasso once said “Computers are useless.  They only give you answers.”  The truth is that computers have to work very hard to provide answers to what appear to be simple questions.  While we are buried in terabytes, petabytes and exobytes of data – answers and information can be very hard to come by, especially information necessary for serious business decisions.   Data must be viewed in context of a subject area to become information, and analytic techniques must be applied to information in order to create knowledge worthy of taking action.  The challenge is getting data into context within a subject area and applying the right analytic techniques to get “real” answers.

Enter Wolfram Alpha, as an “answer” engine.  Once touted as the next generation of search engine, this web application combines free form natural language input, i.e. simple questions, and dynamically computed results.  Behind the scenes, a series of supercomputers provide linguistic analysis (context for both the question and the answer), ten terabytes of curated data that is constantly being updated, dynamic computation using 50,000 types of algorithms and equations, and computed presentation with 5,000+ types of visual and tabular output.  Sound impressive?  It could easily be a glimpse of the next generation of business intelligence and decision-support systems.

Wolfram Alpha lets you input a query that requires data analysis or computation, and it delivers the results for you. It’s “curated” data is specially prepared for computation— data that’s been hand-selected by experts working with Wolfram, who go through steps to make sure the raw data is tagged semantically and is presented unambiguously and precisely enough that it can be used for accurate computation.  Alpha demonstrates the real power of metadata – data about data, and the importance of semantic tags for categorizing data into a context necessary for providing knowledge and, thus, answers.

Wolfram Alpha is not a search engine according to Wolfram Research co-founder Theodore Grey.  It is not a replacement for Google.  He says that Alpha is very, very different from a search engine. “Search engines are like reference librarians,” Grey explained. “Reference librarians are good at finding the book you might need, but they’re useless at interpreting the information for you.”  Alpha takes reams of raw information and performs computations using those data.  It produces pages of new information that have never existed on the Internet. “Search engines can’t find an answer for you that a Web page doesn’t have,” Grey explained.

“It’s been a dream of many people for a long time to have a computer that can answer questions,” said Grey. “A lot of people may think of a search engine as that, but if you think about it, what search engines do is an extreme limited subset of that sort of thing.”  Examples of how Alpha can be used today range from solving difficult math equations to doing genetic analysis, examining the historic earnings of public companies, comparing the gross domestic products of different countries, even measuring the caloric content of a meal you plan to make. You can find out what day of the week it was on your birthday, or show the average temperature in your area going back days, months or years.

Wolfram Alpha would make an “ultimate” business intelligence application by computing over an enterprise data warehouse once the data was properly “curated.”  The ability to create knowledge from data, particularly to create actionable answers is what business executives really expect – not prettier presentations.  The only questions left for Alpha are:

1. who can curate your data for you, and
2. how quick can you see Alpha running over your data?

Bust For Big Three Auto Could Be Boom For Warranty Insurance Companies

With the big three US automakers impacted by the recent recession and becoming very unsteady – closing dealerships, factories, laying off workers, discontinuing lines, and possibly even filing chapter 11 – consumers are faced with a conundrum; To buy or not to buy, that is the question.  The only way for automakers and dealers to get out of this mess is to move cars.  However, will consumers want to purchase a car from a company that may not be around long enough to back their warranty, let alone provide service after the warranty has expired?

For those risk averse consumers that still want to take advantage of these “fire sales”, a great way to get that warranty back is to purchase an extended warranty agreement on their vehicle.  These warranty agreements are backed by warranty insurers like Mercury Insurance, a.k.a. Certified Car Care, Great American Insurance, or Federal Insurance, a Chubb company.  An extended warranty essentially replaces or broadens the manufacturers warranty coverage so that consumers do not have to bear the full burden of repair costs to their vehicles.  Just as with any other insurance, each company’s coverages and benefits are different.  Edmunds’ offers a great description of warranty coverage and how to shop for it.  Here’s an excerpt:

Do you have to pay the bill up front and get reimbursed?  Does the company whose plan it is offer any payment to the repair facility via a credit card over the phone so you don’t have to pay any out of pocket expenses?  How easy is the plan to use at the repair facility that will be dealing with it?  Being on the phone, on hold, waiting to get authorization could cause a major delay in getting your vehicle repaired in a timely manner.  Will a representative from the auto warranty company have to come out and inspect the vehicle?  That will also add delays to the repair process.

The automakers misfortune could become an opportunity for warranty insurers.  Assuming premiums remain reasonable, and there’s no reason not to, warranty insurers could see their business quadruple.  For those insurers that have automated their systems for application and claim processing, they will be in good shape to keep up with the large increases in demand and processing requirements.  The departments that cover these types of policies are no where near the size of the bread-and-butter departments like General Liability.  Those insurers that can keep up with the demand with automated functionality for application entry, quote, and issuance, as well as claim submission and adjudication, should become very profitable.  For those companies whose systems are not ready for the bubble, it could become a nightmare threatening the viability of the company due to reputation and service damage.  Once they cannot keep up with the demand, those requests will dramatically decrease and potentially go away completely.

This can also be another opening for frontline agents.  When consumers come in to request auto insurance, agents could seize the opportunity for the up sell and offer warranty insurance to cover that newly purchased US auto, or any auto for that matter.  Most consumers will expect to hold on to vehicles longer, making the warranty insurance coverage a very attractive option.  Agents are probably already representing carriers that offer this coverage and could easily add this arrow to their quiver.

Some interesting M&A Stats

I just took a look at a news item that arrived in my daily  PEHub Wire news roundup: Gotham Consulting Partners’ private equity survey on value creation.  While I’ve only had time for a quick read, three things jumped out at me immediately.

• 6% of the time spent on due diligence is spent on IT systems. This seems low, especially in light of what the rest of the survey says about value creation. A figure of at least 10% would make much more sense for PE firms that are serious about driving operational value creation initiatives.
• Post-merger integration does yield greater than expected results, according to survey respondents. A logical extension of this thought would be to begin integration planning early, to achieve those results as quickly as possible after the close.
• Most firms are relying on standard financial and operational reporting as tools for managing their portfolios.  However, among the more active methods of portfolio management cited, shared purchasing /shared services is the least used among the respondents.  However, a followup question listed shared purchasing/shared services as one of the two active management techniques that yielded better than expected results.

There is a lot of great information in this survey, but at a high level, it points to the need for further changes in approach both before and after deals close. More time spent vetting out risks at a deep level within operations and IT, rapid integration, and new approaches to active portfolio company management could drive these results in a different direction when the 2010 survey rolls around.

Know Your Customer: How Web Analytics can save your IT applications team money

We’ve all dealt with requirements that were written by well-meaning, but technology-confused procurement departments, or business users who believe that people still use the Mosaic Browser (my first graphical browser!). Few authors of quasi-technical requirements put much thought to the actual cost of implementing a modern, rich, dynamic web application on decade-old technology.

A purposely over-the-top hypothetical quote :

The application must support Microsoft Internet Explorer 5.0+, Netscape 4+ at a minimum graphical resolution of 800×600 pixels.

While you may at first chuckle at this obvious bit of anachronism, think back to the last system requirements you spec’ed out for a web application.

What browsers did you ask to support? Were you shocked when the development team told you you couldn’t have that cool AJAX drop-down because your browsers didn’t support it? Were you suprised when compromises had to be made to the look and feel, or flow of the application? How many users really use those old browsers, anyway? How many of your users do?

“They shoot browsers, don’t they?” — Jeremy Keith

Don’t know the answer? Don’t worry, it’s pretty common. A lot of businesses make requests for web-based applications without first doing internal due diligence to understand their target market. Sure, you can build a web application that settles for the lowest common denominator — but why sacrifice when you might not have to?

Understanding your users’ browsing platform should be one of the first steps to building requirements for projects that involve a significant IT spend on web application development, whether it be enhancements to existing applications, or greenfield development.

Here’s 4 reasons why skipping this important step of due diligence will cost you more money, or users, or attention:

1. You’ll Be Too Conservative. Fearing that you’ll lose the 0.5% of users who may be on Internet Explorer 5.0, you’ll insist (against your CTO’s recommendation) that all users are important, and if it means sacrificing a few bells and whistles, so be it.
2. You’ll Be Too Boring. You’ve heard about rich internet applications, Web 2.0, AJAX? If you’re trying to support these new technologies on browsers that are 5+ years old, forget it.
3. You’ll Spend Too Much. The 80/20 rule will be in full effect when you realize late in the development cycle that no one tested with Netscape 7.2. “But it’s in the requirements document!” cries the project sponsor. Frantic testing will unveil the fact that half the functionality is broken or visually skewed. You fire the designer, and the project goes into a death march to the lowest common denominator.
4. You’ll Be Unhappy with the Final Product. You’re building the web application to replace your mainframe claims processing system. Or your billing system. Or your financial forecasting package. And the final, boring mess will look exactly like what you had on your old green-screen system, except it’s different. Users are complaining that it’s not easy to use, and your CFO is now revisiting your ROI projections. Projects aren’t supposed to end like this… are they?

Fortunately, judicious use of web analytics and good old fashioned business analysis can provide you with concrete data to build a solid foundation of business cases and technical requirements. The chart below illustrates browser market share over the past 9 months:

Source: StatCounter Global Stats, April 2009

You can see that the bulk of market share goes to a very small percentage of very modern and powerful browsers. How can this information help you? In Part 2 of this series, we’ll explore how up-front legwork in web application development can lead to a happy outcome for all.

IT Cost Cutting and Revenue Enhancing Projects

In the current economic climate the CIOs and IT managers are constantly pushed to “do more with less”. However, blindly following this mantra can be a recipe for disaster. These days IT budgets are getting squeezed and there are fewer resources to go around however, literally trying to “do more with less” is the wrong approach. The “do more” approach implies that IT operations were not running efficiently and there was a lot of fat that could be trimmed — quite often that is simply not the case. It is not always possible to find a person or a piece of hardware that is sitting idle which can be cut from the budget without impacting something. However, in most IT departments there are still a lot of opportunities to save cost. But the “do more with less” mantra’s approach of actually trying to do more with less maybe flawed! Instead the right slogan should be something along the lines of “work smarter” or “smart utilization of shrinking resources”; not exactly catchy but conveys what is really needed.

When the times are tough IT departments tend to hunker down and act like hibernating bears – they reduce all activity (especially new projects) to a minimum and try to ride out the winter, not recognizing the opportunity that a recession brings. A more productive approach is to rethink your IT strategy, initiate new projects that enhance your competitive advantage, cut those that don’t, and reinvigorate the IT department in better alignment with the business needs and a more efficient cost structure. The economic climate and the renewed focus on cost reduction provides the much needed impetus to push new initiatives through that couldn’t be done before. Corporate strategy guru Richard Rumelt says,

“There are only two paths to substantially higher performance, one is through continued new inventions and the other requires exploiting changes in your environment.”

Inventing something substantial and new is not always easy or even possible but as the luck would have it the winds of change is blowing pretty hard these days both in technology and in the business environment. Cloud computing has emerged as a disruptive technology and is changing the way applications are built and deployed. Virtualization is changing the way IT departments buy hardware and build data centers. There is a renewed focus on enterprise wide information systems and emergence of new software and techniques have made business intelligence affordable and easy to deploy. These are all signs of major changes afoot in the IT industry. On the business side of the equation the current economic climate is reshaping the landscape and a new breed of winners and losers is sure to emerge. What is needed is a vision, strategy, and will to capitalize on these opportunities and turn them into competitive advantage. Recently a health care client of ours spent roughly $1 million on a BI and data strategy initiative and realized $5 million in savings in the first year due to increased operational efficiency.
 
Broadly speaking IT initiatives can be evaluated along two dimensions cost efficiency and competitive advantage. Cost efficiency defines a project’s ability to lower the cost structure and help you run operations more efficiently. Projects along the competitive advantage dimension provide greater insight into your business and/or market trends and help you gain an edge on the competition. Quite often projects along this dimension rely on an early mover’s advantage which overtime may turn into a “me too” as the competitors jump aboard the same bandwagon. The life of such a competitive advantage can be extended by superior execution but overtime it will fade – think supply-chain automation that gave Dell its competitive advantage in early years. Therefore such projects should be approached with a sense of urgency as each passing day erodes the potential for higher profits. In this framework each project can be considered to have a component of each dimension and can be plotted along these dimensions to help you prioritize projects that can turn recession into an opportunity for gaining competitive edge. Here are six initiatives that can help you break the IT hibernation, help you lower your cost structure, and gain an edge on the competition:

• Server virtualization
• Enterprise application & data audit
• Cloud computing
• Business Intelligence (BI)
• Business process automation
• Centralization & automation of IT operations

Figure 1: Categorization of IT Projects 

In the current economic climate no project can go too far without an ROI justification and calculating ROI for an IT project especially something that does not directly produce revenue can be notoriously hard. While calculating ROI for these projects is beyond the scope of this article I hope to return to this issue soon with templates to help you get through the scrutiny of the CFO’s office. For now I will leave you with the thought that ROI can be thought of in terms three components:

• A value statement
• Hard ROI (direct ROI)
• Soft ROI (indirect ROI)

Each one is progressively harder to calculate and requires additional level of rigor and detail but improves the accuracy of calculation. I hope to discuss this subject in more detail in future blog entries.

Are your KPIs creating a no-win situation?

Businesses that start implementing KPIs at a departmental level, without an enterprise wide effort to define a balanced set of key performance indicators, can unwittingly push their businesses into a no-win situation, as in these real-world scenarios:

• Customer Call Centers (often ahead of the curve as far as setting metrics) are tracking and incentivizing their call center agents to keep their call times short. Call center agents, in an effort to shave seconds off of each call, omit the crucial step of searching for a customer before entering a new one while logging interactions. Result: Duplicate customer records, which  may even be pushed to other systems, creating pain throughout multiple departments.
• In the push to meet monthly sales quotas, hyper-discounting  behavior becomes the norm among the sales team.  If the pricebook is complex and no one can get a true read on profitability, inappropriate discounting may be approved when management doesn’t have access to the right information to make an informed approval decision.
• Some businesses steer only by financial performance measures, but these are lagging indicators, and can seldom, in and of themselves, provide the required agility to succeed in rapidly changing situations.

The key, of course, is to strive for balance when implementing KPIs:

• Balance between leading (forward-looking) and lagging (backward-looking) indicators.
• Balance across stakeholder perspectives. The Balanced Scorecard as a starting point works well to achieve balance across core stakeholder viewpoints of financial, customer, process, and learning/growth.
• Balance across levels in your business hierarchy. Kaplan and Norton expanded on the balanced scorecard approach to help businesses drive metrics down through their organizations via strategy maps.
• Balancing speed metrics with quality metrics

Image courtesy of memory-alpha.org

The alternative to a balanced approach at the outset is usually a technology desparation move, such as manually cobbling together some key reports, manually trying to scrub out duplicate data, implementing undesirable or even temporary customizations to packaged programs. There’s usually at least one person in the IT department who’s enough of a Star Trek fan to want to reprogram that no-win scenario, just like the young James Kirk did with the Kobayashi Maru.

Web 2.0 for Healthcare Providers – Q and A Part 1

Thanks for all those who attended our webinar on implementing web 2.0 strategies last week. If you missed it, the recorded webinar is available on our site. Enjoy.

As I promised, here are some of the questions asked during the session that I have not had time to address:

Q1: Using Facebook and Twitter – how do I get started? How can we monitor it?

Getting started is ridiculously easy. Facebook has a good starter guide . Setting up Twitter is even simpler as there is not much to do other than selecting a name. You have only 15 characters so it is not always an easy task. Twitip has a good guide to best practices in twitting and a list of useful services to track and monitor twitter conversations.

Q2: Why would people want to follow a healthcare organization? How do I promote it without spending money? is it really worth the effort and Investment?

So setting up profiles and pages is easy. The hard part is getting people to follow you on a regular basis. The good news is that you just need to get users to act once and add you to their friends list or follow you on twitter. From that point forward you are just one in a stream of many others.
Spreading the word is done in every way possible, but not through direct advertising. Put it on your website, emails, blog and any other marketing communication form. The best promotion methods are viral. If you have something interesting to say, people will spread the word.

Social media communication tools are just one more way to reach an audience in a fragmented media world but health is something people really care about. If you are a regional hospital, publish daily information your community will want to know. Allergy report, flu alerts, flu vaccine reminders, etc. The cost is usually limited to a resource that will write and maintain all these social media properties. We’ll go into ROI in the next answer but first and foremost the benefit is relevancy. Hospitals that will engage and communicate will be relevant and top of mind. Others will be there when the appendix burst.

Q3: What type of investment is required? What is the ROI

We usually see 2 main areas of investment. The first is Strategy. With so many options, tools, opportunities and risks large organization usually do not just jump in but take some time to look at the landscape, their audience, their revenue centers and their media assets and capabilities to form a cohesive strategy. This is the main area we help clients in as they often lack internal expertise. We usually recommend forming a broader web strategy as these social activities are not isolated from the needs to have an attractive and interactive website than engages users and effective e-marketing programs. The strategy part also looks at the organizational ability to support these types of programs, the skills required and can help in building a cost and ROI structure. The cost of a comprehensive web strategy can range from five to low six figure depending on the size of the organization and scope.

The second area of investment is in the program operations. This usually translates to people who dedicate some of their time to writing content and managing user interactions. It can range from a few hours a week for a small program to a full time position.

The returns: like in any marketing program, these activities are judged by their ability to generate increase in profitable patients and donations. Since they provide a great way to reach an audience without a cost per unit (as you have in email, banners or paid search) the ROI increases as the size of your audience.

Mashable.com has a good overview for the qualitative and qualitative measurements for ROI. I think it goes back to relevancy and the need to be part of your audience daily life.

Illustration: Monica Parra / Newsweek

Why CEO’s must care about Enterprise 2.0 as a Strategic Imperative

One of the strongest and most misguided arguments expressed online and in many companies we speak with about Enterprise 2.0 is that it is not strategic.

That this collection of tools, technologies and ideas is not yet mature enough, lacks proven ROI, introduces a myriad of security and governance issues and even if successful is not a priority in today’s soft economy. It is too often delegated to IT managers to experiment with and report back in a few years.

Here’s where the difference is: Enterprise 2.0 is not a technology. It represents first and foremost a new way of thinking, interacting and communicating that includes attitude and cultural changes, empowered by IT. Is there anything more strategic than that and more important to a business future success?

It is arguably the biggest opportunity for IT driven cultural change facing organizations since the introduction of PC networks more than 2 decades ago.

One of the C suite most important tasks is to shape an organizational culture that will make their company innovative, competitive, efficient and successful not just now but in the future. Embracing Enterprise 2.0 now and guiding their employees through this transitional period should be one of their top priorities.

While in a few cases adoption started from the bottom up, a change of this magnitude usually needs to come from the top accompanied by the matching set of values and actions that prove the seriousness and commitment to change.

It requires leadership that is able to see that transparency and increased visibility into activities throughout the company will finally enable them to know what is really happening and will create a culture of trust. That openness and exchange of ideas will lead to innovation and efficiency. That collaboration will enable a diverse workforce to work together in emergent ways while being physically and geographically dispersed.

In short, it requires vision that will set a future path and will ask managers to overcome the obstacles in the way. The type of vision CEO’s need to provide and not delegate to IT managers.

The challenge and opportunity is that not many chief executives have realized yet that embracing Enterprise 2.0 is a strategic imperative and are focusing the discussion around short term ROI.

Dion Hinchcliffe at ZDNET provides a comprehensive review of the evidence and opinions regarding ROI and adoption challenges, and adds his own interesting model of collaboration cause and effect chains that while clearly provide benefits, make them harder to pinpoint and measure.

He also concludes that

“… an accumulating body of knowledge is pointing to potentially dramatic business returns with Enterprise 2.0. If these continue to be borne out, it will affect the competitive and financial positions of the companies that are proactive and therefore their long-term marketplace success“

And wonders what it will take to break the current status quo?

His colleague Dennis Howlett on the other end thinks the ROI is still years off and concludes

“As always, the secret to long term success depends on management’s ability to maintain a sustained commitment and all that goes with it. The difficulty today is that same management is wondering where the next sale comes from or how cash will be generated.”

The good news is that Enterprise 2.0 does not require large capital expenditures but mostly thorough organizational commitment. There has rarely been an opportunity for businesses to gain so much competitive edge by investing so little.

As in many cultural revolutions, by the time Enterprise 2.0 related changes start translating into business differentiators, organizations that have not made the transition will look as outdated as an organization resisting getting these useless PC boxes or adopting email.

Cloud Computing Trends: Thinking Ahead (Part 3)

In the first part of this series we discussed the definition of cloud computing and its various flavors. The second part focused on the offerings from three major players: Microsoft, Amazon, and Google. The third and final part discusses the issues and concerns related to the cloud as well as possible future directions.

A company may someday decide to bring the application in-house due to data security or cost related concerns. An ideal solution would allow creation of a “private in-house cloud” just like some product/ASP companies allow option of running a licensed version in-house or as a hosted service. A major rewrite of existing applications in order to run in a cloud is probably also a non-starter for most organizations. Monitoring and diagnosing applications in the cloud is a concern. Developers must be enabled to diagnose and debug in the cloud and not just in a simulation on a local desktop. Anyone who has spent enough time in the trenches coding and supporting complex applications knows that trying to diagnose complex intermittent problems in a production environment by debugging on a simulated environment on a desktop is going to be an uphill battle to say the least. A credible and sophisticated mechanism is needed to support complex applications running in the cloud. The data and meta-data ownership and security may also give companies dealing with sensitive information a pause. The laws and technology are still playing catch-up when it comes to some thorny issues around data collection, distribution rights, liability, etc.

If cloud computing is to truly fulfill its promise the technology has to evolve and the major players have to ensure that a cloud can be treated like a commodity and allow applications to move seamlessly between the clouds, without requiring a major overhaul of the code. At least some of the major players in cloud computing today don’t have a good history of allowing cross-vendor compatibility and are unlikely to jump on this bandwagon anytime soon. They will likely fight any efforts or trends to commoditize cloud computing. However, based on the history of other platform paradigm shifts they would be fighting against the market forces and the desires of their clients. Similar situations in the past have created opportunities for other vendors and startups to offer solutions that bypass the entrenched interests and offer what the market is looking for. It is not too hard to imagine an offering or a service that can abstract away the actual cloud running the application.

New design patterns and techniques may also emerge to make the transition from one cloud vendor to another easier. Not too long ago this role was played by design patterns like the DAO (data access object) and various OR (object relational) layers to reduce the database vendor lock-in. A similar trend could evolve in the cloud based applications.

All of the above is not meant to condemn cloud computing as an immature technology not ready for the prime time. The discussion above is meant to arm the organization with potential pitfalls of a leading edge technology that can still be a great asset under the right circumstances. Even today’s offerings fit the classic definition of a disruptive technology. Any organization that is creating a new application or over hauling an existing one must seriously consider architecting the application for the cloud. The benefits of instant scalability and “pay for only what you use” are too significant to ignore, especially for small to mid size companies. Not having to tie up your cash in servers and infrastructure alone warrants a serious consideration. Also not having to worry about setting up a data center that can handle the load in case your application goes viral is liberating to say the least. Any application with seasonal demand can also greatly benefit. If you are an online retailer the load on your website probably surges to several times it average volume during the holiday shopping season. Having to buy servers to handle the holiday season load which then remains idle during rest of the year can tie up your capital unnecessarily when it could have been used to grow the business. Cloud computing in its current maturity may not make sense to pursue for every enterprise. However, you should get a solid understanding of what cloud computing has to offer and adjust the way you approach IT today. This will position you to more cost effectively capitalize on what it has to offer today and tomorrow.