Ireland is building up a speciality in analytics, which finds order – and profit – in random data

'COMPUTER SAYS no," the catchphrase popularised by the unhelpful travel agent in the sketch show Little Britain, is becoming a reality for more and more of our interactions with business and government thanks to the rise of analytics.

Analytical systems, which sift large amount of data to spot patterns and highlight differences from expected norms, have been around since the 1970s when rudimentary decision support systems hit the market. But cheap computing power, the vast amounts of data being captured and stored by all kinds of businesses, and the ascent of executives who have crunched data all their careers, are combining to make analytics a hot topic.

“Using data and analysis for decision making in business is not a new concept. It’s been around for hundreds of years,” says Jeanne Harris, an executive research fellow with Accenture, which earlier this year opened its Analytics Innovation Centre in Dublin.

But analytics is no longer just about crunching numbers. It is increasingly trying to make sense of unstructured data or “big data” as the buzz word goes.

Harris defines it as “data outside your organisation that is largely unstructured and often non-numeric in nature; so it may be textual, it might be images”.

Harris says companies are now using analytics as a competitive differentiator, with Google the prime example of a company “founded on an algorithm” which takes an extreme quantitative view on doing business.

Harris wrote a paper for the Harvard Business Review last year looking at how analytics could be applied to human resources to ensure a business is getting the most from its staff. Google – which has about 30 business analysts working in HR – studied why the bottom ranked 5-10 per cent of its staff are underperforming and how it could be tackled.

They have also defined what makes a great “Googler”, which is not just related to academic achievements but also harder to quantify factors like the employee’s attitude to competition and social behaviours.

“If you are using analytics at that level in a HR department, imagine what they are doing in customer relationship management, finance and other parts of the business,” says Harris.

But analytics is not just transforming tech firms. Another of Harris’s favourite examples is Cemex, the Mexican building materials and cement maker – and owner of Irish listed business Readymix – which realised it could charge a premium price for its product if it applied analytics to the business.

“They realised their customers were looking for less down time on their [building] sites. If you’re building a skyscraper and the cement is coming on Tuesday, workers have to sit around waiting for the cement, because it dries fast. Cemex analysed and re-thought its distribution and can now deliver in a 20-minute window.

“That’s an accomplishment in Dublin but it’s extraordinary in some of the developing nations where they work.”

Cemex tore apart its delivery process and put it back together using sophisticated predictive modelling and analysis, as well as lessons in yield management from sources as diverse as Domino’s Pizza and ambulance services.

Distribution was one of the first applications of analytics at Cemex but it now applies the same rigorous methods to other parts of the business such as assessing potential companies for acquisition.

Unsurprisingly, casino businesses have also been early adopters of the new breed of analytics with Gary Loveman, the chief executive of Las Vegas giant Caesars Entertainment, having told Harris that “one insight can ring the cash registers millions of times”.

Harris says the former Harvard professor was surprised to find when he joined Caesars in 1998 that a gaming business, which is based on odds and statistics, was so “non-numeric” before he arrived.

“The story he likes to tell is the first day he arrived into the job he said ‘How sensitive are people to changes in the slot pay outs?’. There’s a legal range you can make, so how did we decide on putting it where we put it. What they found is that 10 basis points [0.1 of a percentage point] this way or that is indiscernible to those of us who are playing. That one insight generates a million dollars a day in profit,” says Harris.

Caesars now uses analytics in a range of ways to deliver on Loveman’s strategy of “helping people lose money in entertaining ways” while staying within the tightly controlled legal bounds of the US casino business.

It has a predictive model which suggests when a regular customer playing slot machines is getting close to the limit where they will conclude they are on a streak of bad luck. While Caesars can’t rig the slot machine so they suddenly get a pay-out, it does have “luck fairies” who at that point tap the player on the shoulder and tell them they have won a lunch in the casino buffet at the back.

“It’s a signal their luck has changed and it also rewards a loyal customer,” says Harris. “The buffets are always in the back of the casino as well because all the research shows people don’t just walk out, they will play their way to the exit.”

Although Harris, who is Chicago-based, largely has experience of how US and large multinational firms are using analytics, it is an area of technology that Ireland is building up a speciality in. In addition to Accenture’s innovation centre, internet firms like Google and the financial services sector are increasingly using analytics in their local businesses. The UCD Smurfit School of Business also has a Centre for Business Analytics, headed up by Prof Cathal Brugha, which is gaining international recognition.

David Regan, the Accenture executive who heads up the analytics innovation centre, says from talking to clients and interviewing staff for the centre he has noticed that analytics is becoming more a part of Irish business.

“Analytics is very important to the future attractiveness of Ireland. I wouldn’t say we are there yet but I can see those companies becoming more analytical,” says Regan.

Harris rejects the suggestion that many Irish firms are not of a scale to benefit from analytics, while also pointing out that the necessary IT investment is relatively small as the software generally runs on top of existing systems such as databases and business intelligence applications.

“I don’t think you have to be a big company to use analytic; I think you have to have enough data and a mindset that is going to allow you to make analytical decisions,” says Harris.

And just like the character in Little Britain, Harris believes there are times when human intervention is not required and the computer should be allowed say no.

“There really are certain decisions which are well understood, the parameters are clearly defined, there really is no good reason for exceptions, and they are best done in real time automated fashion.”

A case in hand is the massive electricity blackout that hit the east coast of North America in 2003, which left about 10 million people in Canada and 45 million people in the US without power. The root cause was the reciprocal agreements between local electricity suppliers.

The blackout happened so fast it caused a cascade effect.

“Each utility was passing power back to the one that had gone down which was happening so quickly that one went down and in turn the next one.

“The whole country could have gone out but someone had an automated rule that said if these events occur supersede that rule and it couldn’t have been done with manual intervention because it was happening so fast.”