How to Quickly Leverage Big Data Analytics May 23, 2013
Agenda
• 3V’s of Big Data
• Value of External leading indicators • Buy vs. Build Dilemma
• Case Study - Dow Chemical Company
• Case Study - Advanced Drainage Systems • Methods to Identify Leading Indicators
What is Big Data
“Big data” is high-volume, -velocity and -variety information assets that demand cost-effective,
Clearly, knowledge is power
It’s why we know our internal data -- down to the decimal
Profit Margin EBITDA
But according to experts, external data
is even more important
Companies who consistently review industry indicators
outperform peers by 220%
– IBM & MIT
85% of a company’s
Problems to solve
• Global economic changes impact company results
more frequently and with greater depth than ever before
• Companies scramble to find external data for
upcoming board or leadership presentations
• Companies have redundant sources and spend for
external data
• External data is not systematically analyzed against
internal results
Forecast accuracy suffers lowering profits
Results suffer due to staying in existing markets to long or entering new markets to late
It’s a lack of systems to consistently collect, verify and interpret information effectively
The problem is not a lack of data,
and it’s certainly not a lack of will
Big Data Projects
• Build in house expertise on existing tools • Build in house expertise on new tools
Case Study – DOW Presentation
• Overview– Goal was to leverage external leading drivers to improve
forecast ability for several layers of business
• Within 5% very good
• Within 10% Good
• 10%-15% useable
• >20% needs work
– Decided to build with internal team, internal SAS and BI tools
and external consulting
– In 6 months they were able to forecast total net sales with
Case Study
•
Overview
– Goal was to leverage external leading drivers to
improve forecast ability at region and product level
• Within 5% very good
• Within 10% Good
• >10% needs work
– Decided to partner with one provider
– In 6 weeks they were able to forecast at product
Case Study – Global Manufacturer
Patented- automated leading indicator
126,000+ External Data Series
Economic Data Customers &
Competitors Demographics
$ales Volume EBIDTA
High Level Activities
Data Gathering and Structuring Leading Driver Identification Model Building and Tuning Implementation and Training • Internal Data • Business Attributes & Hierarchy • External Data Sources • Suppliers • Competitors • Customers Statistical Analysis • Regression • Lead/Lag • ProCyclic • CounterCyclic ROCET Methodology Engage business leaders Billing Days adjustments Variable Reduction Variable Selection • Cross Correlation • Co-integration • Similarityand Back testing
• Finalize accounts and Permissions • Deploy workbench and models • Update Calendar • Set Alerts • Training and handover • Ongoing Support
8 Week Project
Data discovery Systematic Indicator analysis Interface for automation
1
3
2
Case Study – Highlights
•
Overview
– 3 Internal FTE
– 11,000 Data Series from one provider – 34 Models produced by experts in
economics and statistics
– Forecast down to state and product
levels
– No internal hardware or IT system
Big Data - Build or Buy
Build Buy
Pros
• Own the IP of thefinished product
• Build deep technical
in house expertise
• Expertise of provider
• Can select best of breed
products
• Shorter time to implement
• Internal staff stay focused on
core business
Cons
• Long time to create• High internal cost
• May still need experts
• Acquisition Cost
Identifying Leading Indicators
•
Key Steps
– Detective Work – Format Data
– Chart and Graph to
identify correlation
– Make it a repeatable
Thorough analysis
Proprietary algorithms parse data,analyze influences
and forecast future financials
17+ patents pending
Certified in Time Series Analysis and Forecasting by NABE
Accurate and insightful outputs
Clear picture of business cycle Comprehensive outlook
Actionable insights
“Our CFO and finance organization has to do detailed analysis of economic indicators vs. our business results. The amount of time and effort is immense. Prevedére eliminates the manual part of this analysis and makes it repeatable. Further, our private equity owners are extremely interested in our performance vs. economic indicators. Using
Leading Indicator Analysis
Better predictions
Better actions
Better results
What would 94+% forecast accuracy mean to your bottom line?
Companies that build and verify
a set of leading indicators earn a
2.95% higher return on assets and a 5.14% higher return on equity.
— Wharton 95 85 90 85% 94% forecast accuracy
Start conservatively
A paid trial can be completed in just 2-3 weeks See exactly what reports and insights
you would get for your specific company, indicators and priorities