When Wachovia wants to know a customer, it doesn't look at his profile.
It may sound counterintuitive, but that's how the Charlotte bank's noted Customer Analytics Research and Targeting unit (CART) operates. Forget names, birthdays and account numbers. Inside the analytic alchemy of Wachovia's think tank, people are quotients, equations and sums that relate to living, breathing P&Ls. Their spirits-past, present and future-reside in economic-modeling programs that allow Wachovia, in the end, to bring a personal touch to its customers.
Welcome to the world of business intelligence, where institutions are building a correlation between corporate strategy and consumers' life changes, household details and financial choices. "Things have changed," marvels Wachovia's Dan Thorpe, svp and statistics/modeling director of CART. "It's gone from the pretty simplistic approach of advertising, and getting somebody in the door at all costs, to understanding the value of the customer and the insights that bring them there."
Wachovia is working hard to change with the times. With the help of breakout analytics tactics, the $518 billion-asset bank has earned the top spot among banks in the American Customer Satisfaction Index at the University of Michigan for three years running. It affirms nearly six years of planning and executing strategies under CEO Ken Thompson to focus the bank on an organic, customer-focused growth strategy. This happened as it rounded out its footprint, buying SouthTrust and Golden West Financial in the years since the transformational Wachovia-First Union merger.
Out of strategy sessions held in 2005 with McKinsey & Co., Wachovia launched CART with the intent of looking at customers in a different light. That led to the creation of a new customer definition for analytics purposes. Instead of viewing activity from an individual level, customers are now to be examined as segments of households, where interrelated activity hidden from the silos is unearthed through BI. Not just the nuclear family, but extended and non-related groupings like employee clusters emerge, too.
As far as Wachovia has come, the bank feels it still has a mountain to climb. Later this year, Wachovia will be going "BI-onic," making even wider use of its business analytics to support the creation of an innovation center within the bank. The institution has revamped a marketing unit to house this center of excellence and function as a unit now devoted as much to innovation and idea incubation as to slogan generation and collateral. Wachovia's newly created marketing "super division"-encompassing CART, corporate marketing, e-commerce, customer-excellence units, as well as the forthcoming innovation center-will be partnering with all lines of business to stage incremental product and service enhancements.
Teams within the realigned division are still being formed, but it will be under the direction of Wachovia evp Ranjana Clark, who moved from her role as evp of treasury services to become head of marketing in April. The division's rollout is anticipated by summer's end. Thorpe says it was less a light bulb going on than it was a simple realization that traditional CRM-and all marketing associated with that-would no longer suffice. "What we decided we needed to do was invest more in [analytics]," he says.
Despite Wachovia's initiatives, the nirvana of real business intelligence remains elusive. "When people talk business intelligence," says Gartner research vp John Van Decker, "they can be talking about anything-end-to-end planning, operational reporting, financial reporting, analytics-or they could be talking about using core business-intelligence reporting platforms. You're also talking about a lot of real-time business-intelligence paradigms such as business-activity monitoring, mining customer data and understanding at any given moment how you need to move funds back and forth."
Not surprisingly, Gartner concluded from a survey released in April, most businesses are "fairly early" in the development cycle for business intelligence and performance-management capabilities. In a survey of 350 users, Gartner found only seven percent whose organizations were at the high "strategic" level of business intelligence, in which overall business strategy is driving the use of BI and organizational planners are fully enveloped in it. But even those firms fell short of fully integrating BI into both the architecture and application-development process, and having full "trust" in all the data pulled in from various silos. Gartner found 53 percent of companies were still mired in spreadsheet "anarchy," insufficient executive involvement in business-process BI, and inconsistent, "stove-piped" data.
But that's not slowing down the momentum in banking. For everything from capital risk-management tasks to branch optimization, deeper business intelligence platforms are coming around the bend for financial services. Banks will spend well over $800 million this year, up from $798 million in 2006, on BI and analytics solutions, according to IDC/Financial Insights. The budget growth for the tools will grow at a 10 percent CAGR through 2011 to $1.17 billion, a rate Financial Insights notes will exceed overall IT investments. A recent Financial Insights survey found that 34 percent of institutions plan to increase BI/analytics buys by more than 10 percent.
In 2007, business intelligence initiatives will include building predictive analytics for fraud detection and judging future risk or opportunity with customers. It also means using core analytics for compliance, including embedding enterprise business-rules management, according to Financial Insights. More than two-thirds of banks will continue to invest in performance management to replace outdated financial-management tools that can't push profitability analysis across the enterprise, according to the Framingham, MA-based research and consulting firm. That spending is also concentrated at retail banks, according to Julio Gomez, global head of research for Financial Insights. "The Street is not as far along as banks in the use of BI at all," he says, due mostly to a culture focused on segmented product groups and on individual producers in brokerages and investment banks.
The growing attraction to BI is not something that's escaped the attention of technology players. To vie against pure-play business-intelligence vendors like Cognos, SAS Institute and Business Objects, companies in the ERP, CRM and performance-management space like Oracle, HP and SAP are adding BI features to their platforms. Oracle's $3.3 billion buyout of budgeting/planning BI rival Hyperion-on top of the 2006 purchase of Siebel Systems for $5.85 billion, which forms the basis of Oracle's BI suite-was the highlight of a major consolidation wave that has rolled through the market over the past year. SAP's acquisition of privately- held OutlookSoft for an undisclosed amount in May provided similar upgrades in further integrating its business-process automation toolset with intelligence features.
Microsoft added business-logic and visualization technologies to its BI offerings, including Sharepoint, with the 2006 purchase of ProClarity Corp. First Data's acquisition this year of Intelligent Results gives it a vehicle to market an analytics platform that could tap vast data resources to complement bank repositories. According to Forrester Research other major moves into the BI space include the spinoff of NCR's data-warehousing unit, Teradata, into a free-standing company, and HP's rollout of new data-warehouse tools and a business-intelligence platform.
Many pure-play BI vendors like Cognos and Business Objects have beefed up their performance-management planning, budgeting and consolidation capabilities to match the ERP and CPM players that have launched intelligence pieces. Business Objects spent $300 million to snap up performance-management provider Cartesis and further build its financial-consolidation and reporting features. Cognos bought operational BI vendor Celequest for an undisclosed sum to expand outside its strategic performance-management capabilities. The consolidation activity feeds rumors that BO or Cognos are acquisition targets, possibly by IBM.
These BI-focused deals provide a wider selection of single-source options for C-level executives. Demand for enterprise and componentized BI, however, is rooted in mid-level managers who are fed up with creating reports, requests for proposals and other data-intensive tasks that force them to scavenge for data. Managers spend an average of two hours a day collecting statistics from siloed data warehouses, half of which ended up being of no value, the survey found. About 54 percent of respondents said other departments wouldn't share information, notes Omer Sohail, the global strategy head for Accenture's Information Management Services.
With partner analytics firm SAS Institute, Wachovia is using customer data to phase out instinctual decision-making in marketing and customer service in favor of the scientific method. CART, for example, assessed a corporate- ad budget split by building a new "marketing mix model" for media buys that uses both customer-activity data and U.S. macroeconomic indicators. This doesn't quite replicate the consumer-price index, but the numbers were churned to determine the variable effectiveness of various ad buys on broadcast television, cable, radio and online resources on consumers. And since the economy is the "No.1 driver" for people's spending experiences at financial institutions, Wachovia's Thorpe believes it must be a factor.
Wachovia and SAS also segmented data across households, DMAs, and customer and product areas; from this, CART's labs developed a graphic, pictorial program where everyone from the "yellow bees of corporate marketing" to the business-line decision-makers measure the impact of a past or proposed initiative. "It's about understanding the return on investment of the advertising dollar," Thorpe says.
Banks are now using analytics-based discoveries as a foundation to shift business strategy, according to bankers, BI technology vendors and consultants. Working with Accenture, for example, one top-10 bank absorbed the analysis of its end-users' problems with an internal search engine to boost not only information details, but also to improve the relevancy of searches. A credit-card issuer on Oracle's BI enterprise suite cleaned up $5 million in potential defaults over 11 months, says Oracle's Ashwin Gowal, vp of financial-services industry strategy. "The idea was to find what we know about them, their credit and payment history, what kinds of products and relationships they have, and compare [that] to the benchmarks we define," he says.
Union Bank of California, a $51.9 billion-asset San Francisco bank and an Oracle client, is expanding its retail BI platform into its wholesale business, which will provide relationship managers with a single book of business view on corporate clients. "Right now, they basically see revenue, expenses and total capital, but they can't necessarily drill down on capital and see which of my customers have a certain probability of default, and all the key drivers of those risk metrics," says UBOC svp Michael Barak. From a profitability view, UBOC managers and sales agents can count the revenue from the sum total perspective of net-interest margin, fee collections and expenses, Barak says.
At $486 billion-asset Wells Fargo, much of the buzz has been about using business intelligence to discover "trigger events" outside the customer-bank relationship, in what is emerging as customer-lifecycle management. Using an analytics tool from First Data's Intelligent Results for its call-center operations, Wells can flag accounts for marriages, divorces, job losses or pay raises, according to Intelligent Results' CMO Debbie DeGabrielle. Wells uses not only bank data, but also that from public and third-party sources. (c) 2007 U.S. Banker and SourceMedia, Inc. All Rights Reserved. http://www.us-banker.com http://www.sourcemedia.com
