The Predictive Advantage:

Leveraging advanced analytics to drive better outcomes & maximise ROI

Jason Burke
Adelaide – Wednesday, 8 August 2012
Building a smarter planet

Agenda

• What is Predictive Analytics?

• Three pillars of IBM SPSS Predictive Analytics
• Predictive Operational Analytics - why is it important?
• Analytics in action
• Success Stories

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Building a smarter planet

Our world is becoming smarter

Instrumented

Interconnected

Intelligent

enabling organisations to make faster,

better-informed decisions
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Building a smarter planet
With this change comes an
explosion in information …
Volume of Digital Data
Variety of Information
Velocity of Decision Making
… yet organisations are
operating with blind spots
Lack of Insight
1 in 3 managers frequently make
critical decisions without the
information they need
Inefficient Access
1 in 2 don’t have access to the
information across their organisation
needed to do their jobs
Inability to Predict
3 in 4 business leaders say more
predictive information would drive better
decisions
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Source: IBM Institute for Business Value
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New challenges have placed a renewed urgency

New Approach
Traditional Approach
Predict and act
Velocity Sense and respond
Lack of
Insight Real-time, fact-driven
Inefficient Instinct and intuition
Access
Volume
Skilled analytics experts Everyone

Variety
Back office Point of impact
Inability
to Predict Automated
Optimised

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The business analytics continuum

What is
Business
happening?
Intelligence

Why?

What will
happen
next?

What
should I do Predictive
about it? Analytics

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Taking predictive analytics to the next level

Data Mining: predict the behaviour of the next case with a model

A Universe of Data A Predictive Model

• Known Attributes:
• 4 children
• Lives in Melbourne
• 39 years old
• Works for global (software) company
• High cell phone usage
• Amateur athlete – running events

• Predicted Attributes and behaviour

• Frequent traveler
• Buys high bandwidth internet
• Prefers to purchase on-line
• Thinking about retirement
• Likes technical gadgets and athletic gear
• Training for next big race
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Building a smarter planet

IBM SPSS Predictive Analytics

Optimised Decisions Made Possible By Predictive, Real-time Decisions At the Point of Impact

Predictive Predictive Predictive

Customer Analytics Operational Analytics Threat & Fraud Analytics
Acquire Manage Monitor
Grow Maintain Detect
Retain Maximise Control

Decision
Data Collection CCI Statistics Modeler Management

Collaboration and Deployment Services

IBM Research
etc…

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Predictive Analytics delivers value across the

organisation: The Predictive Enterprise

Predictive
Customer Analytics
Maximise the value of customer relationships

Predictive
Operations Management
Improve and optimise operations and processes
Predictive
Threat & Fraud Management
Mitigate losses from risk, fraud and abuse

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Building a smarter planet
Enabling the Predictive Analytics Process

Transactions Predictive Modeling Prediction

Demographics (Structured & Unstructured Data) Rules
Interactions Social Network Analysis Optimisation
Opinions Entity Analysis Process
Statistical Analysis

CCI
Decision
Statistics Modeler Management

Data Collection
Collaboration and Deployment Services

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Capture

Predict “Interesting”

Impact!
Act

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Acting On Analysis

 Integrate with the operational systems that support key

processes
 Combine analytical results with business knowledge
– Rules, Policies, Exclusions/Inclusions, Constraints…

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Building a smarter planet

Three Predictive Pillars support the smarter planet

Predictive Predictive Predictive

Customer Operational Threat & Fraud
Analytics Analytics Analytics
Acquire Manage Monitor
Grow Maintain Detect
Retain Maximize Control

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Supply Chain Challenges

Supply chain leaders wrestle with five major challenges
Percentage who report this challenge impacts their supply chains to a significant or very significant extent.

Source: IBM Global Chief Supply Chain Officer Study

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Volatile times demand pervasive visibility & flexibility

People Capital

15 Process

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Operational excellence requires agility

Development
Agile
Procurement

Distribution

Support

Long term planning

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Operational excellence is everyone’s business

Product Lifecycle
Forecasting Management
Development

Procurement
Asset
Management

Distribution
Support
Inventory
Service Management Management

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End-to-End Predictive Analytics for Operational Excellence

Product Lifecycle Management

Forecasting Quality Control
Customer Research R&D Optimization
Working Capital Forecasting Commodity Planning Development
Cost Forecasting
Process Control
Procurement Employee Performance

Debt Management Finished Goods Planning Asset Management

Equipment Maintenance
Condition Monitoring
Warranty Analysis Energy Planning
Capacity Planning

Returns Management Inventory Planning

Distribution Inventory Allocation
Support Claims Processing
Call Center Optimization Intelligent Logistics
Seasonal Decomposition
Service Management Assortment Planning Inventory Management

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Building a smarter planet

Predictive Operational Analytics can help you:

Operational
 Manage your operations Analytics
 Maintain your infrastructure

 Maximize capital efficiency

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Evolutionary solutions for operational excellence

Insight for
Decision Makers
Real time
Predicting potential condition
failures monitoring

Root cause analysis

The Next Best Action

Analyze quality
information

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Solutions for Product Line Maintenance and

Warranty / Quality Analysis

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Anomaly Detection – how is it done?

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Anomaly Detection – how is it done?

Identify anomalous production

data and show the specific data
that is out of tolerance

Peer group profile

compared to
anomalous runs

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How Likely Is a Failure at Time X?

 Leverage all available data

– Sensor logs, maintenance logs, condition
monitoring data, etc.

 Build predictive models

– Estimate the failure likelihood at any point in the
future for every piece of equipment
– Neural Nets, Logistic Regression, Decision
Trees, SVM, SLRM, etc.

 Apply models to new data

– Generate updated failure likelihood values

© 2012 IBM Corporation

Building a smarter planet

How Likely Is a Failure at Time X?

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Root Cause Analysis of Failures

Which parts are failing? What is driving the failure?

Operating conditions,
service duration and
manufacturing quality
all play a role in the
failure likelihood

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Root Cause Analysis of Failures

Which parts are failing? What is driving the failure?

4 specific
combinations of
factors that are driving
failure are identified
automatically

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Building a smarter planet

What is the cost of maintenance & failures?

• What will repairs cost me next year? Schedule costs are
greatly reduced, less
service interruption and
increased customer
satisfaction

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Building a smarter planet

Data in motion
Network Management
Business Intelligence
Context

Real-time Services
Weather
Predictive Analytics Data
GPS Location, Sensors, etc. Scoring Engine summaries

Online Monitoring Real-time dashboards

Data Source

Data
Data warehouse
Support Mediation Transformation Predictive Analytics
data (Build/Test)
Stream Processing
---------- Cloud ----------
29 © 2012 IBM Corporation
Building a smarter planet
 UK Utility
– Pro-Active detection rate increased by 90-100%
– Sustained 41% reduction in previously unpredictable
major incidents
– Reduced liability damage by 30.23% in 2 years
 US Navy
– Provides the ability to predict necessary maintenance
over a time horizon in order to schedule and group
maintenance more effectively, avoiding downtime at sea.
– Predict which future deployment variables lead to a
greater amount or frequency of failures and take pre-
emptive action
– Identify the characteristics that tend to increase
ownership cost and downtime over the life of a system
– Root-cause analysis on observations logged by the
maintenance team
30
 Reduce maintenance cost.
 Reduction in operational expenses.
 Avoid/reduce expensive emergency
repairs by addressing expected
weak spots during planned
maintenance.
 Better alignment of maintenance
programs/spend with failure risk.
 More predictable workload.
 Better arrangement with any external
contractors.
 Reduce fines (pollution charges,
non-compliance with regulatory
requirements).
 Reduce MRO Inventory Costs.
 Understand what remedial work has
the biggest effect on risk (biggest
bang for your maintenance buck).
 Reduce environmental impact (more
efficient transport of goods and
people, reduce pollution).
 Increase auditability/accountability.
 Increase product quality.
© 2012 IBM Corporation
Building a smarter planet

.... and where else have we done this before?

© 2012 IBM Corporation

 Building a smarter planet

Executive Summary
 Core Concept
– “The assets are talking to us, we are not listening” -- Mujib Lodhi – CIO, WASA
– Analytics will help us “listen to our assets”.
– Analytics will allow us to gain insights, foresights and prescribe actions in support of
Extending asset lifetime
Improving asset reliability
Reducing down time through predictive maintenance
Optimise MRO inventory

© 2012 IBM Corporation

Building a smarter planet

What can you do next?

 Talk to us or our Partners

 Learn more – how.... ?

© 2012 IBM Corporation

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Building a smarter planet

IBM Performance 2012:

Smarter Analytics. Smarter Outcomes.
Adelaide: Wednesday 19th September, National Wine Centre
At IBM Performance 2012 you’ll see how powerful analytic solutions from
IBM can help you drive better, stronger, more sustainable performance. These
events feature demos of the latest products, useful how-to sessions with
product experts, insightful keynote presentations by industry thought leaders,
and much more.

•Keynote Sessions: 8:30am – 10:00am View more details or register

•Breakouts Session: 10:00am – 12:30pm
•3 Streams including: now at ibm.com/performance/au
•Business Intelligence
•Performance & Risk Management Admission is free, but space is limited.
•Customer & Predictive Analytics

© 2012 IBM Corporation