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AN RIS
EXECUTIVE
WHITE
PAPER
TRANSLATING BUSINESS
INTELLIGENCE INSIGHT
INTO REAL-WORLD VALUE
BROUGHT TO YOU BY
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TRANSLATING BUSINESS INTELLIGENCE INSIGHT INTO REAL-WORLD VALUE
R
etailers have sought
business intelligence
since the idea of “retailing” began. No doubt a
traveling merchant or
the owner of a frontier
general store benefited when they knew
who their customers were, what kinds of
goods they needed and wanted, what
prices they were willing to pay, and what
additional services made them an attractive choice over their competitors.
Retailing has become a vastly larger
and more sophisticated business since
then, but the basic questions business
intelligence needs to answer in order to
provide real-world value remain. What
has changed are retailers’ ability to gather meaningful data, and the systems
retailers can use to meet customers’
needs. Both have multiplied and become
more complex, providing immense
opportunities but also creating challenges that retailers need to tackle in
order to remain successful.
DEALING WITH THE
DATA DELUGE
The overarching business intelligence
challenge today is not a lack of data—far
from it. The majority of retailers have
access to literally mountains of data,
generated from internal sources such as
POS transactions and loyalty programs,
as well as external sources including
third-party companies and the retailer’s
suppliers. In addition, the growth of
multi-channel retailing, with its promise
of ever-more-specific customer information gathered through online interactions, has added a new “mountain range”
of data to be dealt with.
The tasks of gathering, analyzing
and disseminating business intelligence
(BI) can bring execution challenges for
any retailer. The sheer volume of available data can strain the resources of all
but the largest organizations. In addition, much of the data that’s gathered
by retailers remains locked in depart-
2
mental or system “silos.” The geographically dispersed nature of global retailing makes both gathering and disseminating BI more challenging. And while
there are numerous BI solutions available, the technology is often too specific to one functional area to be effective
enterprise-wide, or lacks industry-specific functionality that would make
it useful to a retail business.
To meet these challenges and to tap
the riches that BI can provide, many
retailers are turning to companies such
as Cognizant, which combines a depth of
retail industry knowledge with sophisticated data warehousing and business
intelligence technology thought leadership to get the most out of any BI solu-
Cognizant Facilitates Fast
BI Solution for Grocer
Business moves quickly in the grocery industry, but IT projects rarely
move as quickly as a BI project for category management that Cognizant
coordinated for Andronico’s Market, a small West Coast grocery chain.
Within 30 days, Cognizant gathered the Key Performance Indicators
(KPIs) related to category management from a range of different data
sources, and delivered them into a comprehensive solution.
Andronico’s outsourced its business analysis and solution definition
functions to Cognizant while using a BI solution that processes
transaction-level data into meaningful information. The system
incorporates four key elements:
• Data warehouse that consolidates data from different systems
• Data model that is simple to construct and maintain and preserves
source data elements
• Data engine that rapidly processes data
• Data delivery tools that distribute results to any authorized user
through an end-user friendly web browser.
Within 30 days of the project launch, the grocer’s category managers
began aligning store activities with high-level business strategies, using
uniform KPIs to review consolidated metrics such as sales, profitability,
top/bottom sellers, promotion/markdown effectiveness, weekly
comparisons and customized reports. The integrated system fully
supports tactical and strategic decision-making, lightening the burden on
IT managers for information requests and allowing managers to focus
on the business.
The grocery chain expects the BI solution will produce improvements
in both revenue and marketing dollars, as well as labor savings for each
category manager. The reports provide decision-making insight into key
areas including:
• New item performance
• Pricing/profitability
• Promotion and sales performance
“When I joined Andronico’s, I quickly realized we had lots of data and
very little actionable information,” says Lee Robertson, until recently
the grocery chain’s CIO. “Cognizant delivered a cost effective mix of
retail talent, best practices and incredible analytical/reporting tools.
We achieved the impossible: category management in 30 days!”
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“Most of the retailers that successfully transformed
their legacy reporting systems with more sophisticated
BI technology in the past decade would say that
the journey was ultimately worth it, but often hampered
by numerous implementation challenges.”
John Hagerty, AMR Research
tion. Cognizant’s onsite/offshore
approach offers the bandwidth and
speed to provide BI in a timely fashion
and at higher quality, but at significantly lower cost. In addition,
Cognizant’s specific BI service offerings provide retailers with powerful
tools for improving their business
intelligence profile.
BI: THE NEW RETAIL
IMPERATIVE
Retailers realize how crucial BI is to
them—and most have a good idea of
the difficulties involved in gathering
and disseminating it. “Most of the
retailers that successfully transformed
their legacy reporting systems with
more sophisticated BI technology in
the past decade would say that the
journey was ultimately worth it, but
often hampered by numerous implementation challenges,” writes John
Hagerty of AMR Research, in the
March 2006 article “Implementing a
New Retail BI and EPM Platform
Strategy: Are You Ready?”
Hagerty adds, “Retailers were
forced to build from scratch—often
at a great expense—such essentials
as a workable data model, data loading routines, and even the most basic
report templates from within very
complicated and expensive BI development environments. This often led
to budget overruns and delayed
deployments along with merchant
stakeholder skepticism.”
Despite such “battle scars,” retailer
interest in BI technology has been
accelerating. Hagerty writes, “Our
Retail IT Budget Study, 2004–2005,
completed in partnership with the
National Retail Federation, showed
that 52% of retailers were looking to
either add on to or replace their BI systems as part of their retail infrastructure strategies. This is incremental to
the significant interest retailers had in
implementing more advanced demand
planning applications.” He adds,
“AMR Research’s recently completed
quantitative assessment of broader,
cross-industry BI and EPM spending
confirms this trend, noting a
2005–2006 growth rate of 26% in
spending on dashboard and scorecarding systems alone.”
The RIS News/Gartner 2006
Retail Technology Study also identifies BI as a top priority for retail
executives. “Customer intelligence
analysis” was the third-highest
Customer-Facing Action Item, chosen by 39% of survey respondents. In
addition, the survey indicated strong
support (both in current technology
and future investment plans) for
major customer-centric BI capabilities: centralizing customer data/intelligence; segmenting customers by
needs, behaviors/economic value;
and tracking customer acquisition,
retention and extension.
BI’S ROLE IN REALWORLD RETAILING
Leading retail industry experts and
working CIOs highlight some of the
reasons why BI is such a hot topic
today. Retailers are “dealing with a
fickle, ever-changing public,” says
Robert Fort, Director of IT for Virgin
Entertainment Group, Los Angeles.
Unfortunately, rapid changes in consumer tastes and preferences are often
met with a “same-old” approach from
retailers. “It’s human nature to work
our way into a set way of thinking, and
not want to change,” says Fort.
Certain types of business intelligence can help retail executives be
more flexible, he believes. “It’s beneficial to have visibility to the numbers in
a fashion that lets us step outside of
that ‘rut’,” says Fort. “When we implemented our data warehouse at Virgin,
we didn’t want to just re-create the
reports we already had been using. The
move toward a real-time environment
meant that we could provide tools that
let someone navigate through the data
and actually change their actions.
When people can see trends and up-todate information during the day, they
have exposure to information sooner
and can react to it.”
Many retailers focus on merchan-
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TRANSLATING BUSINESS INTELLIGENCE INSIGHT INTO REAL-WORLD VALUE
dise planning and the supply chain as
areas that will provide them with the
fastest ROI, according to Dale D.
Achabal, Ph.D., Director of the Retail
Management Institute at Santa Clara
University, Santa Clara, CA. “These
are a logical place to start with BI,”
says Achabal.
“The biggest controllable asset a
retailer has is inventory, so a major area
we focused on at the Retail Management
Institute was clearance markdown optimization,” Achabal explains. “No matter
how good your plan is, markdowns will
never go away, and they are the result of
forecasting or planning errors—either
you bought more than you could sell,
resulting in markdowns, or you didn’t
buy enough, resulting in stock-outs and
lowered customer service. So forecasting
becomes a critical element, especially
for promotion-oriented companies that
get huge lifts when they run advertisements—they need to have a pretty good
handle on what they’ll need to support a
promotion, or they will need weeks, or
months, to burn off that inventory.”
Retailers’ desire to gain the benefits
of BI are being matched by advances in
IT, according to Gary Hawkins, CEO of
Hawkins Strategic and a retailer himself,
as CEO of Green Hills, a Syracuse, NY
supermarket. “It’s become more and
more cost-effective for retailers to not
only maintain massive amounts of data,
but technology is also enabling merchants to more quickly analyze that
data,” says Hawkins. “There are more
powerful tools to understand the data—
and to present it to us in an understandable form.
“At the same time, technologies are
making all this information more actionable,” Hawkins adds. “From a product
perspective, we can more easily get our
hands around a product’s profitability or
its margin. We can understand merchandising at a store level, so individual
stores can be merchandised to the neighborhood they operate in. There are also
tools to optimize pricing within a catego-
4
ry. On the shopper side, there’s also more
ability to both gather data and understand it. It’s also possible to communicate more cost-effectively with individual consumers, using e-mail, the
Internet, kiosks and cell phones. I’m seeing more and more retailers working to
optimize the economics on both the
product and consumer sides.”
MAKING BI
TECHNOLOGY MORE
EFFECTIVE
Retailers anxious to reap the benefits of
business intelligence are finding new
ways to surmount the execution hurdles
that have limited BI’s utility in the past.
“The avenues for data are increasing in
retail, for example in the number of
touchpoints retailers have in looking at a
customer,” says Ron Glickman, Vice
President for Retail and Hospitality at
Cognizant. “There’s a need to harness
the power of that customer data, to do
focused reporting, campaign management, and to drive focused sales and
marketing activities. Retailers are also
looking to establish some level of intelli-
Boosting Your Business Intelligence I.Q.
Retail CIOs have been on the front lines meeting the challenges of business
intelligence (BI), and their insights provide some helpful guidelines for
making smarter use of business intelligence.
• “If you can measure it, you can improve it,” says Chuck Adams, CIO
and VP of Distribution at Birmingham, AL-based Hibbett Sporting Goods.
“We keep scorecards on just about everything in the supply chain, from
the time it takes vendors to get products into our distribution center,
as well as through the distribution center and into the stores; how
accurate we are in doing that; and the cost to make that happen,” says
Adams. “We measure everything—dollars, units and cartons.” Hibbett’s
commitment to measurements that are tied to its most important
business drivers is a BI basic. In addition, Hibbett ensures its measurements will be translated into actions: “We top off [these activities] with
bonus plans that reward people for doing things right,” says Adams.
• “Look at historical data, but be predictive about the future,” says
Robert Fort, Director of IT at Los Angeles-based Virgin Entertainment
Group. “BI allows people to place day-to-day activities in the context
of trends,” he notes. “Before we implemented our data warehouse, our
stores got weekly reports, so the data that people had access to
referred to two to three weeks before. Now, with our newer capabilities,
people can see data up to the day, in some cases the hour, with comparative data reaching two, three or four years back. It’s also important to
keep planning for ad hoc queries and capabilities, so that when business
questions arise, people can jump to tools and ask questions where they
haven’t before. That’s where you really start to drive value. For example,
if someone in a store thinks they don’t have enough inventory in a
certain area, they can run a quick report to determine whether they do
or not, based on historical data.”
• Don't wait until you have ALL possible detailed data to start
analysis: Some retailers “think they have to know what the exact
customer bought to know about customer behavior,” says Ted Jackson,
VP of IT and CIO at Sport Chalet, La Cañada, CA. Jackson believes
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gence around who their best suppliers
are, measuring elements such as the
shortest cycle times in procuring goods.
Given the size of those kinds of initiatives, the ability to use BI in ways where
retailers can build volumes of scale
and cost efficiencies into the process
becomes more important.”
Veera
Narayanaswamy,
Vice
President and Global Practice Head for
Cognizant’s Data Warehousing and
Business Intelligence Practice, explains
that retailers are seeking cost-capability
efficiencies around their BI platforms, as
“It’s become more and more
cost-effective for retailers to not only
maintain massive amounts of data, but
technology is also enabling merchants
to more quickly analyze that data.”
Gary Hawkins, CEO, Green Hills
aggregate customer and market basket analysis can, in some cases, be
as powerful as customer-specific information gathered through a loyalty
program. For example, “If people who rent skis and boots also buy
sunscreen and new sunglasses in 60% of our stores, do I not have
displays in the right places in the 40% of stores where they don’t buy
these products?” asks Jackson. Such analysis can provide valuable
affinity marketing and merchandising ideas, he adds, and also help a
retailer do more logical “clustering” of its stores. “By using business
analytics and BI, a retailer might find that in a particular product
category, five of his stores act the same, while in other categories these
five act differently. By grouping clusters of products in these ‘like’
stores, a retailer can create logical groups for forecasting and
allocation, as opposed to just organizing stores geographically or as
A-, B- and C-level stores,” he notes.
• Let business requirements dictate data storage parameters:
“Data for the sake of data is not better,” notes Dale D. Achabal, Ph.D.,
Director of the Retail Management Institute at Santa Clara University,
Santa Clara, CA. “Many companies keep data at too fine a level of
granularity for too short a period of time. Early BI efforts had companies
keeping transaction-level data, but the databases would get so big, so
fast, that the retailers would only keep the data for a few months or
a year. But if you’re trying to do forecasting or a seasonal plan, and if
you’re going to try to separate out an advertising or promotion effect or
seasonality, you need to have at least two to three years’ worth of data
for comparison,” says Achabal. “If you’re not making daily decisions,
you don’t need daily data.”
• Tie BI efforts to your key business drivers: “It’s very easy to become
overwhelmed with information and data,” says Gary Hawkins, CEO of
Hawkins Strategic and himself a retailer—he is CEO of the Syracuse,
NY-based Green Hills supermarket. “I visit merchants with stacks of
reports on their desks that are all good and potentially valuable
information, but there’s so much of it coming in that there’s no way they
can humanly process it. Retailers need to really focus on the key metrics they need to drive to, and also understand operationally what
issues most dramatically impact on those metrics.”
well as the models and technologies they
adopt in building their BI capabilities.
“We are definitely witnessing a strong
‘thumbs-up’ from our customers toward
adopting global service models for
business intelligence,” says Veera.
“This approach empowers retailers to get
BI across to a dramatically increasing
user landscape faster, cheaper and
better than before. It helps them
significantly enhance their Information
Leverageability Index.”
Some of these efficiencies can be
achieved via data centralization, he adds.
“One of the challenges of centralization
has been the ability to render the information at the same speed as smaller,
more ‘localized’ BI systems,” he notes.
“But with the advent of technology that
allows for large-scale data warehousing,
the use of active data warehousing and
the adoption of EBIS (Enterprise
Business Intelligence Suites), retailers
are able to scale those volumes and still
not compromise on speed.”
Active data warehousing generally
involves implementing master data
management templates, an area where
Cognizant has significant experience.
For example, Cognizant has worked
with companies to create a single view
of each customer, even though information on the customers came from
multiple sources, both external and
internal, and across multiple channels.
Cognizant has provided applications to
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BI’s Next Advance: Predictive Analytics
Much of business intelligence is, by necessity, focused on the past: what
happened, when it occurred and who was involved. Much can be learned
from this type of BI—it’s an essential element of successful retailing. But
it’s also advantageous for retailers to look toward the future by employing
predictive analytics, which can provide the insights that enable smarter
decision making.
Cognizant’s onsite/offshore model for BI allows retailers to gain the
benefits of predictive analytics, without requiring large investments in
manpower and solutions. “Predictive analytics, which combines data
mining and sophisticated statistical modeling techniques, increases a
retailer’s ability to forecast their customers’ behaviors and to plan
accordingly,” says Sandilya Gopalan, Cognizant’s Director for
Consulting in the Retail and Manufacturing Vertical.
He notes that some of the most fruitful areas for predictive
analytics include market basket analysis. When combined with pricing
analysis and promotion planning, it can help retailers answer
merchandising questions such as, Which products should I stock
together? What is likely to go out of stock? What is the optimum
price? And what should be promoted, at what markdown?
Another powerful area for study is customer analysis. Predictive
analytics tools can answer such key questions as, What products
should I cross-sell and upsell, and to whom? Who are my profitable
customers? What is driving customer loyalty? And how do I acquire
new customers?
Gaining this type of predictive BI requires a combination of
sophisticated analytical tools and people with the expertise to use
them, including statisticians, programmers and analysts who have both
a keen understanding of the retail industry as a whole and the specific
retailer’s business issues. “All of these people and tools are typically
needed for short, concentrated bursts of time,” says Gopalan. “That’s
why it’s difficult for many retailers to scale their predictive analytics
projects—and why it really lends itself to offshoring.”
Cognizant’s onsite/offshore model provides the combination of
brainpower, manpower and technological savvy to give retailers the
multiple benefits of predictive analytics, without requiring the capital
investment that would make such benefits cost-prohibitive.
“Retailers need to keep rediscovering and understanding the
dynamic nature of customer behavior to create a sustainable
competitive advantage,” says Gopalan. “Using predictive analytics,
retail organizations can derive actionable and powerful insights that
create business value.”
6
de-duplicate customer data, ensuring
that a retailer recognizes each customer
as unique no matter which channel she
shops in. Such applications are basic to
establishing a lifetime value for each
customer, a cornerstone of effective
customer marketing.
GLOBAL SOLUTIONS
FOR GLOBAL
BUSINESSES
Another key BI hurdle has been disseminating information rapidly enough to
affect the course of business. This has
always been a challenge in the geographically dispersed retail business, and it has
become even more difficult as more
retailers go global. The growth of the
Internet, however, has helped link different parts of the enterprise. “With the
advent of the web, retailers can use ‘zerofootprint’ reporting, allowing users to
simply access a portal where information
will be made available,” says Glickman.
Retailers can more effectively leverage such linkages through offerings
such as Cognizant’s Global Report
Shop (GRS). GRS makes use of an
onsite/offshore model to reduce the
costs of rendering BI, while increasing
retailers’ ability to scale across multiple business organizations and roll out
reports more quickly, according to
Veera. “GRS is one of our flagship
offerings (out of a list of 35 varied
services) in the BI space. A key feature
of GRS is the process of enabling
onsite/offshore-based ongoing report
development. GRS focuses on building
the business BI bandwidth while
retaining focus on cost efficiencies to
the tune of 60%, quality improvements
to the tune of 40% and reduced turnaround time to the tune of 75%. The
goal of GRS is to provide a complete
BI ‘buffet’ to the business community.”
With GRS, retailers work with “a set
of key people who understand the retail
business and understand each retailer’s
reporting environment,” he explains.
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“The move toward a real-time environment meant
that we could provide tools that let someone navigate
through the data and actually change their actions.”
Robert Fort, Director of IT, Virgin Entertainment Group
“The Cognizant Report Jockey, who
plays the role of the onsite GRS coordinator, is able to quickly get requirements
from the retailer, and to quickly pass
back the reports that are required.”
The Cognizant report writers are
based in Cognizant’s development centers in India. “In a connected environment, it doesn’t matter where people are
physically. As long as someone can pass
along the requirements and specifications that are needed, the calculations
can be done in an outside location that is
securitized,” Veera says.
“Global Report Shop gives customers
the benefit of large-scale offshoring,”
says Glickman. “It doesn’t make economic sense for a retailer, or any organization, to have their own IT people doing
reports. Rather than having the business
do everything itself, we can provide an
expanded bandwidth capability to render
retail analytics. This model provides cost
efficiencies in the 50% to 60% range,
which frees up dollars that could be
spent on other activities. It also offers
speed—the onsite/offshore model gives
the retailer two people working over a
24-hour period, versus one internal person working an eight-hour shift.
“We combine the know-how of our
retail business analysts, BI technologists, and offshore data analysts and
statisticians to capture, organize and
analyze client data overnight so they
have actionable intelligence on their
desks in the morning,” he adds. “The
convergence of people, processes and
technology with a mature global
delivery model allows us to help our
customers build stronger businesses.”
TOOLS TO RATE
SUPPLIERS
In the crucial supply chain area,
Cognizant offers the Intellibuyer, a customizable application suite that allows
retailers to evaluate and rate their vendors around a number of different
parameters, and in the process helps
them build negotiation leverage with
their vendors. These parameters can
include such elements as:
• On-time delivery
• Quality of delivered product
• Amount of goods unsold due to
quality issues, separated into goods
returned to the supplier or those
unsold by an expiry date
• Negotiated price points
• Promotional price points
“The Intellibuyer is a key aspect of
the domain based solution set that we
provide to our retail customers,” Veera
adds. “With the retail industry operating
on wafer-thin margins, the focus of
improving the bottom line through
reducing buy-side costs has assumed
tremendous importance. The Intellibuyer
focuses on delivering the negotiation
capability to the retailer in the order of
5%, which when viewed over the volume
scale can be significant. From a technology standpoint, Intellibuyer is built on a
strong set of best-of-breed technologies,
and given its open system approach, is
fairly extensible as well.”
“Retailers are looking for ways to
scorecard their vendors, and the
Intellibuyer gives them this capability,”
says Glickman. “This is important in
areas such as inventory management as
well as sales analytics—knowing what is
sold where, what promotion helped sell
it, and the price point. Retailers have a
need to procure and consolidate such
data quickly, in ways that give them a
holistic view across the enterprise—
whether they are looking at all their
stores or one store.”
Applications such as Global
Report Shop and the Intellibuyer
reflect Cognizant’s domain expertise
in retail, developed through its longterm work with a range of retail
clients. “We combine that with a deep
knowledge of the technologies
involved in business intelligence,”
notes Glickman. “We can call on the
expertise of the 2,200 people we have
in the BI Practice, to help our retail
customers understand how to use their
packaged BI applications better.
“Retailers want the functionality of
BI, to understand their customers and
suppliers better,” Glickman adds. “We
help with that but also provide what
retailers need, which is BI rendered
faster, so that people on the ground can
execute the retailer’s strategies better.
We’re focused on providing that kind of
capability to retailers.”
Retailers have a strong interest in
making their business intelligence
efforts as efficient as possible—with
good reason. “The potential of BI has
been proven in so many different
areas,” says the Retail Management
Institute’s Achabal. “It’s just a matter
of how much money retailers are
willing to leave on the table for what
period of time, because every day they
delay using BI, it’s costing them a lot
of money.” ■
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ABOUT COGNIZANT
Cognizant (NASDAQ: CTSH) is a leading provider of information technology,
consulting and business process outsourcing services. Cognizant’s more than
31,000 employees have a single-minded passion to collaborate with clients and
leverage information technology to make their businesses stronger. With global
delivery centers in Asia, Europe and North America, we combine a proven
onsite/offshore delivery model, infused with a distinct culture of customer
satisfaction. A member of the NASDAQ-100 Index, Cognizant is ranked among
the top information technology companies in BusinessWeek’s Hot Growth
Companies. Visit us online at www.cognizant.com.
START TODAY
For more information on how to drive your business results with Cognizant,
contact us at inquiry@cognizant.com or visit our website at: www.cognizant.com.
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Teaneck, NJ 07666
Toll free: 1-888-937-3277