QM901x – Predictive Analytics

Prof. U Dinesh Kumar

Module 1 – Clip 03

Week 3
GAME CHANGERS AND INNOVATORS

In this session, I am going to talk about Examples of companies and how they have used
analytics successfully.

The first company is Google. They developed a page ranking algorithm using Markov Chain.
There is an article titled "25 Billion Dollar Eigenvector", authored by Kurt Bryan and Tanya
Liese that discusses how Larry Page and Sergey Brin developed page ranking algorithm. At
that time there were many search engines such as altavista, infoseek etc. But Google was
much very effective in identifying the most relevant pages by ranking them using the Page
ranking algorithm.

The second example is Procter and Gamble. They use analytics as competitive strategy.
There is a Harvard case which talks about how Procter and Gamble is using analytics as their
competitive strategy. Procter and Gamble, sells large number of products. And, there's a
huge competition for each of the products sold by Procter and Gamble. Also they have to
compete with private labels or house brand that are much cheaper than the products sold
by P&G. P&G uses analytics as their competitive strategy.

The third example is from Target. I already discussed about this.

The next one is Capital One. In Capital One, they run large number of models every day.
And, one of the things they try to do is who is the most profitable customer among the list
of customers they have.

The next one is Hewlett Packard. They developed something called flight risk score to
identify which employee is likely to leave. So, if an employee is important for the
organization, they can intervene.

The last on is Obama's 2012 Presidential Campaign. They developed something called
persuasion modelling. In any kind of election, there'll be a lot of voters, they may not have
decide which way they are going to vote. So, the question here is "Whether those voters or
undecided voters can be persuaded to vote for a particular candidate?" So, that's what was
done by this particular team, which was developing persuasion modelling.

There are also large number of other interesting applications of analytics. One portal which
is called OkCupid, which is a online dating portal. They predicted, based on the online
messages, whether there will be a response from the opposite sex.

There is a German company called Polyphonic HMI. They developed a model called Hit
Songs Signs. Using that model, they can predict whether a song will be successful in the
market before they release that song in the market.

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 QM901x – Predictive Analytics
Prof. U Dinesh Kumar
Module 1 – Clip 03

Week 3
The third example is Netflix. And, Netflix developed a model to predict the ratings given by
customers after watching a movie. So, this algorithm had a root mean square error of 1%. In
fact, few years back Netflix announced a competition and asked anyone to beat their
algorithm by about 10%.

Amazon used large number of analytical tools. It was reported that 35% of sales come from
their product recommendation.
There is site called divorce360.com which predicts success probability of a marriage. So
basically, if you enter the profile, it'll tell you whether the marriage will be successful or
what is the probability that the marriage will be successful.

Several studies have reported the importance of analytics in literature. There was an article
which was published in MIT Sloan Management Review in 2010. In this article, they looked
at different companies across different sectors such as manufacturing, Pharma, Service etc
and they segregated them into high performing companies and low performing companies.
In this article, they claimed that there is a striking correlation between an organization's
analytics sophistication and its competitive performance. Basically, the high performing
companies were analytically sophisticated than low performing companies.

In 2002, Harvard Business review quoted that data scientist will be the sexiest job of 21st
century.

In 2016 an article published at the MIT Sloan Management Review claimed that 54% of
Fortune 1000 companies had chief data scientists a designation that did not exist even 10-
15 years back.

© All Rights Reserved, Indian Institute of Management Bangalore