CHAPTER FOUR COMPETING ON ANALYTICS WITH INTERNAL PROCESSES FINANCIAL, M&A, OPERATIONS, R&D, AND HUMAN RESOURCE APPLICATIONS Flashcards
1
Q
What are the two categories of analytical support for business processes?
A
Internal and external applications.
2
Q
What internal applications are primarily focused on in this chapter?
A
General management, finance and accounting, operations, R&D, and human resource management.
3
Q
What is the challenge in identifying internal applications of business analytics?
A
Finding applications that are clearly strategic and involve competitive advantage.
4
Q
What is activity-based costing (ABC)?
A
Allocating costs accurately to aspects of the business for optimization.
5
Q
What does Bayesian inference help predict?
A
Revenues and the degree of belief in a hypothesis before and after evidence has been observed.
6
Q
Define combinatorial optimization.
A
Efficient allocation of limited resources to yield the best solution when values must be integers.
7
Q
What is the purpose of constraint analysis?
A
To specify the set of feasible solutions using constraint satisfaction algorithms.
8
Q
What is experimental design used for?
A
To assess the effect of a program by comparing treatment and control groups.
9
Q
What is future-value analysis?
A
Decomposing market capitalization into current value and expectations of future growth.
10
Q
What are genetic algorithms?
A
Stochastic optimization models using principles of evolution and natural selection.
11
Q
What does Monte Carlo simulation assess?
A
The probability of certain outcomes or risks through mathematical modeling.
12
Q
What does multiple regression analysis determine?
A
The influence of independent variables on a single dependent variable.
13
Q
What is neural network analysis modeled after?
A
The structure and operation of the brain, focusing on training systems to discriminate inputs.
14
Q
What is the goal of simulation in research?
A
To model how different values generate results for optimal outputs.
15
Q
What is textual analysis used for?
A
Assessing performance or sentiment by analyzing frequency and relationships of terms.
16
Q
What does yield analysis help understand?
A
Yield volume and quality using basic statistics.
17
Q
Why has finance lagged in employing advanced analytics?
A
Finance groups often rely on descriptive analytics and have been slow to adopt predictive models.
18
Q
What is the role of CFOs in analytics?
A
CFOs advocate for the use of predictive and prescriptive analytics for decision making.
19
Q
What is external reporting primarily used for?
A
To report financial results to regulatory bodies and shareholders.
20
Q
What can new regulatory data requirements create?
A
Opportunities for improved performance through enhanced data aggregation.
21
Q
What is a challenge in financial forecasting in uncertain industries?
A
Extrapolations can yield poor predictions due to rapid changes.
22
Q
What technique did Hewlett-Packard use to improve revenue forecasts?
A
Bayesian inference.
23
Q
What is the focus of enterprise performance management?
A
Understanding which activities impact business performance and measuring progress.
24
Q
What has improved management reporting over the past decade?
A
Access to enterprise data through business intelligence applications.
25
What issue do many balanced scorecards face?
They often focus primarily on financial reporting without integrating nonfinancial metrics.
26
What is the explanatory power of financial measures according to studies?
Approximately 50 percent.
27
What do management professors David Larcker and Chris Ittner study?
They studied several companies that had adopted balanced scorecards.
28
What is a significant finding regarding nonfinancial resources?
Nonfinancial or intangible resources are growing in importance to company performance and external perceptions of value.
29
What is the explanatory power of financial measures on market value?
Approximately 50 percent.
30
In some industries, what percentage of value does EPS account for?
Less than 5 percent.
31
What advantage do management teams have when managing all sources of value?
A significant advantage over those who do not.
32
What are companies exploring to enhance shareholder value?
Infusing scorecards with data from Wall Street analysts and future-value analytics.
33
When is reporting and scorecards most likely to lead to competitive advantage?
When the business environment is changing dramatically.
34
What process changes did the insurance company focus on for transformation?
Producer relationships, profitable underwriting, and claims execution.
35
What did the balanced scorecard assess in the insurance company's transformation?
Objectives such as selecting profitable new markets, attracting the right customers, and driving pricing according to risk.
36
What was a key outcome of the insurance company's transformation?
It made substantial amounts of profit and was acquired for $3.5 billion.
37
What approach did University of Utah Healthcare use for cost measurement?
Activity-based costing approach.
38
What is the Value Driven Outcomes (VDO) project focused on?
Accurately measuring costs and integrating quality metrics.
39
What was the result of UUHC's cost management efforts?
Costs declined by 0.5 percent a year.
40
What did Microsoft develop to manage energy costs at its campus?
An analytical blanket to connect diverse systems.
41
What was the savings from detecting exhaust fans running continuously?
$66,000 of wasted energy.
42
What percentage of issues can be corrected in under a minute according to Microsoft?
Almost half.
43
What is a growing challenge for financial services firms?
Protecting against fraudulent claims or purchases.
44
What does the Coalition Against Insurance Fraud estimate as annual fraud costs?
$80 billion.
45
How do credit card companies like Visa detect fraud?
Using advanced analytics methods to recognize fraudulent purchases in real time.
46
What did Infinity Property & Casualty develop to score fraud probabilities?
A process to assign different scores on fraud probabilities.
47
What has increased the number of data breaches each year?
The proliferation of connected devices.
48
What has been traditionally used to address cyberattacks?
Threat signatures based on patterns of previous attacks.
49
What are organizations increasingly using to improve their cybersecurity?
Analytics, cognitive technologies, and automation.
50
What percentage of M&A deals are estimated to be unsuccessful in producing economic value?
70 to 80 percent.
51
What did a 2015 Deloitte survey find about corporate executives and data analytics for M&A?
68 percent were using data analytics for M&A.
52
What did IBM create to improve M&A integration activity?
A machine learning algorithm called M&A Pro.
53
What analytical domain has long existed in companies?
Operations, especially manufacturing, quality, safety, and logistics.
54
What are Total Quality Management and Six Sigma associated with?
Detailed statistical analysis of process variations and defect rates.
55
What is the primary focus of operational analytics?
Operations, especially manufacturing, quality, safety, and logistics
## Footnote
Operational analytics has traditionally focused on manufacturing processes but is increasingly being applied to service industries.
56
What are Total Quality Management and Six Sigma known for?
Detailed statistical analysis of process variations, defect rates, and sources of problems
## Footnote
These methodologies have had a significant impact on manufacturing analytics.
57
What challenge do many organizations face regarding analytics outside manufacturing?
Difficulty in applying statistical quality control and strong process orientation
## Footnote
This limits their ability to compete broadly on the basis of analytics.
58
What analytical tool did Rocky Mountain Steel Mills install?
Profit InSight
## Footnote
This tool helped analyze whether to reopen the pipe mill based on complex market conditions.
59
What was the outcome of using Profit InSight at Rocky Mountain Steel Mills?
Averted a $34 million loss and contributed to a rise in stock price
## Footnote
The tool replaced previous simplistic decision-making methods.
60
What technology did Firewire Surfboards use to enhance customization?
Advanced parametric modeling and Siemens’ NX 3D CAD software
## Footnote
This allowed customers to customize surfboards while maintaining performance.
61
How does Google utilize analytics for its search capabilities?
Testing aspects of its search engine before broad implementation
## Footnote
Google employs a rigorous program for testing search attributes and user experience.
62
What is the configuration problem in manufacturing?
Ensuring the right products are manufactured to meet market demand
## Footnote
It involves predictive modeling and analysis of components for finished products.
63
Which company is known for its configurable products?
Dell
## Footnote
Dell allows customers to customize their computers, showcasing configuration analytics.
64
What innovative approach is Ford using to improve inventory management?
Smart Inventory Management System (SIMS)
## Footnote
SIMS uses advanced analytics to optimize vehicle orders based on demand.
65
What kind of program has Honda instituted for quality issues?
Analytical early warning program
## Footnote
This program identifies potential quality problems from warranty service records.
66
What analytical approach does Toshiba Semiconductor use?
Visual representation of statistical analysis
## Footnote
This approach helps in yield analysis and boosts production quality.
67
How does safety analytics predict future accidents?
Using data on past incidents and associated attributes
## Footnote
This allows for proactive interventions to prevent accidents.
68
What was the focus of the proof of concept project with First Analytics and a railroad company?
Scoring train operators' risk levels based on various data
## Footnote
This analysis improved safety by identifying at-risk personnel.
69
What industries are increasingly adopting safety analytics?
Mining, energy, and manufacturing
## Footnote
The growing use of sensors facilitates this trend.
70
What predictive algorithm does Schneider National, Inc. use?
Alerts supervisors about drivers at risk for accidents
## Footnote
This is based on captured data regarding driving behaviors.
71
What approach has Schneider National, Inc. adopted for safety analytics?
Capturing driver behaviors such as speed, acceleration and deceleration, and driving times.
72
What does a predictive safety algorithm do at Schneider National, Inc.?
Alerts supervisors that drivers are at risk for accidents even before they have had one.
73
Which industries have taken aggressive approaches to safety analytics?
Mining, energy, and manufacturing.
74
What is UPS's commitment to analytics in decision making?
A deep, long-standing commitment to using analytics for decision making.
75
What is ORION?
On-Road Integrated Optimization and Navigation, a prescriptive analytics logistical model for UPS.
76
What significant savings can be achieved by shortening each UPS driver's route by one mile daily?
$50 million to the UPS bottom line annually.
77
What is the impact of preventing one minute of idle time daily for UPS?
Saves $515,000.
78
How many packages does UPS deliver daily on average?
18.3 million packages and documents.
79
What was the investment cost for the ORION project at UPS?
More than $250 million.
80
What complexity did UPS face in optimizing routes?
The sheer volume of data and complexity of the math needed to optimize routes.
81
What did UPS have to develop for their drivers to ensure accurate navigation?
Their own maps for the 250 million different locations.
82
What change management challenges did UPS encounter with ORION?
Communicating and inculcating a new way of performing a core daily task to fifty-five thousand skilled union workers.
83
How did UPS train its drivers for the ORION system?
Devoted six days of training and support to each driver.
84
What is Caterpillar's Global Supply Network Division (GSND) responsible for?
Overseeing an interdependent supply network with over eleven thousand suppliers and 150 facilities.
85
What platform did Caterpillar develop to improve supply chain management?
Assurance of Supply Center (ASC).
86
What percentage of schedules were shipped on time by Caterpillar in 2012?
67 percent.
87
What percentage of schedules are now shipped on time by Caterpillar?
93 percent.
88
What is Vertex Pharmaceuticals known for in its R&D approach?
Taking an analytical approach to R&D to raise drug development productivity.
89
What does Vertex's rational or structural approach to drug design involve?
Designing in drug-like properties from the beginning of a drug development project.
90
What challenge does Vertex face regarding clinical trial design?
Poor clinical trial design leading to ambiguous results or overly large trials.
91
What tools has Vertex developed to enhance clinical trial design?
New trial simulation tools.
92
What does in silico research involve?
Using computational models of both patients and drugs to simulate experiments.
93
What collaboration between Entelos and Johnson & Johnson achieved significant reductions in clinical trial parameters?
A diabetes drug project leading to a 40% reduction in time and a 66% reduction in patients necessary.
94
What is the focus of operational R&D in companies like Amazon and Google?
Testing changes to web pages as small R&D projects.
95
Which healthcare provider began proposing small 'science projects' to improve clinical outcomes?
Intermountain Healthcare.
96
What is the main goal of the Assurance of Supply Center (ASC) at Caterpillar?
To simplify the supply network and improve visibility on orders.
97
What percentage of medical decisions are based on science according to several studies?
Only one-quarter to a third of medical decisions are based on science.
98
Which healthcare provider is known for adopting analytics to improve healthcare efficiency?
Intermountain Healthcare.
99
Who proposed small 'science projects' at Intermountain Healthcare?
Brent James.
100
What is a key aspect of analytical health care?
Population health.
101
What does Healthways use to predict members' healthcare risks?
Artificial intelligence neural network technology.
102
True or False: United Healthcare uses analytics to determine how likely a patient will adopt disease management interventions.
True.
103
What do leading-edge companies use human resource analytics for?
To increase productivity, compensate employees appropriately, help employees succeed, and reduce retention.
104
What do human resource information systems (HRIS) typically record?
Basic HR transactions such as hiring date, compensation, promotions, and performance ratings.
105
Which professional sports team exemplifies analytical HR practices?
New England Patriots.
106
What attributes do the New England Patriots evaluate in potential players?
Intelligence and a low level of egotism.
107
What is the Troutwine Athletic Profile (TAP) used for?
Behavioral and emotional intelligence testing.
108
What is a Draft Decision Support System used for?
To manage potential player data and update reports from scouts.
109
What approach does Google take towards HR analytics?
All people decisions should be informed by data and analytics.
110
What is Project Oxygen at Google?
A project to determine the attributes of successful managers.
111
Fill in the blank: Google uses _______ analytics to improve managerial performance, recruiting, and retention.
predictive.
112
What did Google find to be the top three reasons employees stay?
* The mission
* The quality of the people
* The chance to build skills.
113
How does Capital One use analytics in its hiring process?
By requiring potential employees to take tests measuring analytical abilities.
114
What type of exam did Dennis Liberson take for a position at Capital One?
An algebra exam and writing a business plan.
115
What is a major focus of Walmart's global People Analytics team?
Understanding the business implications of staff turnover.
116
What is the approximate number of associates employed by Walmart worldwide?
Over 2.2 million associates
117
Who heads Walmart’s global People Analytics team?
Saba Beyene
118
What was a big priority for Walmart’s People Analytics team?
Gaining insight into the business implications of staff turnover
119
What misconception did Walmart's management have regarding staff turnover?
They thought losing an associate meant hiring someone at a lower cost
120
What costs did Walmart quantify related to hiring and turnover?
* Cost of hiring
* Cost of on-boarding
* Cost of training
121
What happens when an associate leaves within 90 days?
The company does not get their money back from hiring that associate
122
What actions is Walmart taking in response to turnover findings?
* Investing billions to improve training processes
* Increasing starting salaries
* Giving raises to associates after 6 months
123
True or False: Many organizations are competing on HR analytics.
False
124
What is lacking in many organizations regarding HR analytics?
Management desire to compete on HR
125
What factors may lead to increased interest in HR analytics?
* Rising people costs
* Higher percentage of total costs attributed to people
* Realization that people are critical resources
126
What was the objective of the chapter regarding internal applications of analytics?
To illustrate that analytics can be the basis for a different approach to competition and strategy
127
What does Chapter 5 address regarding analytics?
The use of analytics in external relationships, such as customer and supplier relationships
