| | By Mick James
If knowledge is
power, then wisdom is
bliss and information is
very useful for those of
us who possess very
little of either.
Unfortunately, what we
have a glut of is not so
much information but
data, and very little
time or resource to deal
with it.
It’s an opportunity
that Mark Giles,
managing director of BMG
Strategy Consulting, has
been developing since
2005. “We saw with
clients in financial
services that they had
been making massive
investments in data,”
says Giles. “They had
the ability to store and
manipulate it, and were
very good at using it
for specific purposes,
such as marketing, risk
management, or
regulatory compliance.”
What companies
lacked, though, was the
ability to use all this
data to underpin
strategic decisions.
“There was a massive
gulf between the basis
on which those types of
decisions are made and
the huge ‘teradata | |
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| | warehouses’ of company
information that
companies had built up,”
says Giles.
The problem is not a
lack of statistics, but
the lack of resources to
analyse it.
“It requires a lot of
sophisticated manual
labour which is very
scarce,” says Giles.
“Companies have had to
go to investment banks
or consulting firms or
actuaries – ultimately
in the UK it’s hard to
find good quality
analysts – but India and
China produce a lot of
them and they’re much
cheaper.”
BMG evolved to
provide clients with the
sort of detailed
analysis that could not
be provided at a
reasonable rate in the
UK, and therefore had to
be substituted by models
of varying degrees of
abstraction and
usefulness.
“A strategy house,
for example, will have a
way to calculate average
profitability that uses
a very difficult
formula,” says Giles.
“Ours is very simple –
we look at every single | |
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| | product in the
portfolio.”
With sample bases
running into the
millions, it is possible
to set up these huge
data sets in a way which
permits individuals to
drill down into very
specific subsets of
customers or products,
and also strip away the
“noise” that clouds the
ability to see the
relationships.
This requires that a
high level of business
insight be married to
the raw analytical
power.
“When we started we
were worried that we
would be
disintermediated and
people would go straight
to India,” says Giles.
“But without the blue
chip consulting skills
it’s impossible to
deploy that resource
effectively. You need to
be able to marry the
very detailed analysis
of what we see in your
customer behaviour with
what is happening in the
market.”
BMG’s work can be
applied in a wide range
of contexts, from
helping private equity | |
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| | firms with due
diligence, to advising
mortgage companies on
better ways to lend than
broad brush cut-offs
based on risk profile or
loan-to-value ratios.
“We can cut across
silos of risk and
marketing to segment
customers on the basis
of profitability,” says
Giles. “If you can do
that to improve
marketing why not do it
to improve
profitability?”
Giles acknowledges
that this type of
service can be a hard
sell, particularly in
areas like CRM where
clients have already
invested a lot in
analytics to little
effect.
“It’s difficult and
it’s expensive, but
there’s an appreciation
of the amount of value
that can be added when
you go to that level of
detail,” says Giles. “We
generally target a 15%
uplift against the
current environment. We
bring a very tangible
result and it’s very
easy to measure – here’s
a list of the customers
you had before and here | |
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| | are the customers you
have now.”
Giles says that one
of the challenges of
doing this sort of work
is not simply the
expense but the ability
to create teams of
sufficient size to take
it on. Going to India
solves that problem, but
creates its own
challenges.
“There’s an
inefficiency in numbers
of people if a team is
split across two time
zones, and two locations
that are far apart,”
says Giles. “It’s been
tough, but we’ve learnt
what resources we need
and how to integrate
those people into a team
and manage them to
deliver the level of
result and output we
need.”
BMG is just one
example – and a leading
one – of how people are
beginning to turn the
paradigms that underpin
offshoring and
consultancy on their
heads and are coming up
with strikingly new
business models. It will
be interesting to see
who follows them. | |
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