GOLDEN MEANS: HOW CAN SENIOR EXECUTIVES ENHANCE DATA MINING'S RETURN ON INVESTMENT?
by Inderpal Bhandari, executive editor at large

It has been said that the secret to making a good speech is to start by describing what you are going to say, say it, and then close by describing what you have said. In keeping with that advice, I will expand on a message that has appeared before in this column, namely, the need to educate the senior executives in an organization about business intelligence technologies such as data mining.

In business, data mining can produce impressive results provided that it is applied strategically. Allow me to explain by drawing on the experience I gained by working on the IBM Advanced Scout data mining application for the National Basketball Association (NBA).

In any large business, there are several areas with data that can be targeted for improvement. For example, in the NBA one can mine data of ticket sales, or of broadcast relationships, or of merchandise sales. But, as shown by the simple thought experiment below, those areas may not optimize the return-on-investment in data mining.

Consider the mining of data of ticket sales of the NBA. While it can improve the ticket sales of the NBA, it will not impact the fundamental product of the NBA, the game itself. Contrast this with Advanced Scout, where the target of improvement is the game of basketball itself. Clearly, this impact is more fundamental, reaching every aspect of the business of the NBA. If the game itself is made more competitive, it will rise in popularity, boosting ticket sales, broadcast revenues, merchandise sales, etc.

In other words, mining the game data is strategically far more important to the NBA than mining data of ticket sales. Of course, the billion dollar question is how can an organization identify such strategic applications. There is a bag of tricks that you can dip into. I will list some of those tricks here along with their limitations.

You may attend data mining conferences to get ideas. A worthwhile thing to do, but if your killer app involves the optimization of activities that are specific to your organization, this approach will miss it. You may pilot the data mining solutions that are commercially available for your industry. Again, a worthwhile thing to do, but it has the same limitations the data mining conferences do.

You may experiment with the data in your warehouse. Again, a good idea, but if the killer app is in an area for which data are currently not collected, you may miss it. In fact, this scenario occurred in the case of Advanced Scout. When I started work on that application, the NBA did not collect the game data that Advanced Scout uses. The data collection scheme and the data mining application were developed simultaneously.

In order to get around the above limitations, it is advisable to add another trick to the above repertoire: Get senior executives to think about strategic data mining applications. Not just the CIO but also the line-of-business executives and the strategic planning executives.

Let us consider the role that senior executives must play. They know what areas are of fundamental importance to the company. Which in turn suggests that they should help identify the strategic applications of data mining. Or, at the very least, they should be able to recognize such an application when they see it. I forget who said words to the effect that we stumble across good opportunities all the time, but most of us manage to pick ourselves up and walk on as if nothing ever happened. Which brings us full circle to why executives at the highest levels of an organization must be educated about data mining and other business intelligence technologies. Without their active involvement, it will be difficult for such technologies to take hold in an organization.

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Inderpal Bhandari can be reached via http://www.virtualgold.com