2 August 2006 Vivek Ranadivé
Real-time principles taught CEOs to structure their business around responding immediately to customer demand. But how much better would your performance be if you could predict a customer need before it showed itself or extinguish a business risk before it erupted? In an interview with John Lawrence, Vivek Ranadivé, Chairman and CEO of TIBCO Software Inc, explains how taking a small step into the future with predictive business could put you a long way ahead of the competition.
Tennis is a great passion for Vivek Ranadivé. He likes to tell the story of being on court with his 12-year-old son after the boy has just served into the net. Ranadivé says that all he needs to do is look at his son to know in advance whether his next serve will follow the same fate and leave him brooding thunderously over a double fault.
There is no 100% certainty in this prediction but something in his son's posture, something in the way he responds to the first fault and something in the way he prepares for the second serve feeds into Ranadivé's knowledge of his son's character and allows him to forecast nearly every time whether or not he needs to be ready with a conciliatory remark. This is known as complex event processing.
COMPLEX EVENT PROCESSING
Ranadivé's brain has processed all the information available to it, detected a pattern and made a prediction, allowing him to adjust his behaviour accordingly.
The implications of being able to follow that same thread in a business setting are extremely powerful. Behind the scenes, the world's top-performing companies are already doing it.
Predictive business is the next step on from real-time business. It's about giving yourself a serious competitive advantage by identifying the patterns in historical events, projecting them into the present and future, and, crucially, changing your internal processes or the way your employees interact with your customers.
The end result is that you stifle business risks or convert a potentially unhappy customer into a happy customer.
"Predictive Business is happening now and I think it will have a huge impact on the way people work," says Ranadivé. "CEOs are charged with retaining customers; therefore, they should seek to turn predictive business into a corporate competency."
COLLECTING CUSTOMER STATISTICS
One US business leader who has done that is Gary Loveman, CEO of Harrah's Entertainment Inc, the world's largest casino gaming company with highly profitable destinations in Las Vegas, Atlantic City, Reno and the Gulf Coast.
He has developed an operating model for his casinos built around a 'Total Rewards Card' customer loyalty program.
This works by requiring Harrah's 40 million customers to swipe their cards every time they use a slot machine, play a game or order drinks, meals or a hotel room.
The extraordinarily detailed real-time data this gives the company is correlated with historical data on each customer or their peer group to determine what kinds of promotions or special offers will appeal to them and keep them coming back to spend their money.
In practice, this could mean predictive software monitoring a player's behaviour on a slot machine.
If he is known typically to get up and walk away after losing on 30 straight pulls of the handle, an event warning can be triggered that tells the casino manager to dispatch one of his 'Good Luck Ambassadors' to the customer's side, bearing a smile and a token for free entry to another game or a voucher for a discounted meal in the casino's restaurant.
For the player, a miserable moment has turned into a magic moment; for Harrah, another valued customer has stayed on the premises.
THE POWER TO PREDICT
In his new book The Power to Predict, a natural sequel to his New York Times business bestseller The Power of Now, Vivek Ranadivé argues that there are three essential building blocks in a company's IT infrastructure that make predictive business a fully-functioning success. They are:
Service-oriented architecture – the central nervous system that brings together the various applications and real-time information sources used by a business and makes them accessible via a common interface.
Business process management – a collection of enabling technologies that integrates and orchestrates the muscles of the business, both human and technology, to support a business process or to adapt it if required.
Predictive business – the brain that analyses historical and real-time data to identify patterns and prompts the company to marshal its people and its processes to take pre-emptive action.
Predictive business is applicable across all major sectors: energy supply, healthcare, telecommunications, financial services, transportation, retail and consumer goods.
"I believe that those who take advantage of technology to anticipate the next curve in the road will emerge as winners over the next 20 years," says Ranadivé.
"The only way to thrive in this world of uncertainty is to figure out how to run your business predictively. You don't have to be able to anticipate what will happen next year or even in the next quarter. Just keeping half a step ahead can create huge advantages."