how to optimize analytical impact in your company2009/01/10 · how to optimize analytical impact...

How to Optimize Analytical Impact in Your Company

SAS Forum in Baden, Switzerland, October 22, 2009

Daniel RüeggeHead Business and Client Analytics, UBS AG

t121701 [printed: 01.10.09 8:26] [saved: 01.10.09 8:25] P:\My Documents\Presentations\20091022 SAS Forum\10 Presentation development\20091022 SAS Forum UBS VXX_final.ppt

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How to optimize analytical impact in your companyAn Up-Hill Journey

In which Paradigmsto believe?

How to Drive Analytical

Development?

Why OptimizeAnalyticalImpact?

Financial Industry UBS


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Development?




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Wealth management industry The fundamentals

FragmentedIndustry

Above GDP growth rates

High profitability

♦ Top 10 wealth manager hold a market share of~20%

♦ Profit margin of 30 - 50%

♦ Expected CAGR of 5.2% between 2008-2012♦ Well positioned in fastest growth regions


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Wealth mgmt. market growth and UBS market positionUBS has strong positions in high growth markets Europe, MEA, APAC, LATAM

Market size1 & CAGR 2008-2012(by region)

1) Wealth management market size as of 2007; 2) UBS assets as of 2Q09; 3) Excluding JapanSource: S&BD market sizing report 2008 – 2012; including WM Americas

UBS assets2 & market position(by region)

48 CHFtrn

10.9%APAC3

5.7%Europe

1.9%Japan

3.1%USA

LATAM

Market leader in CH, only truepan-European wealth manager

Market leader in MEAand LATAM

Fastest growingin US UHNW segment

MEA

1.7 CHFtrnMarket leader APAC

8.3%4.6%


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Changing industry landscape

Notes:1 As at 17 March. Transaction included a USD30bn funding package from the Fed2 Acquisition by Barclays of North American IB and Capital Markets businesses for USD250m +

acquisition by Nomura of Asia units for USD225m

♦ Peak of cheap, virtually unlimited funding♦ Investment Banks heavily reliant upon cheap funding♦ Increasing leverage a key driver of revenue growth♦ Financial sector profits reach all-time highs

Beginning of 2007♦ Losses and write downs on range of securitised credit

instruments♦ Extreme liquidity squeeze at major banks, particularly IBs♦ Pressure on industry; insolvency, government intervention,

rescue M&A and large 3rd party equity raisings: ~USD711bn losses

2008

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InsolventRescue M&A for USD475m2

Near-insolventRescue M&A for USD236m1

Near-insolventRescue M&A for USD21bn3

Near-insolventRescue Merger for

USD15.1bn4

Near-insolventRescue M&A for

USD1.9bn5

3 As at 4 Dec upon gaining Shareholder approval (down from USD50bn in Sept)4 As at 3 Oct (all stock deal value), displacing Citigroup’s earlier offer5 As at 25 Sept, facilitated by the FDIC after taking over WaMu; JPM to pay

USD1.9bn to the FDIC in exchange for WaMu’s banking operations

U.S. Treasury nationalisations

Nationalised, then soldfor EUR14.5bn


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Platform of strengths

UBS WM—Challenges and opportunities

Still one of the only truly global wealth managers

Systematic approach to wealth management

Sound balance sheet and strong Swiss government support

In February 2009 UBS wins Euromoney's Private Banking Award for the sixth consecutive year

“ Best private banking services overall – Global ”

Challenges

♦ Cope with revenue and profitability impact of extended market downturn

♦ Increase bottom-line contribution in most onshore businesses

♦ Adapt to challenging regulatory environment for offshore business

♦ Overcome reputation damage in Swiss home market

Platform of strengths

Truly global wealth manager with strong position in all key regions

Client-centric wealth management approach

Preserved strong capital position


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Development?




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The background of analytics in the financial industrySuccessful marketing–driven firms continually leverage market, competitive and client insights to build sustainable business strategies

♦ Increased competitive choicesimplies less client loyalty

♦ Margins are being squeezed

♦ A rapidly changing global marketenvironment demands the ability to anticipate

♦ Client desires are driving the market

♦ Identify opportunities to differentiate

♦ Reduce risk of wasting resources on bad decisions

♦ Increase the likelihood of identifying and capitalizing on new business opportunities

♦ Expand feedback loop regarding initiatives

It's about the ability of client anticipation, client focus and efficiency

Market Trends … … as stated in 2006 Business Needs


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Competing on analytics – Effectiveness Combining client focus with sales efficiency makes the difference

♦ Competitive differences on products and service models disappear more and more

♦ Differentiation on processes is the next challenge and hard to achieve

♦ Analytics are key and become an essential element of competitiveness

♦ Analytics, statistics and fact based decisions are important, but often marginal

♦ Preconditions for Analytics are well met– IT technology and skills are available

(including spreadsheet trained managers)– Data are available– Business need is given

(Recently enforced by global financial crisis)

Planets Are Aligned for Analytics

Source: Tom Davenport and Jeanne Harris, “Competing on Analytics”, Harvard Business School Press 2007


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Using analytics to combine client focus & efficiencyAnalytically based strategies enable companies to out-think and out-execute the competition

Com

petit

ive

Adv

anta

ge

Sophistication

Analytics

Focus on - Explanation- Understanding- Future

Access and Reporting

What’s the best that can happen?Optimization

What will happen next?Predictive Modeling

What if these trends continue?Forecasting/extrapolation

Why is this happening?Statistical analysis

What actions are needed?Alerts

Where exactly is the problem?Query/drill down

How many, how often, where?Ad hoc reports

What happened?Standard reports

Source: Tom Davenport and Jeanne Harris, “Competing on Analytics”, Harvard Business School Press 2007


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How to Drive Analytical Development?




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The development of analytics is a journeyThe challenge is: Trigger change of behavior in an organization

Phase 1: The idea to try Phase 2: The right to serve

Phase 3: The courage to invent Phase 4: The invitation to drive


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Pilot, try, prove that you can: Just do something!Think big, start small, grow fast

♦ Description– "Feasibility study" or "pilot project"– Goal is to create solid facts and examples to

justify next phases of investment

♦ Characteristics– No expertise, low acceptance in the Company– High expectations by some, on an unknown subject

♦ Advantage– Easy and fast wins are possible– Focus on few tangible results

♦ Challenges– Find sponsor, act with low budget– Balance between "quick win" and "assure solid development"– Avoid blocked situation of "big project / big investment" at the end

Phase 1: The idea to try

L' appétit vient en mangeant …


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Example from pilot phase: Closing the loopData Warehousing, November 2000


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Deliver, optimize output: Do things right!Be a small consulting & services firm

♦ Description– Mandate to build up analytics is given– Organizational set-up is clear– Building of team, expertise, culture

♦ Characteristics– Management and processes are key – Development of methods and success measures

♦ Advantage– Solid delivery creates both, value and acceptance – Under your control, just manage well

♦ Challenges– Manage expectations and your resources– Internal shop in shop trap: Reactive set-up– Prioritization: Share holder priority vs. interests of internal requestors

Phase 2: The right to serve

… just delivering "faster horses" …


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Example on service: Set-up, workload and internal clientsCRM Forum 2004: How to establish a Service Unit

"… did an excellent job in delivering upon a very intensive list of questions related to our

mortgage business. The quality of the analysis was strong and it was packed well

to allow for easy interpretation for the results."

(Internal Partner XYZ)


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Anticipate, innovate, change: Do the right thing!Be a think tank, surprise with unexpected, relevant solutions

♦ Description– Analytics as an "untapped opportunity"– Innovation and employees make the difference

♦ Characteristics– Create solutions not asked for, but

welcomed quickly by the users – Start to cross-leverage applications

within the organization

♦ Advantage– Highly motivating for creative people

♦ Challenges– Keep on delivery and value creation– Stay on ground, avoid "ivory tower" activity– Have good ideas no one had before

Phase 3: The courage to invent

"If I had asked people what they wanted, they would have said faster horses." -- Henry Ford


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Example innovation: Re-discover your (real) clients"From Database Marketing to Competitive Advantage -Client Analytics to Mature Your Organization", SAS Forum 2007

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Cl ient Analyt ica l Ser vices p. 22

Identify Client Groups – ExampleFour distinguishable client groups for product XYZ w ere ident if ied and described -> targeted sales concept development

Potent ial faces t o specific client t ypes

ILLUSTRATIVE

XYZ client s

?ILLUSTRATIVE

The clust ering process requires no hypothesis... Prepare f or surprises and unknow n facts

Ag g re ssi ve -Equ it y Tra de r

-- --- -- --- -- --- -- -- --- --- -- -- --- -- --- Hig h r at e of eq ui ti es- Tr ad e a lo t o f str u ct u re d

pr od u ct s an d equ it ies- M ed iu m t u rn ov er vol um e- M an y WM CH clie nt s

Conse rva t iv e -Bo n ds T ra d er

--- -- --- -- --- -- -- --- -- --- -- -- ---- Hig h r at e of b on ds- Tr ad e a ll d if fe re nt

pr od uct s- Hig h t ur n ove r vol um es,

pa rt icul ar ly in b on ds an d m on ey ma r ket inv estm en t s

Act i ve - So ph ist i cat e d-- --- -- -- --- --- -- -- --- -- --- -- -

- Di ver sifi ed po rt f oli o - T ra de all dif f er en t p ro du ct s

- Hi gh t ur no ver vo lu me s, p ar ti cu la rly in alt er na -t ive inv estm en t s, st ru ctu r ed pr od uct s a nd in vestm e nt f un ds

Pas siv e -Un so phi st ica t ed

-- --- -- -- --- -- --- -- -- --- --- -- -- --- -- Hig h r at e of bo n ds an d

inve stm en t fu n ds- Low t r ad ing act ivit y- Low t ur n ove r v olu m e

Con se rv a ti ve St ra t eg y M o d era t e St rat e g y Ag g res siv e St rat e g y

Act

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rad

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Overview of XYZ client types

Agg re ssive Con ser vative Ac tive Pas sive

Asset Allocation by Cl ient T ypes (APS)

Pro

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020

4060

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Ot her In v.Ca sh ( on Acco unts )Alte rna tive I nv.Str uctu red Pro du ctsMo ne y Ma rke tIn v. F und sBo ndsEq uities

Sourc e: Cl ient Analytica l Servic es


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Engage on best things: Leverage analytical capabilities!What is the best thing you can do?

♦ Description– Capabilities are known and accepted– The field of analytical application opens wide

♦ Characteristics– Analytics takes part in relevant decisions

and initiatives which profit of analyses– New application fields are constantly added

♦ Advantage– High and quick value creation, compared to

alternatives, based on existing analytical expertise

♦ Challenges– Constantly decide where to engage– Avoid scope creep: Constantly attracting new topics may divert the energy– Focus exclusively on activities for which analytics creates a unique value

Phase 4: The invitation to drive

"Decision is a risk rooted in the courage of being free." -- Paul Tillich


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Invitation to drive: Broaden application / trigger change"…Targeted Usage of Analytics: What Matters Most?", Nov 2008


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Tools and technology during the development of analytics Do it once, do it right

All time: Have the basics right

♦ Tools, Data, Technology– In all phases: Just get it "right"– "Right" means

– It just works– It's not a bottle neck– It is ready for the next phase– It's cost efficient

Phase 1: The idea to try Phase 2: The right to serve Phase 3: The courage to invent

Phase 4: The invitation to drive

The Analytical Journey

Technology and Tools


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The development of analytics is a journey

Phase 1: The idea to try Phase 2: The right to serve

Phase 3: The courage to inventPhase 4: The invitation to drive

… with loops and set-backs … just keep being on the move

All time: Have the basics right


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The top 10 paradigms in analytics: To be questionedAre they true? Are they of help? How do you apply them?

1. To make analytics successful, the CEO has to have a personal interest in it

2. Analytical organizations have to be positioned in a central high power position

3. Every company in a competitive environment needs analytics to be successful

4. Analytical expertise can / cannot be out-sourced / in-sourced / off-shored

5. Getting data and technology in place is a long and cumbersome process

6. Without data and technology you cannot do analytics

7. Analytics is a thing mainly insiders and experts understand, and vice versa

8. Communication of analytics is more important than analytical people think

9. Analytics only should do things which have a measurable impact

10. Analytics mainly is applicable in retail / standardized environments

Don't believe everything you think


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How to optimize analytical impact in your companyThank you!



