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Insights on the Australian market from PwC’s Global Data and Analytics Survey 2016: Big Decisions | August 2016 www.pwc.com.au Big DecisionsLet the data do the talking 61 % 39 % 5 % vs of Australian organisations admitted that their decision-making process is only ‘somewhat’ guided by data of Australian organisations use analytics tools to ‘look back’ and discover what went wrong who use data and analytics to understand what actions should be taken in the future

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Insights on the Australian market from PwC’s Global Data and Analytics Survey 2016: Big Decisions | August 2016

www.pwc.com.au

Big Decisions™ Let the data do the talking

61% 39% 5%vsof Australian organisations admitted that their decision-making process is only ‘somewhat’ guided by data

of Australian organisations use analytics tools to ‘look back’ and discover what went wrong

who use data and analytics to understand what actions should be taken in the future

Over the last few years, digital acceleration coupled with global shifts in economic power have altered the playing field for companies around the world. Advanced analytics and machine learning – technologies that once seemed like beacons from a distant future – are increasingly available and accessible to businesses. The ability to make intelligent decisions that drive growth, disrupt the market and capitalise on emerging opportunities is now linked less to gut feel and industry knowledge and more to predictive and prescriptive analytics, artificial intelligence and data-driven insights. Gaining competitive advantage is no longer about accepting the status quo or relying on age-old traditions. It’s about mustering the courage and commitment to harness both mind and machine.

PwC’s Global Data and Analytics Survey 2016: Big Decisions, which captures the ground-level view across 2,100 global and over 120 Australian C-suite leaders, business unit heads, and SVPs, provides a compelling snapshot of the ways in which advanced analytics, machine learning and data-driven decision-making are steering the trajectories of businesses worldwide. This paper draws on insights from the Global Data and Analytics Survey to explore the ways in which Australian businesses are adopting advanced analytics. By focusing on challenges and opportunities unique to the Australian landscape, it identifies the directions that are worth embracing as the new age of artificial intelligence draws near.

Towards a data-driven future

PwC | Big Decisions | 2

Now

2020

Data-driven decisions for a changing worldExecutives say their companies need to be faster and more sophisticated when it comes to decision-making capabilities. They’re seeking the right mix of mind and machine to leverage data, understand risk and gain a competitive edge.

“Data can enable immense innovation quickly. Many Australian companies have strong pockets of analytics ability but fail to connect them to innovate. Although they are now using data to understand what happened,

leadership is still slow to embrace the power of predictive analytics.

John Studley, Lead Partner Data & Analytics, PwC

36% vs 26%Two key factors appear to limit the use and application of analytics by

Australian organisations: budgetary considerations (36%) and leadership

courage (26%).

39% vs 33%More Australian organisations are using analytics to ‘look back’ and

discover what has happened (39% vs. global average 27%) and why

(33% vs. global average 28%).

39%organisations globally rate their decision-making as ‘highly data-

driven’ with Australia lagging behind at 27%.

PwC | Big Decisions | 4

There’s no denying that huge strides in advanced analytics, machine learning and natural language processing have created powerful opportunities for savvy businesses over the past few years. When coupled with human intelligence, these new technologies allow business leaders to glean deep knowledge of customer trends, patterns and behaviours, and make near to real-time decisions that are increasingly sophisticated, complex and informed. According to the Global Data and Analytics Survey 2016, businesses around the world are wising up to this challenge but acknowledge that there’s still a long way to go. Sixty-one percent of respondents said that their decisions were only somewhat or rarely data-driven and only 25 percent were using predictive and prescriptive analytics to predict what would happen in the future.

Although the report revealed that international business leaders were still behind the curve when it comes to making the most of these new technologies, it also discovered that their counterparts in Australia lagged even further behind. Only 20 percent of Australian businesses were using analytics to detect emerging opportunities and only 5 percent took action based on data-driven insight, compared to 13 percent of international respondents. This is a serious shortcoming given that Australians are among the earliest technology adopters in the world.

How do Australian business leaders approach data and analytics?

PwC | Big Decisions | 5

It’s worth pointing out that the companies currently excelling in the data and predictive analytics space aren’t typically home-grown businesses but international players such as retailers Tesco and Nordstrom, digital natives Amazon, Google and Uber, telecommunications giant T-Mobile and automotive company Daimler AG.

The findings also suggest that Australian businesses lack leadership courage, face budgetary constraints and are more interested in defending existing market share than they are in creating new revenue streams to drive future growth. This risk-averse behaviour may stem from the composition of Australian boards and an investor class that focuses more on quarterly results than innovative practices such as leveraging data to create value. In Australia, data innovation is more likely to originate from smaller and mid-sized organisations that depend on analytics to grow beyond single digits.

Despite this, no Australian business can afford to ignore the ways in which data-driven decision-making is crucial to both preserving existing market share and driving future growth. We suggest that companies that have already begun to understand the value of capturing their own data from both a customer and organisational perspective just a few years ago start considering embracing automation, doing more predictive and prescriptive work and making machine learning a part of business as usual.

Here are four take-aways that lead us to this conclusion.

PwC | Big Decisions | 6

The Global Data and Analytics Survey 2016 highlighted some interesting observations about the way Australian businesses incorporate predictive and prescriptive analytics across their business. Thirty-nine percent of Australian firms use analytics tools to ‘look back’ and discover what went wrong and 33 percent use it to explain precisely why an initiative failed. This differs from global organisations who use it to look to the future and answer more valuable questions such as what will happen (29% versus Australia’s 20%) and what actions should be taken (13% compared with Australia’s 5%) down the track.

PwC Perspective

Predictive and prescriptive analytics can allow Australian businesses to unearth unexpected patterns, act on trends before they occur and swiftly identify emerging income streams before competitors. Although diagnostic analytics can still play a role, prescriptive and predictive analytics is increasingly important to growth. A wealth of data and processing power makes predictive analytics a really exciting prospect and it’s now within reach of everyone.

Fact one Australian businesses, across all

industries, trail behind global peers when it comes to using predictive

analytics to solve important business challenges. They’re more likely to use analytics to diagnose a problem after the event has happened rather than using it to make decisions and steer

their course.

It’s likely that this is related to Australia’s dependence on board and executive-level input for strategic decisions – in contrast to global businesses, which take a more decentralised approach. The report found that 32 percent of strategic decisions at Australian organisations are made at board level compared with 26 percent internationally.

PwC | Big Decisions | 7

We can’t argue with the fact that human knowledge and experience will always inform an organisation’s vision and strategy but for Australian businesses, overlooking the ways in which machine learning can enable greater automation and accelerate the speed, efficiency and sophistication of business insights is a major loss. The report revealed that nearly half of the global organisations surveyed rate their decision-making as “highly data-driven” in contrast with 61 % of Australian organisations who admitted that their process is only ‘somewhat’ guided by data.

PwC Perspective

Machine learning and advanced analytics offers the opportunity for executives to visualise different scenarios and make complex decisions at a faster rate. Given shorter product life cycles, consumer empowerment and hyper-competition in low-growth economies, this need for ‘speed to insight’ has never been greater.

But failure to incorporate data analytics and machine learning isn’t just inefficient; it also leaves companies vulnerable to the human biases and lapses in judgement that can send them down the wrong path. As an example, the Maps app on our smartphone can navigate our route revised exponentially faster than our brain can, effectively augmenting our knowledge. This is a useful metaphor for understanding how mind and machine can work in tandem to make systematic, accurate decisions. As intelligent systems and robotics applications multiply, smarter companies will use these capabilities to re-imagine business processes. And they’re likely to do it soon.

Fact twoAlthough analytics is becoming

increasingly intrinsic to the way Australian business

leaders make decisions, they still prioritise gut feel and

experience over data-driven decisions.

PwC | Big Decisions | 8

CEE

Japan

Rest of Latin America

Other

Canada

Brazil

Australia

Rest of EMEA

USA

UK

Nigeria

Rest of Asia-Pacific

Netherlands

Germany

Korea

China

-14%-13%-12%-11%-10% -9% -8% -7% -6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14%

Machine algorithms Decision relies on...

Percentage from average

Human judgement

What’s needed: A mix of mind and machineA good mix augments human judgement with machine algorithms to create better outcomes.

We asked: What type of analysis will inform your next big decision?

In the chart below, zero is the average reliance on analysis from either machine algorithms or human judgment. The farther away from zero, the greater the reliance on either mind or machine.

PwC | Big Decisions | 9

Getting started with advanced analytics and machine learning

“Too many Australian companies are chained to static, backward looking reports. An easy win is smarter visualisation. The greatest value of a picture

is when it forces us to notice something that we never expected to see.”

John Studley, Lead Partner Data & Analytics, PwC

Case study: Machine learning in motion

The fact that machine learning can help humans synthesise staggering volumes of data isn’t just good for efficiency – it can also turn entire operating models on their head. Sentrian, a California-based pioneer in the remote patient-monitoring space, is a case in point. The healthcare company equips its patients with wireless bio-sensors that collect data such as body temperature, heart rate and potassium levels before using machine-learning algorithms to identify patterns that suggest symptoms of illnesses like diabetes and heart disease. These are analysed by an engine that alerts doctors as soon as they’re needed, shortening the waiting times for patients in urgent need of care.

Source: Siva, N (2016), ‘Machine learning will keep us healthy longer’, Wired, www.wired.co.uk/article/machine-learning-improves-human-health

Work out the questions that you want to answer

Study global companies that are excelling in the data, AI and machine-learning space and either borrow learnings from their approach or partner with them to capitalise on their knowledge

Workshop these across your data and business teams so that you can refine your questions and focus your effort

Start the prototyping process and begin experimenting with potential business-led use cases. Think big, start small, then scale fast

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02

03

04

PwC | Big Decisions | 10

Although Australian businesses often pay lip service to the idea of analytic data innovation, they lack the structures and mindsets to bring these to life. The report highlighted that 36 percent of Australian executives identified budgetary constraints as their biggest barrier and 26 percent cited a lack of leadership courage as an obstacle to capitalising on data-driven decision-making. Interestingly, global firms ranked these lower (17% and 18% respectively) and revealed that the availability of resources, personnel and operational capacity were their biggest challenges.

PwC Perspective

If Australian organisations want to future-proof their business, we suggest putting foundations into place to foster a culture of analytics capability and innovation, now. Business leaders should incubate and grow data capability, cultivate an open and transparent climate, adopt a test-and-learn methodology and leverage pockets of analytics across the business. There’s no doubt that building analytical capability and being prepared to learn from experimentation and failure can spark high dividends. Even companies that have low data-maturity can make great gains if they decide to be proactive.

Fact threeBudget constraints as well

as the lack of courage to ‘do something different’ hinder the way Australian business leaders

approach decision-making.

PwC | Big Decisions | 11

Case study: Setting the stage for a data-driven future

In February 2016, the New South Wales Government announced plans to establish a whole-of-government data analytics centre (DAC) to tap into its data assets. The move aims to apply the right leadership, policy and analytics capability to improve provision of personalised and customer-centric services and act on predictions and projections as new patterns emerge.

Victoria, too, has released an ambitious ICT strategy to unlock the potential of data-driven decision-making over the next five years. In May 2016, the Victorian government launched plans to create an agency to use and share data in an effort to design more personalised services and policies, invest in its analytics capability and create centralised data systems to improve employee productivity.

Source: Braue, D (2016), ‘The evolution of government analytics’, Technology Decisions, www.technologydecisions.com.au/content/gov-tech-review/article/the-evolution-of-government-analytics-887322134

Philipson, G (2016), ‘Victoria outlines five-year ICT plan’, InnovationAus.com, www.innovationaus.com/2016/05/Victoria-outlines-five-year-ICT-plan

PwC | Big Decisions | 12

Australian and international organisations are aligned in terms of how they view the impact of data analytics – 26 percent of Australian organisations rate increased market share as their biggest incentive (20% global) and 22 percent of international and domestic businesses said that the promise of more innovative products and services was their biggest motivation. However, global organisations ranked customer acquisition more highly than their Australian counterparts and local and global leaders hold significantly different views on the relationship between data-driven decision-making and shareholder value. Twenty-two percent of international players said that data and analytics would increase shareholder value by 100 to 200 percent and 58 percent of Australian organisations believe that data and analytics would bolster value by just by just 5 to 50 percent.

PwC Perspective

Analytics projects are likely to represent the highest ROI investments across a company but relatively few are adequately funded and the survey suggests that some Australian organisations haven’t woken up to this yet. Shareholders won’t thank them later. Data-driven decision-making, AI and predictive analytics will play an essential role when it comes to honing a granular understanding of customer needs and improving customer acquisition and retention. It will also become increasingly intrinsic to driving shareholder value and unlocking value across Australian organisations over the next few years. Prioritising effort and focusing on the most important commercial missives will be mission-critical.

Although technology has become readily available, Australian businesses suffer from a lack of skilled resources as well as the capability to tailor activities to a commercial context. Australian companies are traditionally quite fortressed but they will need to adapt their operating models and shift towards a mindset that embraces partnerships and collaboration. If businesses don’t have the time or bandwidth to seize these opportunities themselves, they should partner with organisations already equipped with the tools to help them achieve their goals.

Fact fourAustralian leaders embrace analytics more than their global counterparts when it comes to increasing market

share and spearheading cost-out initiatives but they aren’t as convinced

as international peers that data and analytics will drive shareholder value.

Instead, they believe that ‘speed to insight’ will be the biggest catalyst for the adoption of analytics in the next

five years. 

PwC | Big Decisions | 13

Case Study: Data-driven by design

In the construction industry, it’s common knowledge that a chunk of every project budget is allocated to material waste and fixing mistakes. However, JE Dunn is using predictive analytics to streamline the way the sector operates. In 2016, the US-based construction giant partnered with tech firm Autodesk to design a system that uses real-time, data-driven predictive modelling to visualise every aspect of the building process and accurately estimate every cost. Although minor design changes once meant weeks of delays, thanks to communications between architects and engineers, embracing predictive analytics has accelerated the design process and reaped savings in time and money.

Source Marr, B (2016), ‘How big data and analytics are transforming the construction industry’, Forbes, www.forbes.com/sites/bernardmarr/2016/04/19/how-big-data-and-analytics-are-transforming-the-construction-industry/

PwC | Big Decisions | 14

A roadmap to help you unlock data possibilities

Make better and faster decisionsUltimately, Australian businesses can benefit from the power of data-driven decision-making if they understand their most important imperatives, invest in the right tools and technologies and commit to a mindset that embraces innovation, collaboration and change. We’ve put together a five-step roadmap to help you get started.

1. Data is an essential augmentation to your decision function. Increasing the speed and sophistication of your analytics is going to be critical for your success.

3. Partner and collaborate with other businesses if you don’t have the capabilities yourself.

5. Industrialise the things that work and make them part of your business operation.

2. Leadership needs to buy into data-driven decision-making. Without leadership, you won’t get the budget or the licence to try new things or innovate.

4. Experiment in a few areas or try specific use cases that are high-value to the organisation and don’t be afraid to test, learn and fail fast.

PwC | Big Decisions | 15

© 2016 PricewaterhouseCoopers Consulting (Australia) Pty Limited. All rights reserved. PwC refers to PricewaterhouseCoopers Consulting (Australia) Pty Limited, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

Liability limited by a scheme approved under Professional Standards Legislation.127042099

ReferencesInterview with John Studley, Monday 11, July 2016

PwC’s Global Data and Analytics Survey 2016www.pwc.com/us/en/advisory-services/data-possibilities/big-decision-survey.html

Gut & gigabytes: Asia Pacific insightswww.pwc.com.au/consulting/assets/publications/big-decisions-gut-gigabyte-14.pdf

Data-driven: Big decisions in the intelligence agewww.pwc.com/us/en/advisory-services/big-decision-survey/assets/Big-decisions-in-the-intelligence-age.pdf

The human factor: Working with machines to make big decisionswww.pwc.com/us/en/advisory-services/big-decision-survey/assets/the-human-factor-working-with-machines-to-make-big-decisions.pdf