customer retention - analytics paving way

whitepaper august 2016

Customer Cockpit© during and after M&A:

Analytics paving way for customer retention

www.hcltech.com

Customer CoCkpit© during and after m&a: analytiCs paving way for Customer retention | august 2016

© 2016, hCL teChnoLogies. reproduCtion prohibited. this doCument is proteCted under Copyright by the author, aLL rights reserved. 2

TABLE OF CONTENTS

Overview & BACkgrOund 3

ChAllenges And interdependenCies 3

referenCe ArChiteCture 5

teChnOlOgy At plAy: Churn AnAlysis 5

sOlutiOn 6

dAtA gOvernAnCe 7

Business Benefits 8

referenCes 9

ABOut hCl 10



Overview & BACkgrOund

m&A’s were runaway successes in 2015 because of the nature of returns investors have realized from the stocks in the last few years. In 2015 alone there were m&A’s worth $3.8 trillion across industries, which makes it a record by itself beating the previous m&A deal value record of 2007. It’s evident that one of the biggest reasons that these m&A’s are happening is because companies need to add scale to the deal where there is either heavy competition or the growth is slowing.

As companies drive a lot of these m&A’s, their intent is to always come out of them strong and profitable. And for doing this they undergo synergies across spectrum in various areas of SG&A, Production, Purchasing, It, etc. while companies work on driving these synergies – one of the biggest areas that haunt them is how successful will they really be as they bring in all these efficiencies – because at the center of all of these is an entity named ‘PeoPle’. People can be in the form of retained employees, sales employees that have been let go, demotivated suppliers, etc. And one of the most important stakeholders getting impacted by this is the customer who has very high expectations:

ChAllenges And interdependenCies

So while m&A’s are said to be successful at the onset, the biggest question is historically how successful are they in the long run? while that question is answered – it’s important to know what companies do that make m&A’s an investor’s panacea for short term returns. companies drive immense synergies which can bring in a good 10-15% cost benefit to the overall deal structure. obviously these are deals that are well planned and laid out on whiteboards and spreadsheets so synergies that are planned will certainly be achieved. what companies don’t anticipate though is the impact of these synergies on the customers. careful analysis reveal various reasons that lead to a negative impact on customers which eventually causes them to defect.

Information Technology

Innovation & Development

Customer Service

Purchasing

Production

Logistics

Sales



It’s evident that synergies are going to offer customers very positive impacts like better price, better quality of products, stronger partner network, etc. It’s even more important to know that this is the time when competition is constantly knocking on the doors of the same customer with better propositions and more commitment. After all it’s not always that situations like these happen.

clearly over the years several customers will be benefitted but the objective of building the customer cockpit© was to focus on those customers that have a tendency to leave because of the post m&A activities and its impact on their business. Below is a snapshot of what all companies drive towards synergies and how customers feel at an overall business level as a result of that.

here the reasons behind the development of the customer cockpit© and how analytics can play a major role in this situation. there are many examples of companies realizing up to 40% of synergy savings through It enablement of various functions. many companies today thus involve It right from the Due Diligence step to ensure that the deal will deliver the expected benefits. Also, companies doing m&A’s today make special investments upfront to build an It platform -

68% of the customer defection is because of Sales & Customer Service Indifference

80% of the failed M&A’s are accredited to Synergy Management

33% of M&A’s fail

Outcome/impact to their business, Loss of trust on the supplier, Ongoing relevance by supplier

5 – 20% customers defect during any M&A and

while companies rely heavily on communication and take provisions, the importance of identifying proactive levers is the key

to a successful M&A

CUSTOMER DRIVING EFFICIENCIES TO GAIN SYNERGIES

Purchasing Category consolidation

Production Optimize global production network

Outbound Logistics Optimize Career network & transportation costs

Inbound Logistics Optimize inventory & storage costs

Sales & Marketing Improve Sales & Marketing efficiency

Customer Service Optimize back-office services

Innovation & Development Streamline the product portfolio

Information Technology Integration and common platforms

85 – 95%

We have a one stop shop supplier

Great partner

Happy

No worries

5 – 15%

No delivery or delayed delivery

Frustrated

Uncertain

Disappointed



agile and robust enough to support future m&A operations. the best practice that can be presented after observation of industry wide m&A’s is to integrate It pre & post acquisitions in a 6 to 18 month timeframe. this truly depends on the size, nature of business, number of entities & geographies involved. companies that have not done this and have let It systems remain unchanged for several years have slowed down synergies at an overall business level.

So looking at role of It and knowing that companies have to integrate It – an entire framework was devised that is driven by a robust data strategy. Needless to say that for any analytics to be fruitful a well laid out integration & data strategy is a foundational block.

referenCe ArChiteCture

the solution provides separate secure workspaces for each party involved in the m&A to load data from their enterprise applications, data stores, spreadsheets, etc. the built-in Data Quality (DQ) and master Data management (mDm) cleanse, standardize, de-duplicate, and establish relationships within and between the data sets.

enriched data from both parties’ source systems ingested to a common information model helps discover relationships between customers, products and vendors of the two parties’. the common information model and data set enables contextual analysis and visualization of the KPIs driving customer experience.

teChnOlOgy At plAy: Churn AnAlysis

objective of the analysis is to identify customers who will discontinue service or cancel orders during a specific time period based on historical data.

Future System

Azure HDInsight (Hadoop)

Azure Stream Analytics

Model Development

Azure Machine Leading

Power BIPublished Models

Data Model

Azure Data Catalog

Azure Data Factory

HEC(Sys of Innovation)

SaaSCRM & Others)

Customer Cockpit©

Dashboards & KPIs for Status

and Continuous improvement

Priority reports and watch lists

(Sys of Innovation )

SQL`

(Sys of Innovation )

ERP

BI, BW

Azure

Azure SQL Server/ Data Warehouse



After comparing the results from various models, the one having higher accuracy, precision and AUc is chosen. In the illustration below the ‘two class logistic Regression model’ has higher Accuracy, Precision and AUc, so the Regression model is more accurate compared to the ‘two class Boosted Decision tree’.

y Accuracy is the ratio of correctly predicted observations

y Precision looks at the ratio of correct positive observations

y A model with an AUC (Area Under curve) Score near 1, has a very good performance

sOlutiOn

this is a next generation solution that makes any organization future ready in terms of understanding customers and the customer’s customer. the proposal is for a 2-speed architecture framework by building this as a digital layer so that it has data about customers and all necessary metrics can be identified through that data by using the proposed architecture.

TWO CLASS LOGISTIC REGRESSION

Accuracy Precision AUC

0.821 0.813 0.837

TWO CLASS BOOSTED DECISION TREE

Accuracy Precision AUC

0.795 0.714 0.807

Data Profiling - Coverage

Apply Churn Model Train Model Score Model Evaluate

Model

%Records havingnon-null values

Apply modelto identify churn population

The machine learning model uses the data to extract statistical patterns and build a model

Score model to generate predictionsusing a trained classification or regression model

Evaluation model to measure the accuracy of a Trained model



dAtA gOvernAnCe

Pre-merger analysis being a one-time activity most of the time the laboriously prepared data, for due diligence, is discarded as they represent only a snapshot and are not up-to-date. this is not the case anymore, using etl and change Data capture (cDc) technologies the customer cockpit© database can be updated for post-merger analysis and customer cockpit© for the merged entity.

one of the keys to any successful merger is the speed of integration. the cleansed integrated dataset prepared for the customer cockpit© can be used as an afterburner to boost up integration and drive operational efficiency.

In the event the companies decide not to merge, the outlay for each party is minimized and they can continue to use the customer cockpit© on their own data set.

CREATING CUSTOMER COCKPIT©

Customers Retention Dashboard

Customer’s Customer

Customer Experience Monitor

Act on the metrics that make customers

defect

Listen to what customer’s customer

are saying of products of the products

Watch customers experience overall

health

Analyze the various metrics through the pre-configured KPI’s identified for ensuring

maximum customer retention

Understand how to make products better and go back to customers with

insights on how to better their products

Put the information together which impacts customer experience by

means of tools

Customers with the risk of leaving

CUSTOMER SEGMENTATION WITH KEY KPI’S TO BE DEFINED

Customers that need to be retained

Identify their potential to grow or assess their potential

Defined must meet criterias to track these customers

Exclusive top[ 100 customers dashboard for driving a relationship

Automated customer messages

Pre-recorded campaigns for customers falling below metrics

Segregate them in a common customer category across 3/2 business’

Identify them in an existing prolonged issues category

Define metrics that will sway these customers to the other side of the fence

Monitor, alert and act for different stakeholders through dashboards and Customer Cockpit©

We are proposing to build a Customer Cockpit© platform to impact these and larger set of customers



hcl has built the KPI’s and data models for customer cockpit© and is offering this service as an on premise solution as well as an Analytics serv ice. Below is a snapshot of what the solution looks like

Business Benefits

this model is aimed at delivering several metrics and impacts various parts of the organization by means of :

1. Predicting which customer has a potential to churn

2. Providing a line of thought on the end to end customer experience

3. Providing a snapshot of various performance viz. Sales, marketing, Product, etc

Stakeholders that will get impacted are as follows:

Role Configuration What he can measure

C-level Dashboard Organizational performance against Top Customers Focus on customers that have a high probability to churn

Business Unit Heads Business view for each Unit and customers representation Performance for al customers against the defined metrics

Customer Experience/Service Head

Focus on impact of various metrics and take corrective measures

Understand the impact of incidents/cancellations

Chief Digital Officer/Chief Marketing Officer

Corrective measures to be taken on communication Define right marketing campaigns based on the impact

Product Managers Product performance Product reach and cross selling opportunities

Sales Managers Sales performance Geographical impact of restructuring CRM Alignment/feedback



referenCes

http://www.bloomberg.com/news/articles/2016-01-05/2015-was-best-ever-year-for-m-a-this-year-looks-pretty-good-too

RB study “Successful PmI synergy management”, october 2011

https://www.capgemini-consulting.com/resource-file-access/resource/pdf/It_in_m_A.pdf

COntACts

Anubhav srivastava

Sr. Director, manufacturing

hcl technologies

[email protected]

susanta Mohanty

Group technical manager

hcl technologies

[email protected]

Ashar pasha

Solutions Director

HCL Technologies

[email protected]

steve thompson

VP, cRm

hcl technologies

[email protected]



https://www.capgemini-consulting.com/resource-file-access/resource/pdf/IT_in_M_A.pdf

https://www.capgemini-consulting.com/resource-file-access/resource/pdf/IT_in_M_A.pdf

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ABOut hCl

About HCL Technologies

hcl technologies is a leading global It services company working with clients in the areas that impact and redefine the core of their businesses. Since its emergence on the global landscape, and after its IPo in 1999, hcl has focused on ‘transformational outsourcing’, underlined by innovation and value creation, offering an integrated portfolio of services including software-led It solutions, remote infrastructure management, engineering and R&D services and business services. hcl leverages its extensive global offshore infrastructure and network of offices in 31 countries to provide holistic, multi-service delivery in key industry verticals including Financial Services, manufacturing, consumer Services, Public Services and healthcare & life sciences. hcl takes pride in its philosophy of ‘employees First, customers Second’ which empowers its 104,000 transformers to create real value for customers. hcl technologies, along with its subsidiaries, had consolidated revenues of US$ 6.2 billion, for the Financial Year ended as on 31st march 2016 (on ltm basis). For more information, please visit www.hcltech.com

About HCL Enterprise

hcl is a $7 billion leading global technology and It enterprise comprising two companies listed in India – hcl technologies and hcl Infosystems. Founded in 1976, hcl is one of India’s original It garage start-ups. A pioneer of modern computing, hcl is a global transformational enterprise today. Its range of offerings includes product engineering, custom & package applications, BPo, It infrastructure services, It hardware, systems integration, and distribution of information and communications technology (Ict) products across a wide range of focused industry verticals. the hcl team consists of over 110,000 professionals of diverse nationalities, who operate from 31 countries including over 505 points of presence in India. hcl has partnerships with several leading global 1000 firms, including leading It and technology firms. For more information, please visit www.hcl.com

customer retention - analytics paving way

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