WHITE PAPER

Thomas A “Tony” RathburnSenior Consultant

The Modeling Agency

www.the-modeling-agency.com

ATi – Adaptive Technologies, Inc.

ATi creates Intelligent InformationSM from YOUR data to solve your complex and dynamic business problems.

This paper reviews how ATi’s unique approach to blending service and software, combined with a unique, proprietary analytics environment, delivers real world business solutions. ATi specializes in business solutions offering the following benefits:

• Maximize your ROI and target your promotions appropriately

• Improve your customer retention

• Define portfolio of customers to achieve your goals

• Predict your high risk situations

• Increase your up-sells and cross-sells by targeting the right customer

WHITE PAPER

2

Overview

As a business manager, you are involved in making decisions on an ongo-

ing basis in a highly complex operating environment. ATi is helping clients reach

higher levels of confidence in decision-making by harnessing advanced technol-

ogy and science in a way that specifically meets their client’s business objectives.

The result is improved business performance.

Clients are no longer left with the often overwhelming task of mastering

a range of technologies in an attempt to determine the right blend of software,

data and techniques that will encapsulate the best approach to achieving their

business goals.

ATi’s software-as-a-service (SaaS) approach to delivering predictive ana-

lytic solutions is business oriented versus technically oriented. By taking the time

to understand their clients’ business objectives prior to initiating a project, they

can focus on utilizing all available data and deliver custom solutions in a format

tailored to the needs of their users.

ATi’s areas of predictive analytics and business intelligence expertise in-

clude:

Segmentation and Profiling•

Customer Retention•

New Customer Acquisition •

Targeted Marketing•

Risk Management•

Executive Summary

“The application of advanced technologies and science to improve business decision-

making has been encumbered by an overemphasis on technology, rather than

focusing on specific business goals and objectives. ATi

brings the focus back to the needs of their clients.”

3

The application of advanced technologies and science to improve business

decision-making has been encumbered by an overemphasis on technology, rather

than focusing on specific business goals and objectives. ATi brings the focus back

to the needs of their clients. Their project management approach is developed in

four major areas:

Defining business objectives•

Identifying, evaluating and accessing all relevant data•

Advanced modelling to provide enhanced decision solutions•

Maintaining solutions•

Unlike most intelligent decision support environments in analytics and

business intelligence tools, ATi develops custom web-based user interfaces to de-

liver specific recommendations to the business manager. These real-time indica-

tors take the form of a dashboard applet to give concise feedback to the user with

supporting customized screens and data access. ATi’s customized solution offers

unique benefits to their clients:

Flags and alerts to customer metrics with specific recommendations for • decision changes.

Dashboard view of actual activities vs. recommended, with comparative • impact on performance metrics.

Incorporation of changes in priorities to assist in “what’s best now” adap-• tation.

Decision impact implications in real-time.•

Incorporation of confidence levels into recommendations.•

Incremental enhancement opportunities within complex decision environ-• ments.

Business Challenge

4

Technical Challenge

The technical staffs of organizations developing predictive analytics and

business decision models have traditionally been faced with three purchase op-

tions: acquire a set of technical tools, build solutions internally or a combination

buying tools and retaining an external consulting firm to build a solution.

Most consulting firms deliver a solution approach that has been general-

ized to the needs of the client base they serve. By offering a set of semi-custom,

or off-the-shelf solutions, they achieve a level of consistency and cost savings in

the operation of their consultancy. Unfortunately, this approach is more consis-

tent with commodity items and typically results in requiring the client to adapt to

the developed solution. A more desirable approach would involve the develop-

ment of a solution that enhances performance based on the particular business

objectives of the firm, while simultaneously being able to adapt to the opera-

tional flexibility required in managing a sophisticated business in today’s environ-

ment.

Buy Option Build Option

Consistent approach that has been validated for a particular problem. However, specific

functionalities may not match organizational needs

Cost savings to vendor that may be passed on to clients

Functional area projects may not incorporate enterprise level objectives

Purchasing tools that are not used or needed; however, represented in cost due to the

software/product packaging.

Development based on custom set of performance metrics and business

objectives

Design of operational flexibility to adapt to changing needs

Requires investment in additional training and software

Early adoption efforts are often wrongly targeted at technical staff rather than to the

functional areas

Requires accurate representation of business objectives adopted by the

enterprise and the functional units involved

Developers often focus on technical proficiency rather than advancing business

objectives

“ATi’s SaaS model provides the expertise that cannot

be hired, yet provides solution flexibility that is

not dependent on any one given technology or piece of software. You get the best of technology and highest level

expertise in one place.”

5

Technical Challenge

The alternative to retaining a consultancy requires that the technical staff

of an organization acquire a set of technologies or tools that are significantly

different in their purpose and operation than those currently utilized for general

business intelligence. The technical staff in most organizations are tasked with

the capture, storage and dissemination of data required to support the daily op-

erations of a firm. Their focus, appropriately, has been based on the data man-

agement requirements and implementing information technologies to meet these

needs.

Developing quantitative models of an organization’s business decision

processes involves the utilization of data for the specific purpose of enhancing the

performance of an organization. This goal-oriented utilization of data requires an

accurate representation of the business objectives adopted by the enterprise, and

by the various functional units. Few firms possess well documented, standardized

metrics to measure performance at all levels of the organization. Instead, perfor-

mance metrics are often implied and the understanding of performance is typi-

cally subjective and inconsistent across the organization. Additionally, individual

functional areas often focus only on the performance of their understanding of

their primary responsibilities without taking larger enterprise level metrics or con-

sidering the impact of their decisions on other areas of the organization.

The adoption of quantitative techniques often inappropriately elevates the

mastery and utilization of advanced model development technologies in an at-

tempt to force performance enhancement through purely technological solutions.

This approach generally fails, not because the technology is lacking, but due to

poor project understanding and design. There is limited expertise of professional,

skilled scientific modellers.

6

Technical Summary: ATi SaaS Advantage

ATi addresses the limitations associated with both build and buy ap-

proaches by: developing an understanding of the various overlapping sets of goals

recognized within the organization; understanding the requirements of the indi-

vidual decision makers within the organization; analyzing the cross-area impact of

various scenarios in an if-then environment; and delivering solutions that adapt

to “what’s best now”. ATi delivers SaaS solution with a view of customer-centric

decision models.

ATi supports organizations’ development of quantitative, data-driven deci-

sion models shifting their orientation to the utilization of technology. The meth-

odology begins with a focus on planning to predict. This approach emphasizes

the unique requirements of each client, their existing environment, and what they

are trying to achieve.

ATi encourages a building block approach that implements an effective so-

lution development platform to support incremental enhancement development.

The systems are built and maintained by ATi’s science and technology experts.

This platform has its own data structures, which allows for multiple perspectives

User Benefits Design Benefits

Zero footprint implementation

Flags and alerts to customer metrics with specific recommendations for decision changes

Dashboard view of actual activities vs. recommended with comparative impact on

performance metrics

Incorporation of changes in priorities to assist in “what’s best now” adaptation

Decision impact implications in real time

Focus on utilization of technology rather than raw technology

Recognizes the unique requirements of each client, their existing environment, and what

they are trying to achieve

Custom performance metrics matching business objectives

Incorporation of confidence levels into recommendations

Incremental enhancement opportunities within complex decision environments

7

Technical Summary: ATi SaaS Advantage

on the data and delivery of robust output in either real-time or batch operations.

The decision models developed from this environment give the decision-

maker a set of custom dashboard indicators based on the unique objectives and

metrics of the decision process at hand. Development of these dashboards is

performance driven with the design based on how they are to be used, where

they are used and why.

An additional enhancement that ATi has incorporated into their develop-

ment SaaS methodology is the ability of the user to consider adopting various sce-

narios and the impact of each on performance. This provides the user with the

unique ability to perform if-then predictive analysis and consider the impact of a

given prospective solution on other systems, prior to implementing a particular

decision. Under each of these scenarios, the user maintains ultimate control of

the individual solution to be implemented, the level of confidence to be expected

in the outcome, and a dashboard view of “I did” vs. “recommended”. ATi’s solu-

tions then adapt to user imposed course changes recommending a “what’s best

now” next step.

ATi’s solutions within an organization are based on the development of an

agent factory of specific decision support modules. These agents, who adopt the

role of human experts in this scenario, reinforce or refute decisions based on cur-

rent and past experiences captured in the data stored in the development plat-

form. Unlike most other approaches, ATi’s agents allow for higher resolution in

the decision process. This approach supports decisions at the individual level, not

just decisions where individuals are a member of a group. ATi’s development of

agents also allows for the support of multiple sets of goals throughout the organi-

zation with pre-determined levels of effectiveness.

ATi provides a zero-footprint development SaaS solution to its clients. It

requires neither new software nor additional staff. When maintenance is re-

quired, ATi provides the expertise to quickly make adaptations.

8

What’s In It For You?

ATi combines the advantages of a traditional software platform with those

of a consulting engagement and overcomes the limitations of both. Their con-

ceptual approach blends development expertise with advanced technologies in a

seamless SaaS development and delivery predictive analytics solution.

Traditional software platforms require the client to develop the skills to

conceptualize a project appropriately, gather and analyze related data from a

variety of sources, evaluate an array of potential quantitative techniques, validate

potential candidate models, and maintain delivered solutions.

Consulting firms possess development expertise but generally deliver

“black box” solutions that may not be optimized to client metrics.

ATi’s SaaS solutions eliminate costly hardware and software investments to

offer substantial business justifications:

Lower risk than either a buy or a build approach•

More rapid implementation•

Higher ROI•

No new tools to purchase •

Custom web-based solutions•

Models and scientific expertise provided by ATi•

ATi maintains platform application •

ATi offers a unique service to blend the build vs. buy technical decision

faced by most firms.

“Clients are no longer left with the often overwhelming task of mastering a range of

technologies in an attempt to determine the right blend of

software, data and techniques that will encapsulate the best approach to achieving their

business goals.”

9

Benefits Summary

Development Cycles ATi Solution Benefits

Project Definition Solutions optimized to client specific business objectives and performance metrics.

Incorporation of goal sets, not limited to individual goals.

Custom solution development, not productized general solutions.

Implementation support - how, where and why to use developed solutions.

Incremental enhancement planning and development environment.

Data Leverage all relevant data.

Development of solution-specific data structures to support the project.

Analysis of all available data not restricted to data with assumed importance.

Explainable relationships between variables and recommendations.

Multi-perspective view of data generating robust output.

Solutions updated as additional data becomes available.

Modeling Consideration and evaluation of multiple advanced quantitative techniques appropriate to solution.

Experimental design that ensures development and validation of solution models.

Determined effectiveness.

Incorporation of confidence levels into recommendations.

Decisions at the individual level... not the individual as a member of a group.

Allowance for “what-if” comparison of recommended course vs. actual activity and impact on performance metrics.

Models learn and adapt.

10

Benefits Summary

Development Cycles ATi Solution Benefits

Solution Delivery Web-based delivery environment.

Decisions in either real time or batch environments.

Output available across the client organization.

Custom dashboard applets supporting screens and data access support.

Inclusion of confidence levels accompanying recommendations.

Solutions adapt to “what’s best now”.

Flags and alerts reflecting impact on client metrics adapting to recent modifications of decisions.

Agent factory reinforces/refutes decisions based on current and prior experiences.

Model Maintenance & Updates Adaptive incorporation of new experiences into models.

Confidence reporting enhanced with on-going utilization of decision history.

11

Technical Comparisons

Technical Solution Client Benefit

Statistical Modeling Advantages:

Expertise and software • packages are readily available

Often powerful in static data • sets with less variance

Most powerful in data sets • with fewer variables

Simplest techniques are easily • understood by most

Large number of possible • models available

Disadvantages:

Models are static•

Often used outside its scope • of effectiveness

Oversensitive to outliers in • the data

Not ideal for larger data sets•

No guidance on what model • to choose

No magic bullet model, every • one has weaknesses

Needs expert modeler • to compare models and decide which are the most appropriate

ATi Solution:

Manages large, dynamic • data sets most commonly associated with business issues with ease

Uses multiple statistical • modeling techniques

Compensates the weaknesses • of one model by combining it with another

Able to identify outliers and • absence of data without its affecting the accuracy of the outputs.

Outputs are transparent with • the key reasons “why”

Artificial Intelligence Advantages:

Able to learn from new data • within the data set

Handles large data sets with • broad statistical distribution well

Doesn’t require perfect data•

Disadvantages:

Must be “trained” and • maintained by an expert in order to keep it “tuned”

Results are very sensitive to • user experience and expertise

Lack transparency and • interpretability

Requires high performance • computing environment

ATi Solution:

Agent-based where an agent • can represent a statistical model or an artificial intelligence model

Multiple types of models • within the platform allow the weaknesses of one modeling technique to be overcome by the strengths of another

More accurate predictions • through agent consensus

Outputs are transparent • (no black boxes)— include the key drivers and level of confidence associated with predictions

Analyses are the functionality • of the technology and hence the iterative processes are “automatic”

Maintained by ATi’s team of • experts on a 24/7 basis

12

Target Market

Solution Functional Area

Prospect Ranking Sales, Marketing

Customer Ranking Sales, Marketing

Customer Valuation Sales, Marketing

Non-Standard Transaction Identification

Compliance, Customer Service

Product Feature Enhancement Product Development, Custumer Support

Customer Attrition Management Sales, Marketing

Cross Sell/Up Sell Sales, Marketing

Lead Scoring Sales, Marketing

Risk Management All Areas of Business

Event Based Marketing Sales, Marketing

Customer Loyalty Sales, Marketing

Customer Profitability All Areas of Business

13

Summary

Predictive analytics is emerging into the mainstream business environment

as the next wave of technologies tries to provide a true competitive advantage.

Many new books on the subject targeted at the business user are being published

while software developers in the area are rapidly gaining access to both tactical

and strategic level managers in many organizations. However, for the business de-

cision maker the initial entry into the work of advanced analytics can be daunting.

The skill sets required to merge the business and technical issues are rarely found

in one individual, or even in one company.

In view of this, traditionally, users have faced a buy vs. build decision. Is it

better to engage a consulting firm and potentially lose the customization desired?

Or better to give up the technology capture to build future projects and become

dependent on an outside resource for critical decision enhancements?

Or, do we make the investment necessary to purchase the talent and skill

sets necessary to explore a highly experimental set of technologies, uncertain of

the risks and with a high probability of unsuccessful results.

At first glance, ATi’s solutions can be difficult to embrace because of the

applications of complex science and advanced technology to address real business

needs. Not because they lack merit. Rather, because they do not fit neatly into

the traditional solution model. They are neither a software vendor, nor a consult-

ing firm. But they do offer an exceptional opportunity to overcome many of the

challenges facing even the experienced predictive analytics solution developer.

ATi’s SaaS model provides the expertise that cannot be hired, yet provides

solution flexibility that is not dependent on any one given technology or piece of

software. You get the best of technology and highest level expertise in one place.

“ATi combines the advantages of a traditional software platform with those of a

consulting engagement and overcomes the limitations of both. Their conceptual

approach blends development expertise with advanced

technologies in a seamless SaaS development and

delivery predictive analytics solution.”

14

More Information

About Adaptive Technologies, Inc. (ATi)

Adaptive Technologies, Inc. (ATi) was founded in 2001 by two world re-

nowned physicists with a passion to use the power of science, human insight and

technology to solve real business challenges. From this vision ATi has evolved into

an elite, research-driven enterprise combining the skill sets of business profes-

sionals, scientists, software engineers and sophisticated data specialists. ATi’s

team has created a proprietary predictive analytics platform so leading companies

make better data-driven decisions. For details about ATi’s product and services,

reference: www.adaptiveinc.com, e-mail [email protected] or call

(602) 923-4200.

About the Author

Thomas A. “Tony” Rathburn is a senior consultant with The Modeling

Agency (TMA) and the primary instructor of TMA’s “Data Mining: Level I”

(http://www.the-modeling-agency.com/training) course. Tony has worked with

commercial and government clients to develop data mining solutions to signifi-

cant business applications since the mid 1980’s. Mr. Rathburn delivers custom

workshops and consults on a wide range of commercial assignments -- many

involving CRM applications. He holds extensive data mining experience in the

banking, insurance, and financial industries.

Mr. Rathburn’s Experience includes seven years teaching MIS and statistics

at both the graduate and undergraduate level while an instructor in the College

of Business at Kent State University. Tony’s consulting expertise has been concen-

trated in the business utilization of advanced knowledge discovery techniques.

He served as Vice President of Applied Technologies for NeuralWare, Inc., a neural

network tools and consulting company. He was also the Research Coordinator for

LakeShore Trading, Inc., a successful futures and options trading firm on the Chi-

cago Board of Trade. Reference details about The Modeling Agency at:

www.the-modeling-agency.com or call (281) 667-4200.