CASE STUDY CHAPTER 6 : INTERACTIVE SESSION: ORGANIZATIONS

Business Intelligence Helps the Cincinnati Zoo Know Its Customers

            Founded in 1873, the Cincinnati Zoo & Botanical Garden is one of the world’s top-rated zoological institutions, and the second oldest zoo in the United States. It is also one of the nation’s most popular attractions, a Top 10 Zagat-rated Zoo, and a Parents Magazine Top Zoo for Children. The zoo’s 71 acre site is home to more than 500 animal and 3,000 plant species. About 1.2 million people visit this zoo each year.

            Although the Zoo is a non-profit organization partially subsidized by Hamilton County, more than from fundraising efforts, the remainder coming from tax support, admissions fees, food, and gifts. To increase revenue and improve performance, the Zoo’s senior management team embarked on a comprehensive review of its operations. The review found that management had limited knowledge and understanding of what actually happening in the Zoo on a day-to-day basis, other than how many people visited every day and the zoo’s total revenue.

            Who is coming to the Zoo? How often do they come? What do they do and what do the buy? Management had no idea. Each of the Zoo’s four income  streams- admissions, membership, retail and food service- had different point- of- sale platforms, and the food service business, which brings in $4 million a year, still relied on manual cash registers. Management had to sift through paper receipts just to understand daily sales totals.

            The Zoo had compiled a spreadsheet that collected visitors’ ZIP codes, hoping to use the data for geographic and demographic analysis. If the data could be combined with insight into visitor activity at the Zoo – what attractions they visited, what they ate and drank, and what they bought at the gift shops – the information would be extremely valuable for guiding marketing.

To achieve this, however, the Zoo needed to change its information systems to focus more on analytics and data management. The Zoo replaced its four legacy point of sale systems with a single platform - Galaxy POS from Gateway Ticketing Systems. It then enlisted IBM and BrightStar Partners (a consulting firm partnering with IBM) to build a centralised data warehouse and implement IBM Cognos Business Intelligence to provide real-time analytics and reporting.

Like all outdoor attractions, the zoo’s business is highly weather-dependent. On rainy days, attendance falls off sharply, often leaving the Zoo overstaffed and overstocked. If the weather is unusually hot, sales of certain items such as ice cream and bottled water are likely to rise, and the Zoo may run out of these items.

The Zoo now feeds weather forecast data from the U.S National Oceanic and Atmospheric Administration (NOAA) Website into its business intelligence system. By comparing current forecasts to historic attendance and sales data during similar weather conditions, the Zoo is able to make more accurate decisions about labor scheduling and inventory planning.

As visitors scan their membership cards at the Zoo’s entrance, exit, attractions, restaurants, and stores, or use the Zoo’s Loyalty Rewards card, the Zoo’s system captures these data and analyses them to determine usage and spending patterns down to the individual customer level. This information helps the Zoo segment visitors based on their spending and visitation behaviors and use this information to target marketing and promotions specifically for each customer segment.

One customer segment the Zoo identified consisted of people who spent nothing other than the price of admission during their visit. If each of these people spent $20 on their next visit to the Zoo, the Zoo would take in an extra $260,000, which is almost 1 percent of its entire budget. The Zoo used its customer information to devise a direct mail marketing campaign in which this type of visitor would be offered a discount for some of the Zoo’s restaurants and gift shops. Loyal customers are also rewarded with targeted marketing and recognition programs.

Instead of sending a special offer to its entire mailing list, the Zoo is able to tailor campaigns more precisely to smaller group of people, increasing its chances of identifying the people who were most likely to respond to its mailings. More targeted marketing helped the Zoo cut $40,000 from its annual marketing budget.

Management had observed that food sales tend to tail off significantly after 3 PM each day, and started closing some of the Zoo’s food outlets at that time. But more detailed data analysis showed that a big spike in soft-serve ice cream sales occurs during the last hour before the Zoo closes. As a result, the Zoo’s soft-serve ice cream outlets are open for the entire day.

The Zoo’s ‘Beer Hut’ concession features six different brands, which are typically rotated based on sales volume and the seasons. With IBM analytics, management can now instantly identify which beer is selling best, on what day, and at what time to make sure inventory meets demand. Previously, it took seven to 14 days to get this information, which required hiring part-time staff to sift through register tapes.

The Zoo’s ability to make better decisions about operations has led to dramatic improvements in sales. Six months after deploying its business intelligence solution, the Zoo achieved a 30.7 percent increase in food sales, and a 5.9 percent increase in retail sales compared to the same period a year earlier.  

                                                      

        Question 1.     What people, organization, and technology factors were behind Cincinnati Zoo losing opportunities to increase revenue?

The factors of losing opportunities to increase revenue are the management and the systems of Cincinnati Zoo itself.  This is because the management had limited knowledge and understanding of what was actually happen in the Zoo om daily basis. They also did not know what was the total revenue and the amount of people came to the Zoo every day. The system that the embedded now is out of date, because they are using different system for different department, which is different point-of-sale platforms. Other than that, they are still relied on manual cash registers, so the management had to sift through paper receipts to understand daily sales total.

       Question 2.     Why was replacing legacy point-of-sale systems and implementing a data warehouse essential to an information system solution?

         Replacing legacy point-of-sale systems and implementing a data warehouse because point-of-sale system are not synchronise and centralise because they had different point-of-sale, so it’s hard to identify and analysis the revenue for each day, the amount of visitor came to the zoo. Data warehouse make it much easier to provide secure access to this management. Data warehouse is all in one, the ability of receiving data from many different sources, meaning any system in Cincinnati Zoo can contribute data of the visitors.

       Question 3.  Describe the types of information gleaned from data mining that helped the Zoo better understand visitor behavior.

Firstly, Business Intelligence, Zoo needed to focus more on analytics and data management. The Zoo replaced its four legacy point of sale systems with a single platform. It enlisted IBM and BrightStar partners to build a centralized data warehouse and improvement IBM Cognos Business Intelligence to provide real time analytics and reporting. Secondly, high velocity automated decision making. The zoo now feeds weather forecast data from U.S National Oceanic and Atmospheric Administration (NOAA) website into its business intelligence system. By comparing current forecast to historic attendance and sales data during similar weather condition, the zoo is able to make more accurate decision about labor scheduling and inventory planning. In addition, zoo’s loyalty reward card, the zoo’s system captures this data and analyzes them to determine usage and spending patterns down to the individual customer level. This information helps the zoo segment visitors based on their spending and visitation behaviors and use this information to target marketing and promotion specifically for each customer segments.

Question 4.  How did the Cincinnati Zoo benefit from business intelligence? How did it enhance operational performance and decision making?

          Cincinnati Zoo enhances operational performance the operation by providing real-time analytics and reporting. Besides, the Zoo make more accurate decisions about labor scheduling and inventory planning by feed weather forecast data from U.S. national Oceanic and Atmospheric Administration (NOAA) Websites to comparing current forecasts to historic attendance and sales data during similar weather conditions.

            The Zoo use the information to achieve target marketing and promotions through use the Zoo’s Loyalty Reward card. The Zoo give rewarded to loyal customer to achieve targeted marketing and recognition programs. The Zoo’s soft-serve ice cream outlets are open for the entire day to achieve their income. Their use IBM analytics to identify which beer is selling best, on what day, and what time to make sure inventory meets demand which is previously take long time and required hiring part-time staff to sift through register tapes.

            The Cincinnati Zoo benefit from business intelligence is an operation has led to dramatic improvements in sales. Besides, the Zoo achieve a 30.7 percent increase in food sales, and a 5.9 percent increase in retail sales compared to the same period a year earlier.   

            The Zoo making decision to change information systems that aimed to focus more on analytics and data management. The Zoo replaced four legacy points of sales systems with a single platform like Galaxy POS from Gateway Ticketing Systems, enlisted IBM and BrightStar Partners.

                                             

CASE STUDY CHAPTER 2: BUSINESS PROBLEM-SOLVING CASE

Modernization of NTUC Income

NTUC Income (Income), one of Singapore largest insurers, has over 1.8 million policy holders with total assets of S$21.3 billion. The insurer employ about 3400 insurance advisors and 1200 office staff, with the majority across an eight branch network. On June, 1, 2003, Income succeed in migration of its legacy insurance systems to a digital web-based system. The Herculean task required not only the upgrading the hardware and applications, it also require Income to streamline its decade old-business process and IT practices.

Up until a few years ago, Income insurance processes were very tedious and paper-based. The entire business processes started with customers meeting with an agent, filling in forms and submitting documents. The agents would then submit the forms at branches, from where they were sent by couriers to the Offices Service department. The collection schedule could introduce delays of two or three days. Office Services would log the documents, sort them, and then send them to the department for underwriting. Proposals were allocated to underwriting staff, mostly randomly. Accepted proposal were sent for printing at the Computer Services department and then redistributed. For storage, all of the original documents were packed and sent to warehouse where, over two or three days, a total of seven staff would log and store the documents. In all paper policies compromising 45 million documents were stored over 16000 cartons at three warehouses. Whenever document needed to be retrieved, it takes about two days to locate and ship it by courier. Refiling again would take about two days.

In 2002, despite periodic investments to upgrade the HP 3000 mainframe that hosted the core insurance applications as well as the accounting and management information systems, it still frequently broke down. According to James Kang, the CIO at Income, “The systems breakdown were a real nightmare. Work would stop and the staff had choose either data reconciliation or backup. However, the HP 3000 backup system allowed restoration to only up to the previous day`s backup data. If the daily backup was not completed at the end of the day, the effected data would be lost and costly and tedious reconciliation would be needed to bring the data up to date.” In one of the hardware crashes, reconciliation would take several months to restore the data loss. In all, the HP 3000 system experienced a total of three major hardware failures, resulting in a total six days of complete downtime.

That was not enough. The COBOL programs that were developed in the early 1980s and maintain by Income`s in-house IT team, also broke multiple times, halted the systems and cause the temporary interruptions. In addition, the IT teams found developing new products in COBOL to be quite cumbersome and the time taken to launch new products ranged from a few weeks to months.

At the same time, transaction processing for policy was still a batch process and information was not available to agents and advisors in real-time. As a result, when the staff processed a new customer application for motor insurance, they do not know if the applicant was an existing customers to the Income, which led to loss of opportunity for crass products sales. Commenting on the problems faced by the agents, Kang said, “When the agents try to submit the documents using the notebooks, they ran into a lot of problems. HP 3000 was a terrible machine to connect to such devices. And with more of the advisors telecommuting, availability become an issue too.” In addition, various departments did not have to up-to-date information and had to pass physical documents among each other.

All this changed in June 2003, when Income switches to the Java based eBao Life System from the eBao Technology. The software comprised three subsystems- Policy Administration, Sales Management and Supplementary Resources. Commenting on its features, Kang said, “It has everything we are looking for- a customer-centric design, seamless integration with imaging and barcode technology, a product definition modules that support new products, new channels and changes in business processes.”

Implementation work started in September 2002 and the project was completed in nine months. By May 2003, all the customization, data migration of Income`s individual and group life insurance businesses and training were completed.

The new system was immediately operational at high-availability platform. All applications resided on two or more servers, each connected by two or more communication lines, all of which were “Load balanced.” This robust architecture minimised downtime occurrence due to hardware or operating system failures.

As part of eBao implementation, Income decided to replace its entire IT infrastructure with more robust, scalable architecture. For example, all servicing branches were equipped with scanners, monitor were change to 20 inches, PC RAM size was upgraded to 128MB and new hardware and software application servers, data based servers, web servers and disk storage systems were installed. Furthermore, the LAN cables were replaced with faster cables, a fiber-optic backbone and wireless capability.

In addition, Income also revamped its business continuity and disaster recovery plans. A real-time hot backup disaster-recovery center was implemented, where the machines were always running and fully operational. Data was transmitted immediately on the fly from the primary data center to the backup machines` data storage. In the events of the datacenter site becoming unavailable, the operation could be switched quickly to the disaster recover site without the need to rely on restoration of the previous day data.

Moving to a paper-less environment, however, was not easy. Income had to throw away all paper records, including legal paper documents. Under new system, all documents were scanned and stored on “trusted” storage devices- secured, reliable digital vaults that enable strict compliance with the stringent statutory requirements. Income had to trained employees who had been accustomed to working with the paper to used eBao system and changed the way they worked.

As a result of adopting eBao Life System, about 500 office staff and 3400 insurance advisors could access the system anytime, anywhere. Staff members who would telecommute enjoyed faster access information, almost as fast as those who accessed the information in the office.

According to Kang, “We got a singular view of every customer- across products and channel and even better life and general business lines. That allowed us opportunities to cross-sell and improve customer service, In addition, because of the straight through processing workflow capabilities, we had 50 percent savings on both the time and the cost needed to process policies. We had also cut the time needed to design and launch new products which was reduced from weeks to just days using the table-driven rule-based product-definition module.”

Commenting on the benefits of eBao Life System, the former CEO remarked, “…eBao Tech Life System has the best straight through processing workflow and it is very flexible. It cuts our new product launch time from months to days. It also allows us to supports agents, brokers and customers to do online services easily. I got a fantastic deal: the best system with much lower cost and much shorter implementation time. I have to say that this is a revolution!”

Question 1. What were the problems faced by Income in this case? How were the problems resolved by the new digital system?

            There are many problems faced by Income in this case. First, their HP mainframe that hosted the core insurance applications like accounting and management information system is frequently breakdown even they upgraded it. The system break down would cause all of the work to stop and the staff must choose whether to reconcile the data or backup, which allowed the data restoration to the previous day`s backup data only. If the daily backup was not completed at the end of the day, the effected data would be lost and costly and tiresome resolution is needed. They also have problem with hardware crashes where the resolution will take several months to recover.

            Problems also rose from the COBOL program like breaking for many time, paused system and causing temporary distractions. Developing new products for the COBOL program is quite burdensome and time taken to launch the product is not consistence since it could be weeks or months.

            Furthermore, they faced difficulty in transaction processing for policy underwriting since the information gathered is not available to all the agents and advisors in real time resulting loss of opportunity to cross-product sales.

            The agents are having hard time when they tried to submit the documents using the notebooks where HP 3000 unable to connect with other devices. The availability of telecommuting also became harder when more advisors are using it. They had to pass physical documents among each other since various departments did not have up to date information about clients.

Question 2. What types of information systems and business processes were used by Income before migrating to the fully digital system?

The type of information systems is legacy insurance systems. Business processes were used by Income before migrating is very tedious and paper-based. Customer must go to meet the agent, filing in form, submit the documents manually. The agent send all document to the Office Services department. Office Services will log documents and send to the department for underwriting staff. Accepted proposals were sent for printing at the Computer Services department and then redistributed. For storage all original documents, all documents will packed and sent to warehouse, it takes a few day and seven staff would log and store the documents. When the document  is needed to be retrieved, it take two day to locate and ship it by courier and also refilling.

Question 3. Describe the Information systems and IT infrastructure at Income after migrating to the fully digital system?

         The information system of Income upgraded when they restored its business continuity and disaster recovery plan using real-time hot backup where the machine always running and fully operational. The backup machines` data storage received data immediately from the primary data center. When the data center become unavailable, operation is switched to disaster recovery site without relying on the restoration of previous data.

        Moreover, they scanned and stored all of the document on “trusted” storage device which is secured, reliable digital vaults that enabling strict compliant with strict legislative requirement.

          The IT structure at the Income is more robust, scalable architecture which capable to minimize the downtime occurrence due to hardware or operating system failure in all services provided. The branches were equipped with scanners, monitors were changes to 20 inches, PC RAM was upgraded to 128 MB and new hardware and software for application servers and disk storage system were installed. Ten, the LAN cables were replaced with faster cables, fiber optic backbone and wireless capability.

            This system is operating at high availability platform where all applications resided on two or more server, connected by two or more communication lines in load balance.

Question 4. What benefits did Income reap from the new system?

The benefit in new system is having LAN cables were replaced with faster cables, a fiber-optic backbone, and wireless capability. The machines were always running and fully operational. Besides, the operations could be switched quickly to the disaster recovery site without the need to rely on restoration of previous day data.

Under the new system, all documents were scanned, stored and storages devices are secured. The system also could be accessed in anytime, anywhere and help telecommute enjoyed faster access to information.

eBao Life System also create opportunities to Income to cross-sell and improve customer service. In addition, the Income take short time to design and launch new products when their use new system.

New system is flexible that allows Income to support their agents, brokers, and customers to do online service easily. Other than that, new system is the best system with much lower cost and much shorter implementation time.

Question 5.  How well is Income prepared for the future? Are the problems described in the case likely to be repeated?

            Income prepared for future through revamped its business continuity and disaster-recovery plans. A real-time hot backup disaster recovery center was implemented, where the machines always running and fully operational. Second, in moving to a paperless environment, Income had to train employees who had been accustomed to working with paper to use the eBao system and change the way they worked. Lastly, cause of the singular view of every customer across product and channels and even better life and general insurance business lines. It is allows Income to take opportunities to cross-sell and improve customer service.