We’re thrilled to launch this blog at a point when commodities-driven industries are on the verge of a sea change. Deep analytics has changed the landscape of industry after industry and is about to do the same in commodities. This change represents a chance to gain serious competitive advantage for those who go after it.
The airline, financial services, and retail industries have been using predictive analytics for a long time now. American Airlines was an early adopter during the period of industry consolidation following the deregulation of 1978. Using predictive analytics, American introduced sophisticated new pricing strategies and increased its market share even as nine other major U.S. airlines and hundreds of small carriers went rapidly out of business.
Financial services followed in the early 1990’s. Like the airline industry, companies like Providian Financial (now part of JP Morgan Chase) were among the first to segment and score consumer credit risk. This allowed them to charge closer to their actual cost to serve each customer segment.
In the late 90’s retail began adopting math in a big way to model pricing and promotion. Retail profit margins are thin, so the motivation to find new ways of boosting profit is strong. Our previous startup, DemandTec (now a part of IBM) played a role in helping retail companies locate more margin, as did ProfitLogic (now a part of Oracle). Gradually retailers like Safeway and WalMart began using predictive analytics to optimize prices and promotions down to the level of each item in each store. The result? Customer demand was more precisely met, errors in store ordering were reduced, and margins rose.
And now, this opportunity has come to commodities industries. As commodities industries veterans, we’re out to help these industries achieve the same profit margin gains enjoyed by other industries before it. We’ve seen that a powerful combination of internal and third party data can help companies achieve new heights of accuracy about future demand and pricing, even as the need for expensive external consultants is reduced.
On this blog, we’ll be highlighting how predictive analytics is transforming and modernizing commodities-based businesses. We’re thrilled you’re on this journey with us. We’ll see you along the way.