Instrumented Interconnecteds Intelligent

IBM Chairman and CEO, Ginni Rometty at the IBM CIO Leadership Exchange in Johannesburg, South Africa, today.

Africa is already well known for leapfrogging the rest of the world in use of mobile money, but African countries now have another big leapfrogging opportunity: big data analytics.

Across the continent, there’s a tremendous potential for using data analytics in powerful new ways in a wide range of industries and domains, from telecommunications and banking to transportation and healthcare.

The big data opportunity for Africa came into sharp focus this week when IBM CEO Ginni Rometty and key members of her executive team visited Africa to meet with clients and government leaders. “Going forward, data is going to be THE source of competitive advantage,” Rometty told a South African audience.

Already, African companies are harnessing big data to transform their businesses. Take Santam Ltd., the leading short-term insurance company in South Africa. The company is using predictive analytics to streamline the processing of claims and to spot potentially fraudulent claims.

When Anesh Govender reported for duty as Santam’s head of operations for finance, his boss told him that he wanted to do more with less. Govender quickly spotted data as his leverage point. “I was amazed how much data was available but how little of it was being used, ” he said. Govender was one of the presenters at IBM’s South African gathering.

Anesh Govender, Santam Ltd.

He decided to completely overhaul the claims processing system. In the past, every claim went through the same steps of being reviewed manually by staff members. Today, they’re all fed into a predictive analytics software program that channels routine claims into a queue for quick action. The others go through deeper analysis that takes into account not just the current claim but a lot more information about the customer and their past claim activities. Computer algorithms search for patterns that suggests the claims might be fraudulent. One example: Fraudsters typically start with small false claims and, if they’re successful, submit larger ones.

Govender’s staff has tuned the algorithms so they identify the maximum amount of false claims without producing too many false positives—which require extra work by the claims processing staff. Today, they kick out only 1% of claims for deep fraud analysis, and about 30% of them are fraudulent.

The system has indeed made it possible for Santam to do more with less. While the volume of claims has risen 8% since the new system was put in place, the staff level has stayed level. Before, it took at least three days to settle legitimate claims. Now Santam clears them within an hour of receiving them.

Looking ahead, the most promising of the big data leapfrogging opportunities for Africa lie within the telecom industry. Mobile phones are now widespread, as are SMS based services such as mobile payments and money transfer. Next, observers expect rapid adoption of affordable smart phones capable of handling more sophisticated applications, such as social networking. It all adds up to a massive amount of data in the hands of the mobile carriers about what people are doing with their phones and where they are. “Businesses that find opportunities in data will do better,” says Michael Rhodin, senor vice president of IBM’s software solutions group. “These businesses will use the combination of data sourced from customer relationship management, operations and talent management.”

What will the carriers do with all that data? For starters, they can look for patterns in customers’ behavior that suggests they’re about to drop their service. So-called “churn” is expensive for carriers. But, alerted that particular customers are dissatisfied, carriers can approach them with offers that might entice them to stay on. Bharti Airtel, India’s largest mobile carrier, which now has a foothold on the African continent, already does this kind of analysis on its home turf.

As the mobile market continues to develop, the carriers will be in a strong position to offer their customers new applications and services. They’ll not only own the relationship with the customer, but they’ll see data patterns in customer behavior that helps them anticipate customer’s needs. Marketers have long dreamed of being able to address not just market segments but individual customers. Big data could finally turn this dream into a reality.

And it could happen first in Africa.

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