Domino’s Pizza, Inc. (DPZ), International Business Machines Corp. (IBM), and Union Pacific Corporation (UNP): How These Companies Are Benefiting From Business Analytics

What do Domino’s Pizza, Inc. (NYSE:DPZ), International Business Machines Corp. (NYSE:IBM), and Union Pacific Corporation (NYSE:UNP) all have in common? More than you might think. All three of these companies are implementing business analytics software to increase customer service, make smarter decisions, and drive costs out of their businesses.

There are thousands of gigabytes of data generated every day, from a multitude of sources. These sources could be anything from the number of times an ad is clicked, to the speed of a railroad car over a certain track, to the traffic patterns in a congested city. All of this is well and dandy, but the data is useless unless there is a way to structure it.

Enter International Business Machines Corp. (NYSE:IBM)’s Watson. Watson is a computer program that is best known for beating two Jeopardy! grand champions in 2011. Watson is a essentially a computer program that is part of a growing artificial intelligence wave that is growing in tandem with the amount of data that we have. Watson is much more than the Siri program that powers search on your iPhone. Watson actually breaks down human language to try and answer the question posed to it, as opposed to matching words you type in.

As all of these companies generate massive amounts of data, they will need more help from computer programs like Watson to decipher it and turn it into action. International Business Machines Corp. (NYSE:IBM) will benefit directly from this next wave in computing by selling its servers and analytics software to companies, and then charging a subscription fee to keep the clients’ software up to date.

Effective marketing dollars

Domino’s Pizza, Inc. (NYSE:DPZ) is one of the success stories when it comes to marketing dollars spent. Domino’s Pizza, Inc. (NYSE:DPZ) spends millions of dollars a year advertising specials, and then analyzing where their dollars were best spent. By implementing big data solutions, Domino’s Pizza, Inc. (NYSE:DPZ) is now able to connect their cash registers and online sales to see what advertisements brought in what customers, and which ones will be the most profitable to repeat. These effective uses of advertising data are what helped Domino’s Pizza, Inc. (NYSE:DPZ) increase their market share, and in turn, their earnings per share by 30% over the past three years.

Domino’s Pizza, Inc. (NYSE:DPZ) management team is seeing just how powerful this unstructured data can be when used in conjunction with the right analytics software. The use of computer algorithms can turn unstructured advertising data into a meaningful story that management can then immediately take action on. Domino’s will be putting more systems in place to track advertising dollars spent world wide as they roll out more stores in growth markets. We will see this help increase the earnings by both increasing revenue and decreasing wasted marketing expenses.

Logistics

The railroad sector has some pretty large barriers to entry, but that doesn’t mean you can’t be out competed by your competitors. As the industry saw consolidation, the bigger players always seemed to always get a leg up on smaller competitors. The space of analytics software is no different.

Union Pacific Corporation (NYSE:UNP) is a giant in the transportation sector. With over 31,000 miles of track, this behemoth generates millions of points of data from the speed of a train, to the number of cars that are being hauled, to the types of containers that are being delivered. With all of this data, new analytics software can help predict the amount of fuel that is needed in a train and the most efficient speeds to run at, all while providing customers an up to date mapping of where their product is. Union Pacific Corporation (NYSE:UNP) will be able to better control fuel expenses and provide customer service, but those aren’t even the biggest benefits.

Analytics software will provide these companies predictive models of where their train engines will need to be and what kind of train cars will be needed. The software will be able to tell Union Pacific Corporation (NYSE:UNP)’s management team that there was a shipment of auto parts to a Ford Motor Company (NYSE:F) plant on Tuesday, and on Friday they will need to have rail cars equipped to pick up SUV’s from the same Ford Motor Company (NYSE:F) plant as they start to roll off the assembly line. This is where the company will really see savings add up, as the computers will be able to most efficiently map where their railcar should be traveling to.

Foolish bottom line

Companies that adopt this type of software to analyze large amounts of unstructured data will see increases in their revenue and better services. Additionally, these same companies will see cost savings by reducing wasted marketing or fuel expenses. Software companies like International Business Machines Corp. (NYSE:IBM) that are providing this type of software to their clients will benefit from the huge recurring revenue streams from the software licenses for years to come.

The article How These Companies Are Benefiting From Business Analytics originally appeared on Fool.com and is written by Wes Patoka.

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