"One of the biggest challenges facing companies trying to move to the next level of business intelligence is management bandwidth. The ability to develop models requires relatively senior-level management insight, perspective, and collaboration to discuss the specifics of what they are looking at. Management is overburdened now, so finding the management bandwidth to dedicate to a project like this is difficult.

The second major challenge is the expertise to understand how the different components of data inter-relate. It's an expertise in which a lot of companies don't have much depth.

The bandwidth issue is truly a matter of prioritization. Companies that are moving forward in predictive analytics and business intelligence are recognizing [those tools] can provide them with competitive differentiation and they are prioritizing their efforts and allocating resources to focus on a particular area.

The ones that have been successful are picking an area to focus on. In the property/casualty area there has been a lot of focus on claims because the leverage of the claims dollar is so high. In other areas it may be on customer segmentation because [insurers] are moving into a differentiated market. They realize profitability varies with each customer so they are going to focus on the most profitable customers.

In terms of developing the expertise, there are some people within organizations that have worked with the data, particularly in the actuarial department or the information reporting department that have awareness. You can supplement that if you get toolset expertise that comes with the installation and development of the first project, so you need knowledge transfer to your internal experts.

If you are trying to leapfrog the process you can contract the expertise if necessary to get your first project in house. The goal would be to get the knowledge transfer in place so you have your own staff develop the data awareness to take you to the next level."

Steve Callahan is practice director for Robert E. Nolan Co.