People and Technology - MicroStrategy Inc.

Permission to Change the Game

The inspiration for MicroStrategy came from a course that Saylor and Bansal took at MIT during their junior year. The class, on systems-dynamics theory, taught them that social or business problems could be modeled using nonlinear math, a concept that forever shaped their view of business. In 1987, after graduating from MIT, each worked as a consultant: Saylor, at a small New York City firm; and Bansal, at Booz, Allen & Hamilton, in Washington, DC, where he grew up. Neither saw his current job as a long-term gig. After a couple of years, Saylor convinced Bansal to join him, and the two struck out on their own.

"We had similar views of the world," says Bansal. "We realized that the information used by corporate decision makers was incredibly shallow. We believed that we had a better way: Set up a system that's continuously being fed lots of information from a company's operation, then apply rigorous mathematics to the data. To run a business successfully, you have to make better decisions than your competitors. And you can do that by applying carefully analyzed information to the process. We've never wavered from that belief."

Initially, MicroStrategy built huge, customized decision-support systems. In 1994, it released its first data-mining software, DSS Agent. Because data mining was so new, the company held classes to teach potential customers about how the software could improve inventory management, sales, and customer service.

MicroStrategy also helped customers that didn't have a database to build and feed one. But more often, the company queried existing databases to find out how fast products were selling, which products were selling in New York but not in Chicago, which products were selling in some New York stores but not in others, and which items should be displayed together, because consumers buy them at the same time. Answers to those questions used to take a team of analysts days or weeks to answer, assuming the information could be calculated. Now a store manager just clicks on a Web site and generates a robust report within seconds.

"You are not only looking at what happened but also at the nature of what happened," says Bansal. "Knowing what's selling and how fast it's going lets you plan ahead of the competition. The beauty of that kind of information is that it eliminates the inefficiencies of any process: You don't order products that aren't selling. You don't advertise items that are out of stock. You control your system."

But even more valuable than understanding your inventory is understanding your customers. The newfound intelligence that MicroStrategy enables creates a new phenomenon in business. Rather than throwing money into a massive ad campaign, a store can solidify its bond with existing customers -- and still improve the bottom line. How? Bansal explains: "Let's say that every Friday evening, I buy Chips Ahoy, Golden Grahams, and milk. If the store where I shop knows that, it can send me an email saying, 'May we suggest our brand of cookies? They're larger and less expensive, and here are the opinions of five shoppers who've bought them. We also have a free bag waiting for you at our nearest store.' " What's more, consumers aren't bombarded with unwanted promotions because the system is permission based, meaning they control the volume.

The degree of customization is even greater online. Instead of a home page with a static storefront, a business can customize its look for each customer, based on purchases, interests, or previous mouse-click trails. Product manager Christian Hernandez, 24, describes a demo that his team produced for an online toy store. The more information customers provide in their profiles, the more personal the shopping experience becomes for them. Suppose a customer reports that he has a five-year-old daughter and is interested in educational toys that cost $25 or less. He also wants to know when items are marked down at least 20%, and he only wants to hear from the retailer once a week, unless something is half-price, in which case he'd like an immediate alert on his cell-phone. "Instead of being just a retailer, that toy store has become an information broker," says Hernandez.

Although dotcoms represent the newest and fastest-growing market for MicroStrategy, traditional companies have used instant intelligence to reinvent the way they work. GE Capital Fleet Services, based in Eden Prairie, Minnesota, leases and manages fleets of vehicles for such companies as AT&T and Honeywell. MicroStrategy's data-mining software monitors a quarter of a million vehicles for about 5,000 companies. Customers can log onto a customized Web site to view mileage, fuel, repair, and accident reports for the entire fleet, or by department, type of vehicle, individual vehicle, or driver. The analysis is as detailed as the fleet managers want it to be. And the software can even manage the fleet for them. If it identifies a vehicle that hasn't had an oil change in 3,000 miles, it sends a reminder to the driver's pager. Or if drivers saved the company money by using a preferred vendor, it can send a thank-you message.