After a painful board-level split in 2007, Fractal Analytics turned things around to become India’s second-largest analytics company and growing
It could be a scene out of sci-fi thriller Minority Report: Procter & Gamble (P&G) executives seated in an oval-shaped room at their headquarters in Cincinnati, Ohio, flanked by two concave 8-ft-by-30-ft screens that have analytics dashboards coursing with product, financial and commodity information. Only, here, Tom Cruise isn’t slicing and splicing data across a fluid display—a data analyst is.
It is no secret that P&G, which did $84 billion in sales last year, is a data-driven business. The world’s largest FMCG company touches four billion consumers every day, generating terabytes of data. Visualising numbers helps the country, category and brand heads identify products which are working, and areas where new opportunities lie, all in real-time. Called the ‘Business Sphere’, this model has become the stuff of corporate legend; the innovation even won P&G’s Filippo Passerini the Information Week ‘CIO of the Year Award’ in 2010.
But P&G did not single-handedly create this analytics approach. It had help from heavyweights like SAP and Cisco, as well as a made-in-India company called Fractal Analytics.
“P&G is the most data-driven company we know of. They use data everywhere,” says Srikanth Velamakanni, 39, co-founder and CEO of Fractal Analytics, a company considered a “strategic partner” by P&G. “Usually their strategic partners are 100x Fractal’s size, like Accenture or HP,” he points out. Fractal’s current revenues stand at Rs 120 crore. Velamakanni is visibly proud of his company’s work—after all, Business Sphere is now used in over 50 P&G offices worldwide and is on its way to getting patented.
Apart from such high-profile associations, what has put Fractal, India’s second-largest analytics company, in the limelight in recent times is a Rs 150-crore investment by Boston-based private equity fund TA Associates in June 2013. Naveen Wadhera, country head of TA Associates India, is bullish on the industry, saying data-driven decision-making has become a major tool for companies, even expanding its reach beyond just the large-sized firms.
Power of Persistence
Forbes India met Velamakanni and Fractal co-founder Pranay Agrawal, 38—the two remaining members of the original five that created the company—the day after their marathon five-hour meeting with the global head of insurance major AIG, who had flown down to Mumbai in his private jet. “The CEO of such a large company doesn’t visit an office like ours unless it is a high priority for him and analytics is a high priority for AIG,” says Velamakanni.
The Fractal office in Andheri, Mumbai, is ideally suited for the business it is in. On entering, you quickly realise that it is a haven for nerds, number lovers and creative data crunchers.
“We are geeky enough to call our conference room the ‘Nash Equilibrium Room’,” says Velamakanni. (Nash Equilibrium is a solutions concept in game theory, named after mathematician John Nash.) And the geeks are now churning out algorithms and other data analytics tools that aid companies like P&G, Colgate, Kimberly-Clarke, VISA and Mastercard make smarter decisions.
Big-ticket partnerships didn’t fall into Fractal’s lap overnight, though. Quality execution of smaller projects helped the company get its foot in the door. It has come a long way since it took on a project with ICICI Bank, its first client, in 2001. Using mathematical models, Fractal built the first statistical consumer credit risk scorecard in India as a pilot for the bank.
Back then, however, the world wasn’t quite ready for data analytics. Later, in 2006, Fractal approached P&G with a proposal for a four-week research engagement worth $2,000. They spoke for almost two years with no success till 2008, when it finally got the green signal.
Impressed by the results, P&G considered Fractal—along with 25 other companies—as a potential global analytics partner. Two, including Fractal, were picked to pitch head-to-head. Fractal won.
It was a significant moment for the fledgling company. P&G wanted to project global demand: 15,000 country-category combinations that would have to be forecast and reforecast every quarter. It sent a two-person team to work with Fractal which deployed 10 employees for the project in 2008; now, the team has expanded to 200.
Then, in 2009, Fractal did a project for an American automotive lender which was trying to recover money from bad loans: It built a model that prioritised recoveries. “The interesting thing was that they were losing money because the dynamics were changing in the time between repossession of cars and recovery,” Velamakanni says. This was a tough one and required an all-nighter from the young team.
Fractal believes analytics is shaking up the insurance industry, among others. The traditional actuarial insurance sector has always been adept at understanding risk but the playing field is changing with new sources of data. People are re-evaluating actuarial tables because one’s own loss experience is not good enough—market experience matters. “If you don’t understand risk—and you price for average risk—only the bad customers take your policy,” Velamakanni says.
A Journey To Remember
(This story appears in the 15 November, 2013 issue of Forbes India. To visit our Archives, click here.)