DAA 2014

Leading the Way in Decision Science

Mu Sigma founder and CEO Dhiraj Rajaram, '03, is helping his Fortune 500 customers use the burgeoning amounts of data available to create what he calls "a better art for solving problems"

By Rebecca Rolfes

Shortly after Dhiraj Rajaram, '03, arrived at Booth in 2001, he saw the future. Solving complex business problems required a radical departure from the silo mentality that separates programmers, analysts, and mathematicians at many consulting firms. Rajaram envisioned a fresh, interdisciplinary approach that brought together math, business technology, behavioral science, and design thinking.

He sold his home, took $200,000 from savings, and started a company that would harness the combined power of big data and data-driven decision making.

The potential payoff in his strategy was evident to Rajaram, but not to the market he was courting. In 2004, big data was not the household term it is today. He knocked on corporate doors for nine months to no avail. Finally, the head of marketing at Microsoft Corp. gave him a pilot project: help the company understand the behavior patterns of its customers. Mu Sigma was off and running.

Today the company, whose name derives from the statistical terms symbolizing the mean and the standard deviation of a probability distribution, leads the burgeoning field of decision science. Headquartered in Northbrook, Illinois, but with operations in Bangalore, India, Mu Sigma has close to 3,500 employees. It counts more than 125 Fortune 500 companies as its clients, including American International Group Inc. (AIG), Caesars Entertainment Corp., Dell Inc., Microsoft, and Wal-Mart Stores Inc. It was valued at $1.5 billion in 2012. The company has more than doubled on most metrics since then.

"It was a gift of fate that I did not get any customers in the first nine months," Rajaram said in an interview. "If I had gotten one in the first month, I would not have heard all the objections that the others gave me. Even those whom I tried to hire had their objections. I was learning on a consistent basis. I had to listen to all those people who said, 'No,' to me. They were as important in the architecture of Mu Sigma as anything else." 


Rajaram calls his upbringing, "lower middle class." He was raised mostly by grandparents who moved from Mumbai to Chennai, on India's southeast coast, where he "played a lot of cricket, a lot of playing on the streets." He studied electrical engineering at Anna University in Chennai and then moved to the United States to earn a master's degree in computer engineering at Wayne State University.

He was working in consulting at PricewaterhouseCoopers LLP when he realized that he needed a grounding in business to help solve the complex problems before large clients. "Just being technical wasn't enough," he said. He enrolled in the MBA program at Chicago Booth.

The Booth approach would provide the underpinnings for the structure and philosophy of Mu Sigma: the emphasis on hard skills, curiosity, fundamental questions, and challenging conventional wisdom.

"Everything that Chicago Booth taught me is that we have to live with a duality of humility and irreverence," he said. "Humility because we don't know much, and we will constantly learn. But irreverence because questioning enables you to learn new things. Expert is a bad word."

Three traits give a Booth alumnus away, Rajaram contends. "A Chicago person isn't afraid of delving into the abstract—delving into theory and having a debate about it," he said. "The Chicago person takes a multidisciplinary approach toward a problem. He will look at the qualitative side of things but also will balance or harmonize it with the quantitative side. And the Chicago person always is willing to look at the thesis and the antithesis at the same time. He can hold two opposing thoughts in his mind, and I think that's a great perspective that the school has given us."

One of Mu Sigma's first employees in the United States was a Booth graduate, Mukund Raghunath, '04, a client services partner. "The idea of building something appealed to me," Raghunath said in an interview. "The passion and the vision of what he [Rajaram] wanted to do - I was completely aligned with that. So it was easy to leave the consulting company I was working at and come to Mu Sigma."

Rajaram's passion was evident from the start. When he told his wife, Ambiga Dhiraj, then a research engineer at Motorola Inc., that he wanted to sell their home in suburban Schaumburg, Illinois, "she didn't wince," he said. "She just replied, 'go ahead and do it.' I was quite surprised that she would say that, and I asked her how could you agree so easily? 'There's no point in arguing with you. You've already made up your mind,'" he recalled her saying.

Spending his own funds rather than borrowed money had an upside, Rajaram said. "It gives you clarity - it forces you to build the right muscles." Nevertheless, once Mu Sigma had gotten off the ground, it required capital for funding and expanding its operations. His persistence gradually won over investors. Rajaram raised $1.8 million from angel investors in 2005 and then went on to raise larger amounts: $30 million from FTV Capital in 2008; and then $25 million from the Menlo Park, California, venture-capital giant Sequoia Capital in 2011. Mu Sigma was the only company positioned to deliver business analytics on a large enough scale for Fortune 500 clients, Shailendra Singh, managing director at Sequoia Capital India, said in making the announcement. Sequoia, known for its prescient investments in Silicon Valley tech giants such as Apple Inc. and Google Inc., later that year went on to invest $108 million in partnership with General Atlantic, an investment firm based in Greenwich, Connecticut.

Rajaram credits his Booth classes in entrepreneurship with helping him prepare for the demanding requirements of early-stage investors: "Professor [Steven Neil] Kaplan would be proud."


Mu Sigma staked out a sweet spot between incumbents in the world of data technology - currently estimated to be an $18 billion industry, but forecasted by some analysts to explode to $50 billion in the next three years.

On one side are what Rajaram calls the Superman consulting firms that sell their knowledge and expertise, such as Booz Allen Hamilton and Boston Consulting Group. On the other side are systems integrators such as IBM and Accenture and product companies such as JDA and DemandTec. At the intersection of the two approaches - of man and machine - is Mu Sigma. Rajaram calls this the Ironman model.

The explosion of data requires new methods to make sense of it. The world, Rajaram estimates, creates 2.5 quintillion bytes of data every day - from social-media postings to supermarket purchases.

At the same time, knowledge quickly becomes obsolete. "Learning is more important than knowing," he added, a mantra his employees repeat when asked what the company stands for.

Math and technology are helpful to solve focused problems - problems that are complex, yet clear. Real-world problems, he contends, are muddy. As a result, these problems require not just math and technology, but also business context and behavioral science to probe the psychology of human decision making. Finally, design thinking is required to evaluate the practicality of proposed solutions.

Mu Sigma applies its tiered approach to companies in financial services, insurance, consumer packaged goods, retail, pharmaceuticals, and health. "Asking the right questions, asking them in the right manner, and allowing for the least amount of misinterpretation - these are all very important," Rajaram said.

That ability to ask the right questions is what attracted Mu Sigma to The Schwan Food Co., the Minnesota-based frozen foods company that sells via its Schwan's Home Delivery channel, through supermarkets and food service distributors. "One of the things that they do a good job of is helping us holistically identify and analytically solve problems," said Nick Reinbold, senior director of business analytics at Schwan's Home Service. "Too often in organizations, people think they know what the problem is. They have gotten us to take a step back to look at all the contributing factors and gotten us to pause before we charge ahead."

Mu Sigma has worked for the last 14 months on projects ranging from marketing to operations. "They've played a key role in helping unlock our data: calculating return-on-investment for promotions, predicting possible business events, working out pricing models, and broadly understanding the opportunities in our business, " Reinbold said. "When I talk about my team, I consider Mu Sigma part of it."

When Rajaram is not at Mu Sigma's operational base in Bangalore, he is on the road, visiting Mu Sigma offices or meeting with customers. He's a tireless traveler who "will take a meeting with a client at any time," Fred Neil, an executive who oversees marketing and customer analytics at client The Home Depot, told the Chicago Tribune.

Companies that can solve problems and make decisions quickly, more quickly than their competitors, will win in the new data-driven world, said Murli Buluswar, '01, chief science officer at New York insurance giant AIG. "The gap between winners and losers will widen," he said, "but also change quickly because technology changes so quickly. What Dhiraj is doing is nothing shy of opening people's hearts and minds to how decision science can be fundamentally transformative to their business."

AIG is using big data to figure out ways to reduce truck-driver fatigue, a leading cause of accidents. The insurer is exploring new technology that can be used to develop seat cushions that will mitigate health problems and work-related injuries. One of the insurance industry's unsolvable problems is that you don't know how much the policy is going to cost you when you sell it, Buluswar said. "Mu Sigma has been instrumental in getting the industry to think about new ways of doing things." What's next for Mu Sigma? Will Rajaram join the ranks of tech moguls and sell the company? "We've had some very serious offers," Rajaram acknowledged. But he is more inclined to continuing growing the company. "We have not fulfilled what we can do with Mu Sigma," he said. "The company is part of a larger revolution of how the world works, and I want to stick around and see where this goes." ■

Photo by Chris Strong

Dhiraj Rajaram explains Mu Sigma's interdisciplinary approach, which brings together math, business technology, behavioral science, and design thinking. Booth, he says, provided the underpinnings for the company's structure and philosophy: the emphasis on hard skills, curiosity, fundamental questions, and challenging conventional wisdom. View the video »



December 2004
Dhiraj Rajaram uses his life savings to launch analytics company.

September 2008
FTV Capital commits $30 million.

June 2010
Microsoft makes Mu Sigma its preferred vendor for analytics.

September 2010
Mu Sigma is named to Inc. magazine's list of the fastest-growing private companies.

June 2011
Sequoia Capital invests an initial $25 million.

December 2011
General Atlantic and Sequoia invest $108 million.

June 2012
Mu Sigma passes $100 million annual revenue run rate threshold.

August 2013
Rajaram announces plans to open a Mu Sigma office in Austin, Texas.

September 2013
Rajaram included in Fortune magazine's "40 Under 40" feature.



Dhiraj Rajaram has spent his professional life in the United States, but "the origin of India is there in me," he said. Mu Sigma, a company with what he called "a lot of Indian- ness," mirrors that bilateral personality.

"There are many Indians who have acclimated much better than I have done," he said. "I'm native Indian, but I would not have realized the greatness of the United States if I didn't come from India. I started seeing why the United States was the way it was - the innovation, the financial markets, the melting pot, the openness. But India is also like that, a melting pot over thousands of years."

Frugality is a byword and Rajaram often shares hotel rooms with colleagues.

The company is strictly alcohol free. The company employs a lot of young workers in their early 20s, "and we can't afford to have any kind of substance abuse," said Ambiga Dhiraj, Rajaram's wife, who joined the company in 2007 as director of innovation and development and who now oversees client engagements based in Bangalore. On the other hand, she said, those young workers spend a lot of time at the office. Many of them are looking to date and meet their life partner "and it would be unnatural not to let that happen," she said. "We need to bring more life into work. We don't believe in just work-life balance. We believe that there should be work-life harmony. Bring more life into your work and work into your life."

There are no typical performance appraisals for the first three years, Dhiraj said. Many young Indians lead sheltered lives and are unprepared for the rough and tumble of a competitive office environment, she said. A fixed three-year package keeps the focus on their development rather than on financial incentives. Training, however, is rigorous. Direct feedback helps people constantly improve themselves, she added.

Faced with what he perceived to be a talent gap, Rajaram launched Mu Sigma University to school recruits in analytics and problem solving. The company trains young Indian and American graduates in math, business, and technologies to create the new category of decision scientists.

Rajaram contends that Mu Sigma could not have been built more than a decade ago because the talent wasn't available. "The way the company operates is the way India operates - so many languages, so many religions, but one of the largest democracies in the world - not having everything on your platter and still making something out of it. I would not be able to do this if I were not Indian," he concluded. "The concept of resource scarcity and of optimism is quite amazing. Everything being so chaotic in some sense moves you forward."

Deepinder Dhingra, head of products and strategy, said Mu Sigma's processes reflect the gods of creation, preservation, and destruction that are part of Hindu mythology. "We have a creation group, the innovation group, the product group," he said. "We preserve processes that work and then creatively destroy processes that are no longer beneficial so that we can continually evolve." ■

Last Updated 4/23/14