The importance of business analytics (BA) was revealed in a recent Bloomberg survey, which found that BA has been effective in decision making for three out of four enterprises. Among the improvements are increased profitability, reduced cost, faster decision making, and critical performance improvements.
Meaning can be found in data
BA refers to technologies, applications, skills, and practices for the investigation of past business performance to improve insight into this past performance. BA is much more than merely providing simple data to a business. By using BA tools, meaning can be found in data, which results in a business improving its business intelligence. Some examples of Business Analytics include statistical analysis, decision processes, web analytics etc.
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Creating novel insights through Business Analytics
An important distinction needs to be made between BA and Business Intelligence (BI). BA mostly focuses on creating novel insights and the understanding of business performance based on statistical methods, data, quantitative analysis, explanatory and predictive modeling, and fact-based management to drive decision making. Business Intelligence also uses data and statistical methods, yet it rather focuses on using a set of metrics to measure both past performance and guide business planning. Also it looks at querying, reporting, OLAP, and alerts. Examples of questions asked by Business Analytics are “why is this happening”, “what if these trends continue”, “what will happen next”, and “what is the optimal outcome”. Examples of questions asked by BI are “what happened”, “how many times did it happen”, “where is the problem”, and “what are the solutions to the problem”.
Big Data Analytics
With big data only increasing, the use of business analytics has increased, with a greater need to understand this data and the realization that Business Intelligence has many advantages. In the past three years, the percentage of respondents benefiting from business analytics has risen from 90% to 97%, clearly emphasizing the business world’s increasing thirst for making sense of its data.
Executives embrace analytics
The most important characteristics of business analytics for businesses are a top-down embrace of analytics by senior leaders and managers. This allows them to make better decisions by accessing data themselves which might only have previously been accessible to the IT crew. In this way, Business Analytics that informs business decisions can be used to optimize business processes. Also, data-driven companies use their data as a strategic asset by enhancing competitiveness.
Create an environment which is receptive to innovation
A recent paper by IBM shows the three ways in which the most successful companies are operating when they deploy business analytics. The high-performing businesses are firstly challenging, in that they create an environment which is receptive to innovation by disrupting the status quo, and they are more ambitious in applying new insights. Secondly, they’re good at anticipating and predicting outcomes and trade-offs proactively. Thirdly, they’re empowering, by allowing employees to use information with confidence, which helps them act on their insights to improve the business.
Applications of Business Analytics
Some specific applications of Business Analytics, which allow for many novel avenues of opportunity for businesses to optimize and adapt their business model, are:
- critical product analysis
- improved customer service
- up-selling opportunities
- simplified inventory management
- and competitive price insights.
Critical product analysis allows minor alterations to be made to a location-specific product, including aiding the study in trends associated with those locations. Improved customer service keeps track of frequent customer queries, which prevents businesses from repeating mistakes, and improves customer satisfaction. Up-selling opportunities identify the most prominent needs of a business’ customer base. Simplified inventory management is supported by Business Analytics, as gathered data can help predict which products are on the verge of becoming outdated, minimizing losses. Competitive price insights can help businesses make their prices competitive by tracking the customer trends and price ranges which suit the customers.
The quality of the data can be a huge headache for managers
Start-up businesses without any data of their own need to either purchase data or focus on gathering it over time. Purchasing data collected by third parties is one solution, however these are also prone to inaccuracies or defunct records. Business Analytics can therefore be a time-consuming and expensive affair for start-up businesses. The quality of the data can also be a huge headache for managers, as some records are either duplicated or misleading, making analysis difficult. However, working with data deviations will allow for fairly accurate analysis.