Business analytics is the term used to describe the discipline of using a data-driven approach to improve business performance. Analytic insights can drive informed decisions and incremental improvements to the business. Business analytics can also be used to explore data to explain the reasons behind performance challenges.
Business performance management
An old business adage states you cannot manage what you cannot measure. To align teams to management goals, businesses establish a set of measurable metrics with milestones to reach those goals. These metrics are referred to as Key Performance Indicators (KPIs). Management teams usually agree on which KPIs the business is best measured by, collect the data to enable measurement and create dashboards to report on progress.
Measuring business performance
Goal setting is usually done before the beginning of a fiscal year. Progress towards the established goals is measured continuously, with reporting at regular intervals such as month-end or quarter-end to allow for quarter-on-quarter comparisons, for example.
Business analytics allows an organization to explore trends so management can make operational adjustments or course corrections to keep focused on the defined goals. Just reporting facts without accompanying explanations can limit the value of reporting. Business analytics can often reveal the root causes of performance problems so that management teams can make effective changes.
Data is the foundation
Without data, a business is flying blind. At the operational level of a company, data needs to be very granular, for example, every product item level on an invoice. Management can use aggregated or summary data to report on departmental sales goals. Executives use more macro-level information showing the business is on course to deliver on revenue and profitability goals for the board and shareholders. When goals are missed, business analysts need the ability to drill down into the granular data to identify trends or root causes. A quality problem in a single part can trigger returns of larger items that trigger instances of brand damage and lost customers. Real-time reporting allows a business to respond to issues before impacting bottom-line margins.
The role of Business Intelligence solutions
Early IT, decision support systems, generated text reports making analysis labor intensive. Modern Business Intelligence (BI) solutions can provide real-time visual reporting that highlights anomalies and allow drill-down under the covers for deeper data exploration. Delivery of intuitive visuals for all levels of an organization is the core value of BI solutions.
Gathering data for Business Analytics
Data warehouses and data marts are essential for collecting and organizing data for business analysis. Today’s data platforms use relational technology for structured data and enable SQL access to semi-structured data. For unstructured data such as voice and video files, a relational database can maintain indexes to external objects stored in file systems or URLs to web-based assets. Using a film production studio as an example, a data warehouse can collect viewership, ratings and box-office revenue data for a particular movie and provide drill-down links to video reviews and promotional items such as movie trailers without leaving the context of the calling application.
Example KPIs by industry
Every business is different, but analysts tend to group and compare a business to their industry peers. Below are the kinds of metrics external business analysts use when making comparisons:
- Telcos measure performance by profitability, customer growth, network capacity, coverage, customer churn rates and customer satisfaction scores.
- Retailers use business analytics to report on sales, to drive inventory levels, promotions and to look for product correlations. A famous example of correlation concerns a US retail chain that uncovered a strong relationship between diaper and beer sales. They increased beer sales simply by placing it next to the diapers to help with the stress of new parenthood.
- Hospitality businesses need analytics to target promotions that maximize occupancy levels.
- Gaming organizations use player statistics to drive cross-sells, in-game purchases, and recommendations.
Business data analysis benefits from graphs and charts that intuitively let casual users see data trends, exceptions, and progress against goals. For example, pie and tree charts show proportional relationships between data values, and polar diagrams let viewers quickly assimilate complex multivariate comparisons between related entities.
The benefits of Business Analytics
A Harvard Business School report on the importance of business analytics, linked here, cited the following findings from a study:
- Improve efficiency and productivity (64%)
- Achieve more effective decision-making (56%)
- Drive better financial performance (51%)
The more general benefits include the following:
- More Informed Decision-Making
- Greater revenue
- Improved operational efficiency
Actian can help in Business Analytics
Actian was founded to enable businesses to do more with their operational data. This has culminated with the creation of the Actian Data Platform. The Actian service provides a platform for hosting business analysis projects. Analysis projects can be initiated in minutes, and multiple data sources can be integrated into cloud-data warehouses using built-in connectors to popular business applications such as Salesforce and ERP systems. The Actian Data Platform works with all Business Intelligence tools and has its own reporting and visualization technology.
It is easy to get started with the Actian Data Platform using the free trial at https://www.actian.com/avalanche-try-now-start-free/