What is Business Analytics? Definitions, Examples, and Applications
Understand the concept of Business Analytics and why it is relevant for strategic decision-making.
Using data and analytics to make business decisions is the next big step in management. Understand the concept of business analytics, what it is, how it works and how to get started.
If you’re like most business owners, you want to see your business grow but this can be a hard task if you only rely on the gut feeling. You may have heard the term “business analytics” and are wondering what it is. Business analytics is a process of collecting, analyzing, and reporting on data to help businesses make decisions.
Data-driven decision-making is becoming important in today’s business world. By using business analytics, businesses can identify trends, optimize processes, and make better decisions which are based on data instead of intuition and guessing.
Not sure where to start? Then you found the right guide helping you on how to get started and learn more about business analytics in general.
What is Business Analytics?
Business analytics is the process of examining large data sets to uncover hidden patterns and insights that can help businesses make better decisions. The goal of business analytics is to use data-driven decision-making to improve performance and profitability. This can be done by analyzing past performance, predicting future trends, and identifying opportunities and risks.
Business analytics relies on a variety of techniques, including data mining, predictive modeling, and machine learning. Data mining is the process of extracting valuable information from large data sets. Predictive modeling is the process of using historical data to predict future outcomes. Machine learning is a type of artificial intelligence that allows computers to learn from data without being explicitly programmed.
What does business analytics do?
Business analytics can be used in a variety of ways some of the most common applications of business analytics include:
1. Predicting future sales and trends.
Business analytics can be used to predict future sales and trends by analyzing past data. This information can be used to make better decisions about production, inventory, and marketing.
2. Identifying opportunities and risks.
Business analytics can be used to identify opportunities and risks by analyzing data sets for patterns and correlations. This information can help businesses make better decisions about where to allocate resources and how to respond to potential threats. This all helps your strategic business planning.
3. Improving customer service.
Business analytics can be used to improve customer service by tracking customer behavior and preferences. This information can be used to create targeted marketing campaigns, improve product offerings, increase customer loyalty and optimize customer support processes.
Benefits of Business Analytics
There are dozens of different benefits of using data-driven decision-making in organizations. But not to overwhelm we focus on four of the most important benefits of business analytics:
1. Helps businesses make better decisions
Business analytics can help businesses make better and more informed decisions by providing them with insights into their data. This can help them improve their operations, marketing, sales, and overall performance.
2. Helps identify opportunities and trends
By analyzing data, businesses can identify trends and opportunities that they may not have otherwise been aware of. This can help them stay ahead of the competition and increase their profits.
3. Helps improve customer engagement and retention
Business analytics can help businesses understand their customers better, which can help them create more effective marketing campaigns, personalized offerings and provide a better customer experience which would lead to better customer retention and more customer-lifetime-value (CLV).
4. Helps reduce costs
Business analytics can help businesses reduce their costs by helping them optimize their operations and identify areas where they can save money. All this by having deep insights into data.
4 Types of Business Analytics
There are four different types of business analytics that can be used to help businesses make better decisions:
Descriptive – What is it?
Descriptive business analytics is the most basic type of business analytics. It simply involves taking data and describing it in a report. This can be helpful for businesses who want to track trends over time or see how they are performing compared to competitors.
One common use of descriptive business analytics is to track website traffic. By tracking the number of visitors to a website and where they come from, businesses can get a better idea of what marketing strategies are working and which ones need improvement. Another example of descriptive business analytics is sales data. By tracking sales data, businesses can see which products are selling well and which ones are not. This information can help businesses make decisions about what products to stock in their stores or offer on their websites.
Diagnostic – What is wrong?
Diagnostic business analytics is a field of analytics that deals with diagnosing and solving problems within businesses. It involves the use of data to identify and correct issues in operations, marketing, sales, finance, and other areas of a company. By using diagnostic business analytics, companies can improve their performance and competitiveness in the marketplace.
One common use of diagnostic business analytics is to identify and correct issues in operations. For example, a company might use diagnostic analytics to figure out why their production process is not meeting quotas. By identifying the problem and fixing it, the company can improve their production process and meet their quotas.
Predictive – What happens next?
Predictive business analytics is the use of data to predict future events. This type of business analytics can be used to predict things like sales trends, customer behavior, and financial outcomes. By using predictive business analytics, businesses can make better decisions about where to allocate their resources and how to respond to potential problems.
One common use of predictive business analytics is in finance. Businesses can use predictive analytics to predict how a certain investment will perform over time and whether or not it is worth investing in.
Prescriptive – What should be done?
Prescriptive business analytics is the use of data to recommend actions to be taken. This type of business analytics goes beyond predicting future events and actually tells businesses what they should do in order to improve their situation. By using prescriptive business analytics, businesses can make sure they are using their resources in the most efficient way possible.
One common use of prescriptive business analytics is in human resources. Businesses can use prescriptive analytics to figure out which employees are the best fit for a certain job and which ones are not. This information can help businesses save money by hiring the right people for the right jobs and getting rid of employees who are not a good fit.
Prescriptive business analytics is a powerful tool that can help businesses make better decisions and improve their performance. By understanding what it is and how it can be used, businesses can take advantage of all that it has to offer.
How to start with Business Analytics
1. Set clear goals
When it comes to business analytics, it’s important to set clear goals for what you want the data to accomplish. Whether you’re looking for insights on customer behavior, financial performance, or market trends, you need to know exactly what you’re aiming to learn from your data. Once you have defined your goals, you can work on finding the right data and methods for analyzing it.
2. Map the relevant data
When it comes to business analytics, one of the most important steps is mapping the relevant data. This involves finding and collecting all of the data that is relevant to your goals. This can include data from internal sources and KPIs such as sales figures and customer data, as well as external sources such as market research, external business analytics platforms or even social media or open data like the weather.
3. Select the right tools and software
Tools are not everything, but certain tools are necessary. When choosing software, it’s important to start small and avoid getting trapped by “feature promises”. There are many programs available, so take your time to find the ones that fit your needs and many are even free and open-source. If the software is more expensive than the outcome (e.g. just used once a year), it will not likely make sense.
One important thing to keep in mind is that not all software is created equal. Some programs are better at certain tasks than others. For example, some programs are better at analyzing text data, while others are better at analyzing numeric data. So, when selecting software, make sure to choose ones that are specifically designed for the tasks you need them to perform.
4. Secure the resources
Another important step is the securing of resources you need to achieve your goals. This includes getting the right infrastructure, talent, and budget.
One step is makig sure you have the right tools and software in place to analyze your data. You also need to make sure that you have the bandwidth and storage capacity to handle all of the data you will be collecting. Another step is to have the right people in place to help you analyze the data. This includes people with expertise in data analysis, as well as people with expertise in your industry. And of course, also the necessary budget.
5. Share the insights
Once you have collected and analyzed your data, it’s important to share the insights with the people who need them. This includes managers, employees, and other stakeholders who may be interested in what the data has to say.
Sharing the insights can be done in a variety of ways. Create reports that summarize the findings and share these internally, create dashboards or use visualization tools. These tools allow people to see the data in a graphical format, which can make it easier to understand and interpret. Best would be to implement the business analytics into the tools the users and management use on a daily basis.
6. Identify and support data-advocates
One way to make sure that the data is used effectively is to identify and support data-advocates within the organization. These are individuals who are passionate about data and are eager to use it to improve the business.
Data-advocates can be a great resource for other employees, so support them with access, training and preferred access. They can help explain the findings from the data to others, and they can also provide guidance on how to use the data to achieve specific goals.
7. Build a data-driven culture
One way to build a data-driven culture is to make it standard for meetings. This means requiring all managers and employees to review data before meetings and to come prepared with questions or ideas that can be gleaned from the data. It should be implemented in every management decision-making process. This means using data to help make decisions about things like product development, marketing, and staffing.
Best would be also to base the organizations strategy on data and link every action point to data. This means using data to identify trends and opportunities, and then using that information to make decisions about where the company should focus its efforts.
How to get the most value from Business Analytics
There are several topics that need to be addressed in order to get the most value from business analytics and data-driven decision-making:
Give everyone access to relevant insights
It is important to give everyone access to relevant insights in order to make data-driven decisions. However, the data should be relevant and useful for the person and that depends on seniority, job or department. For example, someone in a marketing role would need different data than someone in a accounting role. The data should be democratized so that everyone can benefit from it.
Create a data-driven culture
Creating a data-driven culture is essential for getting the most value from business analytics. A data-driven culture means that everyone in the company is focused on using data to make decisions, from the CEO to the front-line employees. It means that data is accessible to everyone and that everyone is willing to use it to make better decisions.
Get the right talent
The challenge for many companies is finding the right talent to help them make the most of business analytics and data-driven decision-making. The demand for analysts has never been higher, as more and more companies are realizing the value.
Provide the right infrastructure
One of the challenges that businesses face when trying to get the most value from business analytics is that the infrastructure can often not handle the requirements. In order to be able to provide the right infrastructure, businesses need to be able to assess their needs and make sure that they have the necessary resources in place. This includes having the right hardware, software and personnel in place to support the analytics initiatives.
Communicate the benefits
Another challenge that businesses face when trying to get the most value from business analytics is that the benefits can often not be seen immediately. It can take time for the full benefits to be realized and this can often lead to a disconnect between the effort and the benefits. It is therefore important to communicate the benefits of using business analytics every day so that everyone is aware of what is being achieved. This will help to keep everyone connected to the effort and ensure that the full benefits are realized.
Align the business goals and incentives with data
One way to ensure that the goals and incentive systems are aligned with data-driven decisions is to make sure that the data is accessible to everyone in the company. This means that everyone can see the data and use it to make better decisions. It also means that the goals and incentive systems are aligned with the data.
Business analytics has become a core part of every planning effort and data-driven decision-making is now enabling better decisions based on data. Of course, the right talent, infrastructure, and tools are essential for business analytics. But communication and the right mindset as well as the right culture are also key to success.
Do you have what it takes to make your company more data-driven? If not, then start by making sure that you start small, have clear goals, align it with your business needs and slowly build your culture and your business analytics toolset.
Author: Benjamin Talin, CEO MoreThanDigital