It should be no surprise that data-driven decision making is more effective than relying on managers’ intuition. Research clearly shows that analytics oriented organizations largely outperform their peers.
Making sense of the data becomes an increasingly challenging task as corporate data continues to grow at a 40% yearly rate as a result of the rapidly declining cost of computer memory.(1)
An IBM-CFO study shows that analytics-driven organizations had 33% more revenue growth, 12 times the earnings (before interest, tax, depreciation, amortization) and 32 percent more return on capital invested.(2)
This is where Business Analytics (BA) becomes handy providing data management, integration, multi-dimensional analysis, visual discovery, data mining and statistical methods to improve productivity in nearly every business function.
Business Analytics is an all-encompassing name for a new discipline resulting from the integration of Business Intelligence and Predictive Analytics. BA not only includes the classic Business Intelligence functions of reporting what happened, drill-down to how it happened, find out the cause of why it happened and alert management as soon key metrics move in the wrong direction.
In addition, BA includes a highly sophisticated subject called Predictive Analytics that can be defined as Advanced Computational Statistics. It uses large cleansed historical data sets to look forward. Specifically, Predictive Analytics finds patterns in the data to forecast what has a high probability to happen in the future.
BA applications include operational intelligence, strategic and competitive analytics, customer acquisition and retention, risk management, fraud detection and demand driven forecasting among others.
According to Tom Davenport, “Companies that invest heavily in advanced analytical capabilities outperform the S&P 500 on average by 64%”.(3)
Having a clear view of the profitable customers, products, regions and market segments is fundamental to understand the causes and expand upon the successes. Equally important is to find those customers, brands, markets, segments and competitors responsible for draining cash and quickly stop the bleeding.
Business Analytics is a fundamental discipline to find the root cause of issues and probable outcomes. It allows to take prompt corrective actions to satisfy customers’ needs faster and better than the competition providing the company a competitive advantage.
In their book, “Competing on Analytics – The Science of Winning”, Thomas Davenport and Jeanne Harris define decision support, business intelligence, data mining and predictive analytics and put all these concepts well in perspective.
The book shows the five stages of analytical competency and gives plenty of examples of companies that are successful in both the internal and external implementation.
- Stage 1: Analytically Impaired – Lack of analytical skill or executive interest.
- Stage 2: Localized Analytics – Uncoordinated activities or silos.
- Stage 3: Analytical Aspirations – Good intentions with slow progress.
- Stage 4: Analytical Companies – Widely use analytics internally.
- Stage 5: Analytical Competitors – Use analytics as a competitive advantage.
Up until now, BA has been the exclusive domain of large companies that were able to afford the investment. Fortunately, this situation has changed. Today, there are many analytic applications, either on premise or in the cloud, that are powerful, user friendly and very cost effective; making them ideal to bring mid size and smaller companies to the forefront of the 21st century technology to become true analytic competitors.
by Bill Cabiro and Strat-Wise LLC
„Please visit their web site at www.strat-wise.com for additional articles and resources on the strategic use of Business Intelligence and Analytics”