Business analytics, at its very essence, is about answering questions about a business using information or data gathered about the business. The data that are needed could be internal or external to the business, and they usually reside in databases, applications, and flat files; either on-premises or in the cloud. To find answers to your questions, you need to start with querying the data and then analyze the results of the queries using data visualization techniques.
What are some examples of business analytics?
Here are some examples to further illustrate this point.
Finance
A finance manager or director who looks after the finances of a department or line of business would want to know the revenue, costs, profit margins, etc. for his or her line of business. A CFO on the other hand would want to know similar metrics at an aggregate level across all lines of businesses and have the ability to drill-down into any line of business. The CFO might also want to know about interest expenses, impact of currency exchange rates, taxes, etc. that might be beyond the scope of what a finance manager cares about
Marketing
A marketing manager responsible for demand generation would want to know about the number of leads, opportunities, and closed deals. He or she would also look at how various online and offline demand gen channels are performing. On the other hand, a marketing manager responsible for brand development would want to know how the company’s brand is perceived by its customers, partners, competitors, influencers etc. A CMO would be interested in both brand and demand related metrics and would want to know what the aggregate Return on Marketing Investment (ROMI) is
Sales
A sales manager, who has a territory to focus on and a quota to achieve, would be focused on his sales pipeline, which consists of opportunities created, opportunities won, and opportunities lost. He or she would also want to know time taken to close an opportunity in order to assess how many opportunities are needed to achieve quota targets. A VP of sales on the other hand would want to know similar information at an aggregate level and have the ability to drill-down to a sales rep or sales territory.
Operations
An operations manager, who focuses on a production line, wants to make sure that products are getting out the door in a timely manners, while keeping defects to a minimum and maintaining the right level of inventory to meet market demand. He or she would therefore want to know how many units are being processed in a production line, the time it takes for a unit to get through the process, the rate at which a process is delivering output, number of units failing the quality test, etc.
Human Resources
A human resources manager who focuses on on-boarding, retention, and off-boarding of employees would be interested in knowing about number of open headcounts, number of candidates in the interview pipeline, number of employees leaving the company voluntarily or involuntarily, etc.
C-Suite
A CEO of a company looks at all facets of the business and as such is interested in all the examples noted above. He or she wants the ability to look at aggregate metrics for every facet of the business and drill-down into a particular area to learn more. In addition, the CEO would also want to know how the company compares with similar companies in the market.
What are the key ingredients for success with business analytics?
To reap the benefits of Business Analytics, you need three things:
- Focus: Ask questions that are relevant to your business. It is easy to fall into the trap of asking irrelevant questions that may lead you down the wrong path or make you do a lot of work in getting answers to questions that don’t help you.
- Data: Have access to accurate data to help you answer the questions. This is often easier said than done. In order to get the data you want, you need to instill a data-oriented culture in the organization (top-down and bottom-up) and have processes in place to capture data faithfully and accurately.
- Systems & Tools: Have the means to process and analyze data. We live in an information economy where businesses are collecting data in terabytes and petabytes and they are located in disparate databases tied to various hardware and software systems. You will need systems or tools to help you extract the data, process the data, analyze the data and later visualize the data.
What are the benefits of business analytics?
Companies that are successful at business analytics become more self-aware and aware of the environment they are operating in. This helps them understand their strengths and weaknesses, focus on their core competencies, predict where the market is headed, and stay ahead of their competitors
Data-driven culture
Instead of being bogged down with data, data becomes an asset and a friend. All your employees rely on data to make decisions and are therefore diligent on collecting timely and accurate data.
Quick feedback on business performance
Once you setup business dashboards that can be refreshed automatically when the underlying data changes, you are now alerted to what’s going well and what’s not so that you can course-correct as needed.
Striking the right balance between the big picture and the details
The big picture tells you where you are headed and how you are doing as a business but doesn’t tell you why. To answer the why question, you need to drill-down into the details. Business analytics gives you the best of both worlds. You can have an overall business performance dashboard that gives a 360 degree view of your business. At the same time, you can drill-down into any chart on your dashboard to understand why you are doing well or not so well
