A Definition of Business Analytics
Business Analytics is “the study of data through statistical and
operations analysis, the formation of predictive models, application
of optimization techniques, and the communication of these results
to customers, business partners, and college executives.” Business
Analytics requires quantitative methods and evidence-based data
for business modeling and decision making; as such, Business
Analytics requires the use of Big Data.
Big Data: An Overview
SAS describes Big Data as “a term that describes the large volume
of data – both structured and unstructured – that inundates a
business on a day-to-day basis.” What’s important to keep in
mind about Big Data is that the amount of data is not as important
to an organization as the analytics that accompany it. When
companies analyze Big Data, they are using Business Analytics to
get the insights required for making better business decisions and
strategic moves.
Benefits of Data-Driven Decision Making with Business
Analytics
Companies use Business Analytics (BA) to make data-driven
decisions. The insight gained by BA enables these companies to
automate and optimize their business processes. In fact, data-driven
companies that utilize Business Analytics achieve a competitive
advantage because they are able to use the insights to:
Conduct data mining (explore data to find new patterns and
relationships)
Complete statistical analysis and quantitative analysis to
explain why certain results occur
Test previous decisions using A/B testing and multivariate
testing
Make use of predictive modeling and predictive analytics to
forecast future results
Business Analytics also provides support for companies in the
process of making proactive tactical decisions, and BA makes it
possible for those companies to automate decision making in order
to support real-time responses.
The Differences Between Business Intelligence and Business
Analytics
Business Intelligence (BI) and
Business Analytics are similar, though they are not exactly the
same. Business Intelligence involves the process of collecting data
from all sources and preparing it for Business Analytics. Business
Intelligence is more of a first step for companies to take when they
need the ability to make data-driven decisions. Business Analytics,
on the other hand, is the analysis of the answers provided by
Business Intelligence. While Business Intelligence answers what
happened, Business Analytics answers why it happened and
whether it will happen again. Business Intelligence includes
reporting, automated monitoring and alerting, dashboards,
scorecards, and ad hoc query; Business Analytics, in contrast,
includes statistical and quantitative analysis, data mining, predictive
modeling, and multivariate testing.
Challenges with Business Analytics
Penn State University’s John Jordan described the challenges with
Business Analytics: there is “a greater potential for privacy invasion,
greater financial exposure in fast-moving markets, greater potential
for mistaking noise for true insight, and a greater risk of spending
lots of money and time chasing poorly defined problems or
opportunities.” Other challenges with developing and implementing
Business Analytics include…
Executive Ownership – Business Analytics requires buy-in from
senior leadership and a clear corporate strategy for integrating
predictive models
IT Involvement – Technology infrastructure and tools must be
able to handle the data and Business Analytics processes
Available Production Data vs. Cleansed Modeling Data – Watch
for technology infrastructure that restrict available data for historical
modeling, and know the difference between historical data for
model development and real-time data in production
Project Management Office (PMO) – The correct project
management structure must be in place in order to implement
predictive models and adopt an agile approach
End user Involvement and Buy-In – End users should be
involved in adopting Business Analytics and have a stake in the
predictive model
Change Management – Organizations should be prepared for
the changes that Business Analytics bring to current business and
technology operations
Explainability vs. the “Perfect Lift” – Balance building precise
statistical models with being able to explain the model and how it
will produce results
Business Analytics Best Practices
Adopting and implementing Business Analytics is not something a
company can do overnight. But, if a company follows some best
practices for Business Analytics, they will get the levels of insight
they seek and become more competitive and successful. We list
some of the most important best practices for Business Analytics
here, though your organization will need to determine which best
practices are most fitting for your needs.
Know the objective for using Business Analytics. Define your
business use case and the goal ahead of time.
Define your criteria for success and failure.
Select your methodology and be sure you know the data and
relevant internal and external factors
Validate models using your predefined success and failure
criteria
Business Analytics is critical for remaining competitive and
achieving success. When you get BA best practices in place and get
buy-in from all stakeholders, your organization will benefit from
data-driven decision making.
How business analytics works
Once the business goal of the analysis is determined, an analysis
methodology is selected and data is acquired to support the analysis. Data
acquisition often involves extraction from one or more business systems,
cleansing and integration into a single repository such as a data
warehouse or data mart.
Initial analysis is typically performed against a smaller sample set of
data. Analytic tools range from spreadsheets with statistical functions to
complex data mining and predictive modeling applications. As patterns and
relationships in the data are uncovered, new questions are asked and the
analytic process iterates until the business goal is met.
Deployment of predictive models involves scoring data records -- typically in a
database -- and using the scores to optimize real-time decisions within
applications and business processes. BA also supports tactical decision-
making in response to unforeseen events. And, in many cases, the decision-
making is automated to support real-time responses.
Business analytics vs. business intelligence While the
terms business intelligence and business analytics are often used
interchangeably, there are some key differences:
Business analytics applications
Business analytics tools come in several different varieties:
Data visualization tools
Business intelligence reporting software
Self-service analytics platforms
Statistical analysis tools
Big data platforms
Self-service has become a major trend among business analytics tools. Users
now demand software that is easy to use and doesn't require specialized
training. This has led to the rise of simple-to-use tools from companies such
as Tableau and Qlik, among others. These tools can be installed on a single
computer for small applications or in server environments for enterprise-wide
deployments. Once they are up and running, business analysts and others
with less specialized training can use them to generate reports, charts and
web portals that track specific metrics in data sets.
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