In the modern world, business analytics has become a necessary component in business strategy, operations, and finance. Without analytics, businesses risk overlooking operational inefficiencies that could result in them falling behind the competition. So, what is business analytics?
Business analytics is a type of data analytics that provides actionable insights to business leaders. It entails the process of collecting, organizing, maintaining, analyzing, reporting, and visualizing data to measure, understand, evaluate, and predict all aspects of business performance. Through data analysis and forecasting, business leaders can solve business problems and make data-driven decisions to improve and strengthen their business decisions, strategy, operational efficiency, productivity, performance, and financial health.
Familiarizing yourself with the different types of business analytics, processes, and tools along with the benefits of business analytics can help you gain a more thorough understanding of why it’s become essential to business success.
Types of Business Analytics
Business analytics is best applied with a particular goal in mind, and analytics goals can be defined by the kinds of questions you are trying to answer. Almost all types of analytics and metrics fall into one of the following four basic categories of business analytics:
Descriptive Analytics
Descriptive analytics uses historical data to help business leaders understand what has happened in their companies. For example, descriptive analytics can reveal past performance, trends, and patterns in sales, operational performance, profit margins, direct costs, and indirect expenses. Looking at these reports, business leaders can identify growth trends, patterns of seasonality, or detect trends that might be of concern (such as shrinking profit margins).
Descriptive analytics lead astute business leaders to ask why questions, such as:
- Why did profit margins shrink?
- Why did we experience higher costs last year?
- Why was one sales method more successful than another?
- Why does one product or service have stronger profit margins than another?
- What’s causing seasonal upticks or downticks?
Diagnostic Analytics
Diagnostic analytics aims to answer the above questions with the formation of hypotheses and further analysis that seeks correlations and causation between different activities and subsequent results.
Predictive Analytics
Predictive analytics is another valuable form of business analytics. It uses predictive modeling to forecast what will happen in a business’s future. Predictive analytics relies on historical data, patterns, and past trends in addition to current conditions to create predictive models to produce forecasts that project future performance. The more accurate historical data a business has, the better its forecasting will become, which is why it’s valuable for business leaders to focus on implementing sound data mining and data management practices from the very beginning.
Several different types of complex statistical models and technologies can be used in predictive analytics, such as:
- Classification models
- Clustering models
- Time series models
- Machine learning algorithms
- Artificial intelligence (AI)
Prescriptive Analytics
Understanding business drivers with diagnostic analytics and predicting future outcomes with predictive analytics empowers business leaders to make better strategic decisions. They can use their foresight and manipulate business drivers to take action in the present to prepare for the future.
This means they can avoid or prevent business problems, such as cash flow shortages, before they cause issues. They can also take advantage of opportunities, like cash flow windfalls, by making plans for the extra cash before the opportunity occurs.
The Business Analytics Process
The business analytics process can be fairly complex. It requires several steps and careful attention to detail.
Data Collection
To have data available for analysis, business analysts must first collect raw data. This step requires developing and implementing automated systems that eliminate the need for manual data collection and data entry. Automation helps minimize errors and protect data integrity while saving time and resources. It’s important that data collection systems also be fully integrated within a central data management system to prevent siloing within separate departments or locations.
Data Processing
While automated systems can help ensure complete and accurate datasets, they won’t eliminate all errors. So, in this step, data analysts clean and prepare the data by filling in missing values, addressing inconsistencies, and inspecting anomalies to ensure quality and reliability.
Data Analysis
In this step, analysts apply the various methods of data analysis techniques to reveal patterns and trends and identify relationships within business drivers.
Decision-Making
After analysis, the findings should be visualized and reported so they can be communicated with business leaders and stakeholders. Business leaders can then leverage actionable insights gained from the data analysis to answer their questions and help them make strategic, data-driven decisions.
Tools and Technologies Used in Business Analytics
A number of tools and technologies are necessary for business analytics, as they can help automate processes such as data collection, data processing, reporting, and visualization. The following list includes some of the most popular:
- Microsoft Excel – Excel spreadsheets offer a range of features for aggregating, manipulating, evaluating, and visualizing data. It allows for inputting formulas and functions, helping analysts glean insights from raw data.
- SQL – Structured Query Language (SQL) is a programming language tool analysts use to manage large datasets. SQL enables the management of data in relational databases and the performance of complex operations.
- Tableau – Tableau is a powerful business analytics and intelligence software suite that automates reporting and visualization while powering it with interactive features and easily shareable dashboards. This is a great tool for beginners or those with limited computer science skills.
- Power BI – Power Business Intelligence is an analytics tool from Microsoft. It supports the integration, analysis, and visualization of data from multiple sources. Its features are user-friendly for those accustomed to other Microsoft products.
- Python – Another versatile programming language, Python is used extensively in data analytics. It features adaptable frameworks and libraries that support data analysis, manipulation, and visualization.
- R – R is an open-source programming language that is primarily used for data analysis and statistical computation. It can be used to develop systems for data processing, modeling, analysis, and visualization. Plus, it’s free.
- SAS – The Statistical Analysis System (SAS) is a suite of software tools used for a variety of data management tasks, including business analytics. It’s a user-friendly tool for professionals who are better-versed in business administration than in computer science.
Applications of Business Analytics
Business leaders leverage analytics every day to make strategic decisions that strengthen their companies for a better future. Business analytics has countless applications across business structures and industries, including:
- Retail
- Finance
- Healthcare
- Human resources
- Manufacturing
- Construction
- Service businesses
These are just a few notable examples of real-world business analytics success stories:
- Microsoft consolidated its staff into four buildings (down from five) in 2015. Analyzing calendar data revealed that meeting travel time had been reduced by 46%, saving $520,000 annually in employee time while increasing collaboration.
- Coca-Cola leverages its millions-strong social media following. The company tracks mentions, posts, and tags and uses AI-powered image recognition to identify its products in posted photos. It then uses this data to determine who drinks their beverages, in addition to where and when they drink them, to deliver highly targeted advertising.
- The meal-delivery company Blue Apron tracks an enormous set of data from user preferences and menu choices. It then uses predictive analytics to anticipate product demand, mitigate food spoilage, and fulfill orders.
Business Analytics vs. Data Analytics
The difference between business analytics and data analytics is subtle, but they are indeed distinct.
- Business analytics uses data to predict trends and improve performance by making informed decisions
- The term “data analytics” refers to the principles of mathematics, statistics, and computer science used to power business analytics.
Benefits of Business Analytics
Data analytics drives value with nearly infinite applications in all types of businesses in every industry, and its benefits are numerous. The following are among the most significant:
Data-Driven Decision-Making
Savvy business leadership requires good instincts, but your gut feeling can only take you so far. The most successful businesses have leaders who back up their instincts and decisions with data.
Improved Operational Efficiency
Tracking the right metrics can help business leaders identify and eliminate inefficiencies to streamline workflow and maximize productivity.
Enhanced Customer Insights
Tracking consumer-based metrics allows businesses to better understand what makes their customer base tick. Understanding customer behavior, profiles, preferences, and satisfaction levels helps businesses improve everything from marketing campaigns and the customer experience to customer loyalty and retention.
Better Risk Management
Predictive analytics supercharges risk management by enabling business leaders to detect and respond to emerging problems before they become a reality. As a result, leaders can proactively mitigate risks instead of reacting to challenges that have already occurred.
Competitive Advantage
The insights gained from business analytics give companies a competitive edge. The better your analytics processes, the greater your potential across all departments and all metrics.
What Does a Business Analyst Do?
A business analyst uses data to improve business operations with the goal of identifying and solving problems while also enhancing efficiency, productivity, performance, and profits. Business analysts have the following roles and responsibilities:
- Gathering and analyzing business information – Analysts implement systems designed to automate data collection and analysis.
- Translating information into technical solutions – They organize the data into meaningful information and help translate the findings into actionable insights and recommendations for business leaders.
- Evaluating business processes – Analysts interface financial data with enterprise-wide data to evaluate the company’s operations and processes for efficiency and workflow.
- Creating reports and dashboards – They generate reports and visualize data on business leaders’ personalized dashboards.
- Monitoring performance metrics – Analysts identify the metrics that are most meaningful to their company’s operations, performance, strategy, and goals. They implement systems for measuring and tracking those specific key performance indicators (KPIs).
- Facilitating stakeholder communication – Business analysts translate data into easily digestible reports and charts — allowing them to clearly communicate the findings and insights with stakeholders.
- Recommending improvements – Analysts provide data-based, actionable insights and recommendations to business leaders.
Careers in Business Analytics
As you can see, business analytics encompasses several roles and responsibilities. Most often, these are divided among separate positions within a business and therefore offer slightly different career paths.
- Data analyst – A data analyst is experienced and trained in all aspects of data analytics. However, they tend to focus on the actual analysis and interpretation of data.
- Business intelligence (BI) analyst – A BI analyst tends to work with large datasets in expansive corporations. They’re responsible for most aspects of the data analysis process and, ultimately, provide findings and recommendations to stakeholders and leaders.
- Business analyst – A business or management analyst focuses on actionable data and providing recommendations for improving the business, financial health, and efficiency while identifying problems and solutions. They might work at companies or as independent consultants.
- Market research analyst – Market research analysts help businesses understand their customers by studying related data. They work to synthesize market trends, customer preferences, and competitor strategies to optimize pricing, products and services, marketing, and consumer messaging.
- Data visualization specialist – A data visualization specialist is an expert in business analytics and graphic design. They specialize in interpreting data and communicating it through easy-to-understand charts, graphs, and infographics.
Business Analytics: Key Takeaways
While business analytics can be a complex undertaking and is not without its challenges, the benefits of having actionable data at your fingertips are invaluable to business leaders. Businesses with robust data analytics systems and processes in place will have the information available to make data-driven decisions, in turn enabling them to gain a competitive advantage and achieve their goals.
Take the First Step on Your Professional Path to Business Success With JWU Online
At Johnson & Wales University, our Bachelor of Science in Business Administration provides students with a well-rounded business background. The comprehensive coursework, including business analytics study, is designed to help students sharpen their business acumen and acquire technical skills. Additionally, the program helps students develop a variety of business and leadership skills that will prove indispensable — whether you wish to start or advance your career in the business world or pursue a future as an entrepreneur.
For more information about earning your degree online, complete the Request Info Form, call 855-JWU-1881, or email [email protected].