What is Business Analytics?
Simply put, business analytics – or “analytics” for short – is a term for data-based applications of quantitative analysis methods in use in businesses for decades. In the mid-1980s, I read “Quantitative Methods in Management,” which was written in 1977. There are dozens of books that apply various quantitative analysis, operations research and discrete mathematics methods to specific business domains, ranging from sophisticated customer segmentations and predictions of customer lifetime value to demand forecasting and supply chain optimization. So the field of analytics, per se, is not new. Rather, tried and true quantitative analysis methods have been implemented as packaged software applications that can be leveraged to build a wide range of company-specific analytical applications that address common business challenges.
Business Analytics and BI – What’s the Difference?
We define business intelligence as the use of business information (data) and business analyses to support business decisions in the context of core business processes that drive profit and performance.
BI has always been about analysis, and business analyses come in a wide range of types and uses, from simple analyses such as accounts receivable aging reports to the sophisticated anti-fraud analytics used by major credit card companies. Our focus for this article is on the BI subcategories advanced analytics and predictive analytics – which we will refer to as business analytics or analytics.
Business Analytics Opportunities
There are a large number of potential opportunities for leveraging analytics to create competitive advantage – and ultimately to drive profit improvement. Analytics can be used across organizations for such purposes as:
- Customer segmentation.
- Category management.
- Risk analysis.
- Inventory optimization.
- Demand forecasting.
- Sales trend analysis.
- Statistical process control.
- Cash flow forecasting.
- Market analysis.
Business analytics are essentially a toolkit that sophisticated business analysts can use to glean insight regarding a wide range of business decisions in different parts of companies – all with a goal of increasing revenues, reducing costs or both. And while these opportunities are many, so are the potential pitfalls.
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