Over the last 30 years several acronyms have sprung up naming essential systems for storing and processing business data, such as MRP (material requirements planning), ERP (enterprise resource planning) and CRM (customer relationship management).
Companies invest a lot of time and money in these tools, as executives know that collecting data to report on what’s happening in the business is vital. But how many actually understand how to use the data?
Considering the huge expense and effort that goes into collating data, it’s surprising how many organisations fail to reap the full benefits. A lot of businesses have become data junkies, addicted to collecting and storing information but not putting it to good use.
The purpose of collecting and analysing data should be to inform decision-making and to guide the business so it can meet the needs of its customers better and become more profitable.
So, let’s break it down. What are business intelligence (BI) and business analytics (BA)? How do they differ? And why do we need them?
Business intelligence is an umbrella term used to encompass the processes, methods, measurements and systems businesses use to analyse raw data. These might include reporting, automated monitoring and alerts, dashboards, scorecards and ad hoc queries. Using business intelligence is a good way to check how well a business is doing and benchmark it against past performance.
Many of us go for routine medical check-ups just to check whether we’re in good health and to pick up any issues that need to be addressed. Monitoring your BI is similar, in that it allows you to see how healthy your processes, methods and systems are and to check whether things are improving or deteriorating.
Business analytics takes things a step further. Put simply, we can use business intelligence to manage our day-to-day business. We can then take that same information and use business analytics to change the business.
It’s through BA that we can leverage the value of the data we have collected. So BI is a first step for companies to take when they need the ability to make data-driven decisions, and BA is the analysis of the answers provided by BI in order to actually drive the business forward.
BA includes statistical and quantitative analysis. It also encompasses data mining, which we can use to find out what has happened (descriptive analysis) and why it happened (diagnostic analysis), as well as techniques to discover whether it’s likely to happen again (predictive analytics) and optimisation and simulation to help with deciding on the best course of action (prescriptive analysis).
So business analytics enables leaders to make decisions based on deep learning rather than instinct.
As an example, during weekly sales meetings, you might review your sales KPIs and use a dashboard to see where you stand against targets, then discuss what happened, when and how. This is business intelligence. If you finish your review there, you will need to cross your fingers that you will reach the target next week.
On the other hand, business analytics applies statistical modelling to extrapolate from past results what future results can be expected. Using a business analytics tool will help you predict, if you go on as you are, whether you will reach your monthly target or not. Clearly this is a useful feature to support business planning.
The insights gained from BA enable companies to automate and optimise their business processes in four distinct categories:
- operations analytics
- financial analytics
- customer analytics
- employee analytics
Business intelligence and business analytics should, in theory, make everything visible,
transparent and easy to manage. In reality, while having all this deep insight is great, actually applying it to making decisions on a day-to-day basis is not always easy. This is why, despite acknowledging the importance of BI and BA, and investing good money in them, many businesses fail to unlock the potential gains available. BI and BA projects can also fail due to issues like unreliable data, wrong or too many KPIs or misinterpretation of data.
If you’re struggling to use business intelligence data effectively within your organisation, the Renoir team can provide the support you need. We can help you select the right tools or even develop bespoke tools. We can also provide coaching on how to use them effectively and, crucially, how to use the insight you gain to foster a culture of continuous improvement.
Effective use of business analytics will help you quickly identify key opportunities to boost efficiency, drive profitability, improve customer satisfaction and motivate employees.
The world of business is already fast-moving, and the pace is only going to pick up. Data is your best friend to survive tomorrow.