Business analytics (BA) refers to the skills, technologies, and practices for continuous iterative exploration and investigation of past business performance to gain insight and drive business planning. Business analytics focuses on developing new insights and understanding of business performance based on

data In the pursuit of knowledge, data (; ) is a collection of discrete values that convey information, describing quantity, quality, fact, statistics, other basic units of meaning, or simply sequences of symbols that may be further interpret ...

and

statistical methods Statistics (from German: '' Statistik'', "description of a state, a country") is the discipline that concerns the collection, organization, analysis, interpretation, and presentation of data. In applying statistics to a scientific, industr ...

. In contrast,

business intelligence Business intelligence (BI) comprises the strategies and technologies used by enterprises for the data analysis and management of business information. Common functions of business intelligence technologies include reporting, online analytical pr ...

traditionally focuses on using a consistent set of metrics to both measure past performance and guide business planning. In other words,

focusses on description, while business analytics focusses on prediction and prescription. Business

analytics Analytics is the systematic computational analysis of data or statistics. It is used for the discovery, interpretation, and communication of meaningful patterns in data. It also entails applying data patterns toward effective decision-making. It ...

makes extensive use of analytical modeling and numerical analysis, including explanatory and predictive modeling, and fact-based management to drive

decision making In psychology, decision-making (also spelled decision making and decisionmaking) is regarded as the cognitive process resulting in the selection of a belief or a course of action among several possible alternative options. It could be either ra ...

. It is therefore closely related to

management science Management science (or managerial science) is a wide and interdisciplinary study of solving complex problems and making strategic decisions as it pertains to institutions, corporations, governments and other types of organizational entities. It is ...

. Analytics may be used as input for human decisions or may drive fully

automated decision Automated decision-making (ADM) involves the use of data, machines and algorithms to make decisions in a range of contexts, including public administration, business, health, education, law, employment, transport, media and entertainment, with var ...

s. Business intelligence is querying,

report A report is a document that presents information in an organized format for a specific audience and purpose. Although summaries of reports may be delivered orally, complete reports are almost always in the form of written documents. Usage In ...

ing,

online analytical processing Online analytical processing, or OLAP (), is an approach to answer multi-dimensional analytical (MDA) queries swiftly in computing. OLAP is part of the broader category of business intelligence, which also encompasses relational databases, re ...

(OLAP), and "alerts". In other words, querying, reporting, and OLAP are alert tools that can answer questions such as what happened, how many, how often, where the problem is, and what actions are needed. Business analytics can answer questions like why is this happening, what if these trends continue, what will happen next (predict), and what is the best outcome that can happen (optimize).

Examples of application

In healthcare, business analysis can be used to operate and manage clinical information systems. It can transform medical data from a bewildering array of analytical methods into useful information. Data analysis can also be used to generate contemporary reporting systems which include the patient's latest key indicators, historical trends and reference values. * Decision analytics: supports human decisions with visual analytics that the user models to reflect reasoning. * Descriptive analytics: gains insight from historical data with reporting, scorecards, clustering etc. *

Predictive analytics Predictive analytics encompasses a variety of statistical techniques from data mining, predictive modeling, and machine learning that analyze current and historical facts to make predictions about future or otherwise unknown events. In busin ...

: employs

predictive modelling Predictive modelling uses statistics to predict outcomes. Most often the event one wants to predict is in the future, but predictive modelling can be applied to any type of unknown event, regardless of when it occurred. For example, predictive mod ...

using statistical and

machine learning Machine learning (ML) is a field of inquiry devoted to understanding and building methods that 'learn', that is, methods that leverage data to improve performance on some set of tasks. It is seen as a part of artificial intelligence. Machine ...

techniques * Prescriptive analytics: recommends decisions using optimization, simulation, etc.

Basic domains within business analytics

* Behavioral analytics * Cohort analysis * Competitor analysis * Customer journey analytics * Cyber analytics * Enterprise optimization *

Financial service Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, accountancy companies ...

s analytics *

Fraud In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right. Fraud can violate civil law (e.g., a fraud victim may sue the fraud perpetrator to avoid the fraud or recover monetary compen ...

analytics *

Health care analytics Health care analytics is the health care analysis activities that can be undertaken as a result of data collected from four areas within healthcare; claims and cost data, pharmaceutical and research and development (R&D) data, clinical data (collec ...

Key performance indicators A performance indicator or key performance indicator (KPI) is a type of performance measurement. KPIs evaluate the success of an organization or of a particular activity (such as projects, programs, products and other initiatives) in which it en ...

(KPI's) * Market Basket Analysis *

Marketing Marketing is the process of exploring, creating, and delivering value to meet the needs of a target market in terms of goods and services; potentially including selection of a target audience; selection of certain attributes or themes to empha ...

analytics *

Pricing Pricing is the process whereby a business sets the price at which it will sell its products and services, and may be part of the business's marketing plan. In setting prices, the business will take into account the price at which it could acq ...

analytics * Retail sales analytics * Risk and credit analytics *

Supply chain In commerce, a supply chain is a network of facilities that procure raw materials, transform them into intermediate goods and then final products to customers through a distribution system. It refers to the network of organizations, people, activ ...

analytics, an area noted for its "growing importance". DeAngelis refers to multiples interpretations of the term "supply chain analytics". Westerveld notes that the significance of supply chain analytics lies in the importance of aligning corporate strategy and supply chain execution. *

Talent Talent has two principal meanings: * Talent (measurement), an ancient unit of mass and value * Talent (skill), a group of aptitudes useful for some activities; talents may refer to aptitudes themselves or to possessors of those talents Talent ma ...

analytics *

Telecommunications Telecommunication is the transmission of information by various types of technologies over wire, radio, optical, or other electromagnetic systems. It has its origin in the desire of humans for communication over a distance greater than tha ...

Transportation Transport (in British English), or transportation (in American English), is the intentional movement of humans, animals, and goods from one location to another. Modes of transport include air, land ( rail and road), water, cable, pipel ...

analytics

History

Analytics have been used in business since the management exercises were put into place by

Frederick Winslow Taylor Frederick Winslow Taylor (March 20, 1856 – March 21, 1915) was an American mechanical engineer. He was widely known for his methods to improve industrial efficiency. He was one of the first management consultants. In 1909, Taylor summed up h ...

in the late 19th century.

Henry Ford Henry Ford (July 30, 1863 – April 7, 1947) was an American Technological and industrial history of the United States, industrialist, business magnate, founder of the Ford Motor Company, and chief developer of the assembly line technique of ...

measured the time of each component in his newly established assembly line. But analytics began to command more attention in the late 1960s when computers were used in decision support systems. Since then, analytics have changed and formed with the development of

enterprise resource planning Enterprise resource planning (ERP) is the integrated management of main business processes, often in real time and mediated by software and technology. ERP is usually referred to as a category of business management software—typically a sui ...

(ERP) systems, data warehouses, and a large number of other software tools and processes. In later years the business analytics have exploded with the introduction of computers. This change has brought analytics to a whole new level and has brought about endless possibilities. As far as analytics has come in history, and what the current field of analytics is today, many people would never think that analytics started in the early 1900s with Mr. Ford himself.

Challenges

Business analytics depends on sufficient volumes of high-quality data. The difficulty in ensuring data quality is integrating and reconciling data across different systems, and then deciding what subsets of data to make available. Previously, analytics was considered a type of after-the-fact method of

forecasting Forecasting is the process of making predictions based on past and present data. Later these can be compared (resolved) against what happens. For example, a company might estimate their revenue in the next year, then compare it against the actual ...

consumer behavior by examining the number of units sold in the last quarter or the last year. This type of data warehousing required a lot more storage space than it did speed. Now business analytics is becoming a tool that can influence the outcome of customer interactions. When a specific customer type is considering a purchase, an analytics-enabled enterprise can modify the sales pitch to appeal to that consumer. This means the storage space for all that data must react extremely fast to provide the necessary data in real-time.

Competing on analytics

Thomas Davenport, professor of information technology and management at Babson College argues that businesses can optimize a distinct business capability via analytics and thus better compete. He identifies these characteristics of an organization that are apt to compete on analytics: * One or more senior executives who strongly advocate fact-based decision making and, specifically, analytics * Widespread use of not only

descriptive statistics A descriptive statistic (in the count noun sense) is a summary statistic that quantitatively describes or summarizes features from a collection of information, while descriptive statistics (in the mass noun sense) is the process of using and a ...

, but also predictive modeling and complex optimization techniques * Substantial use of analytics across multiple business functions or processes * Movement toward an enterprise-level approach to managing analytical tools, data, and organizational skills and capabilities

Examples of application

Basic domains within business analytics

History

Challenges

Competing on analytics

See also

References

Further reading