Business analytics (BA) refers to the skills, technologies, and practices for continuous iterative exploration and investigation of past

business Business is the practice of making one's living or making money by producing or buying and selling products (such as goods and services). It is also "any activity or enterprise entered into for profit." Having a business name does not separ ...

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, industria ...

. 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 ...

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 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 ...

, 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 decisions. 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, repor ...

(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 busine ...

: 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 Behavioral analytics is a recent advancement in business analytics that reveals new insights into the behavior of consumers on eCommerce platforms, online games, web and mobile applications, and IoT. The rapid increase in the volume of raw event ...

Cohort analysis Cohort analysis is a kind of behavioral analytics that breaks the data in a data set into related groups before analysis. These groups, or cohorts, usually share common characteristics or experiences within a defined time-span. Cohort analysis all ...

* Competitor analysis *

Customer journey Customer experience (CX) is a totality of cognitive, affective, sensory, and behavioral consumer responses during all stages of the consumption process including pre-purchase, consumption, and post-purchase stages. Pine and Gilmore described the ...

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 *

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 eng ...

(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 emph ...

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 Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesaler, and t ...

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 In the field of management, strategic management involves the formulation and implementation of the major goals and initiatives taken by an organization's managers on behalf of stakeholders, based on consideration of resources and an assessment ...

and supply chain execution. * Talent 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 that ...

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, pipelin ...

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 ...

in the late 19th century.

Henry Ford Henry Ford (July 30, 1863 – April 7, 1947) was an American industrialist, business magnate, founder of the Ford Motor Company, and chief developer of the assembly line technique of mass production. By creating the first automobile that ...

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 A decision support system (DSS) is an information system that supports business or organizational decision-making activities. DSSs serve the management, operations and planning levels of an organization (usually mid and higher management) and ...

. 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 Consumer behavior is the study of individuals, groups, or organizations and all the activities associated with the purchase, use and disposal of goods and services. Consumer behaviour consists of how the consumer's emotions, attitudes, and p ...

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 Babson College is a private business school in Wellesley, Massachusetts. Established in 1919, its central focus is on entrepreneurship education. It was founded by Roger W. Babson as an all-male business institute, but became coeducational in ...

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 an ...

, but also predictive modeling and complex

optimization Mathematical optimization (alternatively spelled ''optimisation'') or mathematical programming is the selection of a best element, with regard to some criterion, from some set of available alternatives. It is generally divided into two subfi ...

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