What Is Business Analytics? Here's a Primer
When it comes to using the term “business analytics," people often throw it around without truly knowing what it means. But the impact that business analytics is having on the world — not to mention the technology behind it — is immense and quantifiable.
Total revenue generated by business analytics is projected to increase from $168 billion to about $274 billion in 2020, indicating that organizations across the business spectrum are investing in analytics solutions.
According to Gartner, business analytics is comprised of solutions used to build analysis models and simulations, to create scenarios, to understand realities and to predict future states. Business analytics includes data mining, predictive analytics, applied analytics and statistics, and is delivered as an application suitable for a business user.
In short, business analytics is a tool for analyzing business data, making predictions based on that data, and running tests on how future scenarios might look based on proposed decisions. A restaurant, for example, might use software to analyze past customer data and predict how a coupon promotion might be structured -- factoring in things like menu item, marketing channel, and percentage discount. As advances in BA continue to merge with machine learning, businesses will be able to better analyze the impact of decisions and strategies with more granularity, and to choose the most cost-effective and productive solutions.
How is Business Analytics Used?
For starters, it's important not to confuse business analytics (BA) with its close relative, business intelligence (BI). While the two terms are sometimes used interchangeably, they are not the same. BI simply refers to the information and collection methodologies that form your data sets. By contrast, BA is used to analyze and interpret those data sets.
A restaurant being able to smartly roll out a coupon promotion to maximize profits is a powerful example of how BA is enabling businesses to make better, data-driven decisions, and is just the tip of the iceberg of how BA is used today — and potentially the future. Banks, for example, now use business analytics in many facets of their business, such as predicting credit risk of customers when they're applying for a loan. In this case, a data analytics system might pull information from a variety of sources, including things like purchasing, credit, and real estate history to determine the proper terms of a loan.
Organizations that make the most of business analytics tools, technologies, and software are those that have well-defined business goals and use cases. A technology company, for instance, might want to reduce the time it takes to locate, interview, and hire software engineers by 25 percent. Some businesses even use predictive artificial intelligence (AI) in combination with BA to predict things like which candidates are most likely to accept a job, or to map out various scenarios based on potential changes in the recruiting process. Based on the results, a company might determine that their goal can be achieved by interviewing more applications, reducing steps in the interview process, or taking other defined steps to meet their goals.
The Future of Business Analytics
Business analytics is advancing at a rapid pace, and its impact within organizations are already becoming apparent. Our Ki business analytics software platform, for instance, uses machine learning AI algorithms to analyze and generate more scenarios than humans can. The Ki engine then ranks the results based on both past data and advanced predictive modeling.
The AI algorithms provide the ability to rank each theory or scenario based on its validity and likelihood in solving specific business problems and creating models to map the impact of specific changes or decisions. For example, advances in business analytics and machine learning will help companies find new efficiencies such as reducing shipping costs, or increase companies net promoter scores, or even decrease the time it takes a drug to pass FDA trials. All based on insights derived from BA engines.
Sources of data continue to grow with the proliferation of things like connected devices, Internet of Things (IoT) devices, and smart home equipment. BA systems will likely begin adapting to those changes, becoming more efficient at collecting and processing information from multiple sources on an ongoing basis.
At its core, business analytics is all about squeezing every ounce of value from the vast array of data that businesses generate every second, and using that data to help business leaders predict which decisions will make the biggest positive impact on the bottom line.
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