What is Business Analytics?

Business analytics is the process of collating, sorting, processing, and studying business data,
and using statistical models and iterative methodologies to transform data into business insights. The
goal of business analytics is to determine which datasets are useful and how they can be leveraged to
solve problems and increase efficiency, productivity, and revenue.

A subset of business intelligence (BI), business analytics is generally implemented with the goal
of identifying actionable data. Business intelligence is typically descriptive, focusing on the strategies
and tools utilized to acquire, identify, and categorize raw data and report on past or current events.
Business analytics is more prescriptive, devoted to the methodology by which the data can be analyzed,
patterns recognized, and models developed to clarify past events, create predictions for future events,
and recommend actions to maximize ideal outcomes.

Sophisticated data, quantitative analysis, and mathematical models are all employed by business
analysts to engineer solutions for data-driven issues. They can utilize statistics, information systems,
computer science, and operations research to expand their understanding of complex data sets, and
artificial intelligence, deep learning, and neural networks to micro-segment available data and identify
patterns. This information can then be leveraged to accurately predict future events related to
consumer action or market trends and to recommend steps that can drive consumers toward a desired
goal.

Components of Business Analytics

Mobile dashboards have similar components to business dashboards, but with a few key
differences. The components of business dashboards include:

1. Data Aggregation

Before data can be analyzed, it must be collected, centralized, and cleaned to avoid
duplication, and filtered to remove inaccurate, incomplete, and unusable data. Data can be
aggregated from:

 Transactional records: Records that are part of a large dataset shared by an organization
or by an authorized third party (banking records, sales records, and shipping records).

 Volunteered data: Data supplied via a paper or digital form that is shared by the
consumer directly or by an authorized third party (usually personal information).

2. Data Mining

In the search to reveal and identify previously unrecognized trends and patterns, models can
be created by mining through vast amounts of data. Data mining employs several statistical
techniques to achieve clarification, including:
  Classification: Used when variables such as demographics are known and can be used to
sort and group data

 Regression: A function used to predict continuous numeric values, based on

extrapolating historical patterns

 Clustering: Used when factors used to classify data are unavailable, meaning patterns
must be identified to determine what variables exist

3. Association and Sequence Identification

In many cases, consumers perform similar actions at the same time or perform predictable
actions sequentially. This data can reveal patterns such as:

 Association: For example, two different items frequently being purchased in the same
transaction, such as multiple books in a series or a toothbrush and toothpaste.

 Sequencing: For example, a consumer requesting a credit report followed by asking for a
loan or booking an airline ticket, followed by booking a hotel room or reserving a car.

4. Text Mining

Companies can also collect textual information from social media sites, blog comments, and
call center scripts to extract meaningful relationship indicators. This data can be used to:

 Develop in-demand new products

 Improve customer service and experience

 Review competitor performance

5. Forecasting

A forecast of future events or behaviors based on historical data can be created by analyzing
processes that occur during a specific period or season. For example:

 Energy demands for a city with a static population in any given month or quarter

 Retail sales for holiday merchandise, including biggest sales days for both physical and
digital stores

 Spikes in internet searches related to a specific recurring event, such as the Super Bowl
or the Olympics

6. Predictive Analytics

Companies can create, deploy, and manage predictive scoring models, proactively
addressing events such as:
  Customer churn with specificity narrowed down to customer age bracket, income level,
lifetime of existing account, and availability of promotions

 Equipment failure, especially in anticipated times of heavy use or if subject to

extraordinary temperature/humidity-related stressors

 Market trends including those taking place entirely online, as well as patterns which may
be seasonal or event-related

7. Optimization

Companies can identify best-case scenarios and next best actions by developing and
engaging simulation techniques, including:

 Peak sales pricing and using demand spikes to scale production and maintain a steady
revenue flow

 Inventory stocking and shipping options that optimize delivery schedules and customer
satisfaction without sacrificing warehouse space

 Prime opportunity windows for sales, promotions, new products, and spin-offs to
maximize profits and pave the way for future opportunities

8. Data Visualization

Information and insights drawn from data can be presented with highly interactive graphics
to show:

 Exploratory data analysis

 Modeling output

 Statistical predictions

These data visualization components allow organizations to leverage their data to

inform and drive new goals for the business, increase revenues, and improve consumer
relations.

Types of Business Analytics

There are four types of business analytics, each increasingly complex and closer to achieving
real-time and future situation insight application. These analytics types are usually implemented in
stages, starting with the simplest, though one type is not more important than another as all are
interrelated.
 The following BA examples provide insight into the roles of each type in the analytics process. By
leveraging these four types of analytics, big data can be dissected, absorbed, and used to create
solutions for many of the biggest challenges facing businesses today.

1. Descriptive Analytics

Descriptive analytics describes or summarizes a business’s existing data to get a picture of

what has happened in the past or is happening currently. It is the simplest form of analytics and
employs data aggregation and mining techniques. This type of business analytics applies descriptive
statistics to existing data to make it more accessible to members of an organization, from investors
and shareholders to marketing executives and sales managers.

Descriptive analytics can help identify strengths and weaknesses and provide insight into
customer behavior. Strategies can then be developed and deployed in the areas of targeted
marketing and service improvement, albeit at a more basic level than if more complex diagnostic
procedures were used. The most common physical product of descriptive analysis is a report heavy
with visual statistical aids.

2. Diagnostic Analytics

Diagnostic analytics shifts from the “what” of past and current events to “how” and “why,”
focusing on past performance to determine which factors influence trends. This type of business
analytics employs techniques such as drill-down, data discovery, data mining, and correlations to
uncover the root causes of events.

Diagnostic analytics uses probabilities, likelihoods, and the distribution of outcomes to

understand why events may occur and employs techniques including attribute importance,
sensitivity analysis, and training algorithms for classification and regression. However, diagnostic
analysis has limited ability to provide actionable insights, delivering correlation results as opposed to
confirmed causation. The most common physical product of diagnostic analysis is a business
dashboard.

3. Predictive Analytics

Predictive analytics forecasts the possibility of future events using statistical models and
machine learning techniques. This type of business analytics builds on descriptive analytics results to
devise models that can extrapolate the likelihood of select outcomes. Machine learning experts and
trained data scientists are typically employed to run predictive analysis using learning algorithms
and statistical models, enabling a higher level of predictive accuracy than is achievable by business
intelligence alone.

A common application of predictive analytics is sentiment analysis. Existing text data can be
collected from social media to provide a comprehensive picture of opinions held by a user. This data
can be analyzed to predict their sentiment towards a new subject (positive, negative, neutral). The
 most common physical product of predictive analysis is a detailed report used to support complex
forecasts in sales and marketing.

4. Prescriptive Analytics

Prescriptive analytics goes a step beyond predictive analytics, providing recommendations

for next best actions and allowing potential manipulation of events to drive better outcomes. This
type of business analytics is capable of not only suggesting all favorable outcomes according to a
specified course of action, but recommending specific actions to deliver the most desired result.
Prescriptive analytics relies on a strong feedback system and constant iterative analysis and testing
to continually learn more about the relationships between different actions and outcomes.

One of the most common uses of prescriptive analytics is the creation of recommendation
engines, which strive to match options to a consumer’s real-time needs. The key to effective
prescriptive analysis is the emergence of deep learning and complex neural networks, which can
micro-segment data across multiple parameters and timelines simultaneously. The most common
physical product of prescriptive analysis is a focused recommendation for next best actions, which
can be applied to clearly identified business goals.

These four different types of analytics may be implemented sequentially, but there is no mandate.
In many scenarios, organizations may jump directly from descriptive to prescriptive analytics thanks to
artificial intelligence, which streamlines the process.

Business Analytics Examples

When it comes to business analytics, success often depends on whether or not all parties of an
organization fully support adoption and execution. Successful BA examples—and subsequent
deployment of new predictive-based initiatives—include:

a) Predictive Maintenance: Shell

Royal Dutch Shell PLC recently implemented predictive maintenance driven by artificial intelligence
to cut down on time lost to machine failure. The AI-powered tools predict when maintenance is needed
on compressors, valves, and other equipment, can autonomously analyze data to help steer drill bits
through shale deposits, and will soon be able to identify and alert station employees of dangerous
behavior by customers, reducing risks from the drilling platform to the gas pump.

The systems can anticipate when and where more than 3,000 different oil drilling machine parts
might fail, keep Shell informed about the location of parts at their worldwide facilities, and plan when to
make purchases of machine parts. These systems also determine where to place inventory items and
how long to keep parts before putting them into rotation or replacing/returning them. Shell has since
reduced inventory analysis from over 48 hours to less than 45 minutes, saving millions of dollars each
year thanks to reduced costs of moving and reallocating inventory.

b) Predictive Deliveries: Pitt Ohio

 Pitt Ohio, a $700 million freight company, was significantly impacted by Amazon’s same-day delivery
initiative, which ramped up customer expectations. Customers also became more demanding,
requesting up-to-the-minute tracking and estimated times of delivery that were much narrower than
formerly acceptable windows. The company turned to data analysis to find a way to improve customer
experiences.

A cross-departmental project involving market research, sales operations, and IT was launched
internally, leveraging data that was previously unused. The historical data, predictive analytics, and
algorithms that calculated freight weight, driving distance, and several other factors in real-time allowed
Pitt Ohio to estimate delivery times at a 99 percent accuracy rate. The company estimates that repeat
orders increased its revenue by $50,000 per year, and customer churn reduction equaled retained
revenues of $60,000 per year.

c) Predictive Banking: Axis Bank

Axis Bank, the third-largest private sector bank in India, implemented robotics process automation
and deep learning to identify customer behavioral patterns and recommend next best actions to prevent
customer churn, including streamlining document processing, identifying “events” when customers
were more likely to leave, and preemptively offering special promotions targeted to those segmented
audiences to prevent churn.

For better customer experience, 125 “customer journeys” were identified, analyzed, and retooled,
and time spent verifying customer-provided data across multiple documents in the back office dropped
from 15 minutes to 2–3 minutes. Axis is now developing a chatbot to speed customer interactions and
reduce wait times for service at busy branches and during peak interface times.

Challenges Presented by Business Analytics

When it comes to business analytics, success often depends on whether or not all parties of an
organization fully support adoption and execution. Successful BA examples—and subsequent
deployment of new predictive-based initiatives—include:

a. Executive Distrust

Getting everyone in upper management to sign off on BA implementation can be difficult.

Although most organizations have embraced some form of BI and are likely handling data
warehousing effectively, analytics is still an area viewed with distrust by many top-level executives,
and trust must be built to effectively leverage data analysis. Presenting business analytics as
supportive to existing company strategies and outlining clear, measurable goals can help convince
slow adopters to approve a trial project.

b. Poor Collaboration

Failure to achieve teamwork among a cross-section of departments can cripple the

evaluation and implementation of analytics-driven initiatives. Business and IT personnel must be in-
 sync for an analytics strategy to succeed. Poor collaboration creates the risk that analytics won’t
provide the information promised, leading to further distrust and potential abandonment of
beneficial technology innovation. A cross-functional analytics team that includes major players in
technology, business, operations, legal, and HR can help full-scale adoption of analytics in every
department.

c. Lack of Commitment

While many analytics software packages are presented as a prefabricated solution that is
easy to implement, cost can be discouraging and return on investments are often not immediate.
Although analytical models develop over time and predictions will improve, dedication is required
during the initial months of an analytics initiative. Businesses that fail to make it through this crucial
investment period may see executives losing trust in the solution and refusing to believe the
models, eventually abandoning the concept. Process and goal owners must establish a productive
analytics environment and set realistic timelines for results.

d. Slow Information Maturity

BA implementations often fail due to lack or low quality of available data. A maturity
assessment should always be performed on the company’s information architecture and data
sources based on analytical requirements. Transactional, aggregated, and operational information
should be scored for quality, and the existing integration infrastructure’s ability to support new
sources and data feed should be evaluated. The time required to acquire, clean, and analyze new
data must be built into the adjustment period.

Careers in Business Analytics

A career in business analytics usually requires at least a bachelor’s degree in business analytics, data
science, information management, applied analytics, business intelligence, statistics, marketing, or a
related field. A master’s degree can widen job choices and certifications can provide more authority and
help increase value. BA experts often report directly to upper management within their organization.
They may be in a department of their own but coordinate closely with sales, marketing, and operations.
Careers available in business analytics include (but are not limited to):

 Management Analyst/Consultant

Management analysts and consultants work to ensure that their organization’s business
operations are running efficiently. This job typically requires working closely with all departments to
identify which business processes can be improved, find solutions to enhance efficiency, and
communicate recommendations to upper management.

 Data Analyst/Scientist

Data analysts and scientists are expected to collect, organize, and analyze data to determine
how to leverage insights for their organization. This includes using mathematical models and other
 tools to determine what data is useful and deliver actionable recommendations. In most cases, a full
report complete with visual tables, charts, and reports must be presented to upper management to
inform their decision-making processes.

 Business Intelligence Analyst

BI analysts are tasked with gathering and analyzing information to gain an advantage in their
organization’s associated market. The analysis should show upper management a clear picture of
where the business stands and its strengths and weaknesses, guiding decisions for higher
profitability.

 Program and Marketing Managers

Programming and marketing managers generally have the responsibility of developing and
deploying their organization’s marketing strategies. In many cases, this means managing their
organization’s entire sales and marketing staff, overseeing all marketing initiatives and campaigns,
and reporting to and advising upper management.

 Big Data Analytics Specialist

Big data analytics specialists utilize the latest in modern technology and data science to
solve the challenges presented by an increasingly digital landscape. This position will be expected to
deliver improved business performance and to weigh in on data-driven decision-making within their
organization.

 Operations Research Analyst

Operations research analysts are responsible for analyzing their organization’s operational
data. This typically requires using information technology to complete analysis and develop
solutions for improving process efficiency across multiple departments. This position may also
include the responsibility of creating and presenting a comprehensive report to stakeholders.

 Market Research Analyst

Market research analysts are expected to collate, manage, and derive insights from vast
amounts of marketing data for their organization. This data analysis should help identify potential
customers and price points and evaluate product desirability, enabling the company to increase
revenues consistently over time.

Trends in Business Analytics

 Big Data

With an increasing emphasis on digitization in every aspect of life, datasets continue to expand at an
unprecedented rate. This expansion is both an advantage and a disadvantage—more data means more
potential insights, but the sheer volume can be overwhelming.
  Artificial Intelligence

As AIs become smarter and able to teach themselves, AIs created by AIs are being developed and
launched in industry verticals such as banking, financial services, insurance, retail, hospitality,
engineering, manufacturing, and more.

 Deep Learning

The next step up from machine learning, deep learning leverages the advantages of vast computing
power to manage enormous data sets, identifying patterns and delivering predictive results that were
formerly impossible.

 Neural Networks

Data scientists can now create “brains” which have the computing power of thousands of human minds.
Data can be processed and sorted, patterns can be identified along a historical timeline, and future
predictions are delivered with an unprecedented level of accuracy.

 The Internet of Things

IoT-driven devices number in the millions, delivering real-time data to organizations worldwide and
allowing intimate entry into the lives of consumers around the globe.

 Micro-Segmentation

As data becomes bigger, the ability to separate it into smaller and smaller slices enables organizations to
accurately define their “ideal” customer and create funnels that lead them directly to the desired action.
This granular segmentation is the driving force behind successful digital transformation initiatives.

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Monnappa, Avantika (2020). Data Science vs. Big Data vs. Data Analytics. Retrieved from
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Verma, Eshna (2020). How Big is Big Data. Retrieved from https://www.simplilearn.com/how-big-is-big-
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guides/business-analytics-everything-you-need-to-know